Economics: Familiar official pledges at the Banking Convention fail to address problems in credit access for MSMEs
At the latest annual Banking Convention, the Sheinbaum administration served up the familiar petitions to facilitate access to credit for MSMEs (micro, small and medium-sized enterprises) and lower interest rates for that segment of the productive sector. Easier said than done, as history has shown, and the government has failed to undertake the hard work needed to create the conditions necessary to deliver on such intentions.
In the first quarter, total credit issued by commercial and development banks to the non-financial private sector increased a real 9.7% yoy, with the strongest gains observed in credit to companies (+11.7%). In fact, there has been something of a recovery in credit in recent years. But financial penetration in Mexico remains among the lowest in the world at less than a fifth of the average of its upper middle-income country peers.
Commercial banks appear to be unwilling to grant loans and compete aggressively in the market to attract new clients as they enjoy a practically risk-free source of income: major banks report that income from commissions accounts for 25% and 30% of their total. They issue credit in a selective manner to low-risk companies, leaving those who may represent a medium or high risk without easy access. Banks also charge relatively high lending rates. To cite just one example, the CAT effective interest rate on credit cards ranges between 80% and 90%.
Banxico’s fourth quarter credit market survey showed that of the total financing received by companies, 60% came from vendors and other creditors, only 28% from commercial banks and a mere 1% from development banks. The low availability of financial resources is undoubtedly a severe obstacle to expanding Mexico's productive capacity and long-term economic growth potential.
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