Introduction
The issue of limited access to formal credit for Mexican businesses, particularly small ones, has been a national concern for many years. Recently, the Mexican Federal Government has brought this topic back to the forefront and even reached an agreement with banks to address it.
ENAFIN 2024 Report Findings
The National Financing Survey for Companies (ENAFIN) 2024, released by the National Institute of Statistics and Geography (INEGI) and the National Banking and Securities Commission (CNBV), confirms the need for more companies to gain access to financing.
According to ENAFIN, only half of the companies (with more than six employees) have applied for credit or financing since they began operations. The other 50% have not.
Of the 50% that have sought financing, 45.9% have received it, while 4.1% have not.
From over 140,000 companies (50%) that applied for credit or financing since their operations started, nearly 80,600 (57.5%) did so in the period 2022-2024, i.e., over the last three years.
Most of these were medium and large businesses, with fewer being small and microenterprises.
Primary Sources of Financing
In the last three years, commercial banking was the primary source of financing for companies that applied for credit, accounting for 82.8%. Providers followed with 28.5%, and family or friends accounted for 12.7%.
Other sources, such as credit unions, development banking, and collective financing, were less frequently used.
Reasons for Rejection
Although 93.7% of the credits requested by companies in the period 2022-2024 were approved, 6.3% were rejected.
The main reasons for the rejection of financing applications of greater amount include:
- No reasons or explanations given
- Insufficient or lack of guarantees
- No credit history
- Failure to meet requirements and inability to prove income
- Low repayment capacity
- Poor credit history
- Excessive debt burden
Principal Impacts of Not Obtaining Financing
The report highlights that from 2022 to 2024, 72% of the companies experienced negative impacts due to not obtaining larger financing amounts.
The primary effects were:
- Delays in company expansion and purchase of new machinery
- Cancellation of investments
- In smaller proportion, cancellation of contracts, orders, and services; suspension of operations; and personnel reductions
Only 21% considered seeking credit in the future.
Need to Include More MICs
Authorities and private sector players agree that more companies, especially small ones, need access to more credit.
“Despite the progress made, the main challenge remains access to financing, particularly among MICs. Almost half of the MICs have never formally applied for financing. More financial literacy efforts are needed, especially for smaller businesses,” said Omar Mejía, Deputy Governor of Banco de México (Banxico).
Jesús de la Fuente, President of the CNBV, emphasized that financial inclusion of companies is a priority for authorities.
Francisco Cervantes, President of the Coordinating Council of Mexican Business Chambers (CCE), also expressed commitment to exploring various avenues for strengthening a new era of financial inclusion for SMEs.
Key Questions and Answers
- What is the main issue highlighted by the ENAFIN 2024 report? Limited access to formal credit for Mexican businesses, especially small ones.
- What percentage of companies have applied for credit since they began operations? 50%
- What are the primary sources of financing for companies that sought credit? Commercial banking (82.8%), providers (28.5%), and family or friends (12.7%).
- What percentage of credit applications were rejected? 6.3%
- What are the main reasons for credit application rejections? Insufficient guarantees, lack of credit history, poor repayment capacity, and excessive debt burden.
- What negative impacts did companies experience due to not obtaining financing? Delays in expansion, cancellation of investments, and suspension of operations.
- What do authorities and private sector players agree on regarding financial inclusion? More companies, especially small ones, need access to more credit.
