Agreement Aims to Increase Formal Credit for Micro, Small, and Medium Enterprises (MSEs)
Nuevo Nayarit, Nayarit. The Mexican banking sector and the federal government have signed an agreement to boost formal financing for micro, small, and medium enterprises (MSEs) in the country. Julio Carranza, President of the Mexican Banks Association (ABM), emphasized that this agreement addresses President Claudia Sheinbaum’s call for more credit availability for small businesses.
Background on Key Figures and Relevance
Julio Carranza, as the President of ABM, plays a crucial role in representing Mexico’s banking interests. Claudia Sheinbaum, the Head of Government in Mexico City, has been vocal about the need for increased credit access for small businesses in Mexico compared to other regional countries.
Details of the Agreement
During the 88th Banking Convention, Carranza announced that the agreement aims to ensure that at least 30% of MSEs have formal bank credit by the end of 2030. Additionally, the banking sector will collaborate to reduce active interest rates on key credit products for MSEs, involving development banks.
- Key Components of the Agreement:
- Support from development banks
- Regulatory changes for simplifying credit application requirements
- Integration of MSEs into anchor companies’ supplier chains
- Reducing informality and providing financial education
Current Barriers Faced by MSEs
The ABM highlighted that MSEs are the driving force of Mexico’s economy, accounting for 99% of all companies and generating eight out of ten jobs. However, several structural barriers hinder their growth through credit access:
- Informality: 63% of Mexican businesses are informal.
- Lack of financial education: Misconceptions about bank credit in the sector.
- Self-exclusion: 66% of MSEs do not have a business account, believing they don’t need one.
Existing Favorable Conditions
Despite these challenges, the ABM noted that banks have been offering credit to MSEs under better conditions than other intermediaries, with an average interest rate 29 percentage points lower than alternatives.
Key Questions and Answers
- What does the agreement entail?
- What are the current barriers for MSEs?
- What favorable conditions already exist for MSEs?
The agreement focuses on increasing formal credit access for MSEs by 2030 through development bank support, regulatory changes, integration into supplier chains, reducing informality, and providing financial education.
Informality, lack of financial education, and self-exclusion are significant barriers hindering MSE growth through credit access.
Banks are offering credit to MSEs under better conditions and with lower interest rates compared to other intermediaries.
