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Mexican non-bank financial corporations have grown faster than traditional banks and are beginning to play an important role in the financial system, notes Moody's Investors Service.
In a new report, the International Rating Agency noted that since 2017, non-bank financial companies have issued external debt for $ 850 billion, underscoring its rapid expansion and interest investors.
"Non-bank financial corporations grow rapidly on arrival in two niche market segments – low-income people and small and medium-sized enterprises (SMEs) – to whom banks restrict credit because of relative risk. high that they represent, as well as the high cost of their service, "said Moody's analyst, Vicente Gómez
The agency estimated that Mexico has experienced a growth in the number of SMEs and in the formal economy over the past five years, which has increased the number of potential new customers for those consumer finance companies that focus on niche market segments with limited access to banking services.
Four out of five Mexican firms, he added, qualify as SMEs, although they account for more than half of the country's GDP and employ Around 11.5 million, more than two thirds of them do not have access to bank financing.
Moody's noted that non-bank financial corporations are benefiting from While banks have increased about 10% over the past year, non-bank financial corporations, such as payers, have increased their portfolios by 24% and leasing companies He added that these non-bank financial institutions were using innovative approaches to manage the risks inherent in lending to low-income debtors and small businesses with limited credit history.
Measures include contracts signed by creditors with public sector entities and unions in which employers agreed to withhold credit payments before paying wages, he added.
He noted that these contracts help to minimize discretionary violations while establishing a payment priority over other creditors, including banks. He pointed out that if creditors use resource retention contracts to secure their loans, lessors can mitigate their risks by retaining ownership of the property they rent.
He felt that one of the main problems increasing the provision of credit to SMEs in Mexico is the difficulty that banks face for the recovery of assets, including delays in the lending. enforcement of court orders.
"Specialized lenders have solved this problem by renting only assets owned by them – that is, focusing on pure leasing and not on capital," he said. Moody's Analyst
In addition to the high credit costs that correspond to riskier markets, financial companies are facing high operating costs as they need significant sales forces to attract new ones. customers and rely heavily on the market. and interbank, which increases its financing costs.
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