Background on the Importance of Micro, Small, and Medium Enterprises (SMEs)
Micro, small, and medium enterprises (SMEs) are crucial to Mexico’s economy, generating eight out of ten jobs. However, they only receive 14% of the total credit, according to official figures. The Association of Banks of Mexico (ABM) and the Federal Government are now setting up working groups to increase credit access for SMEs, aiming to bank 30% of small businesses by 2030 with an annual growth rate of 3.5%.
Five Working Groups Focused on Key Areas
The ABM has outlined five thematic working groups, or topics of discussion, involving both the banking sector and financial authorities as part of the Mexico Plan. These groups are:
- Financial Education: Develop high-impact programs and tools to encourage SMEs’ access to financing, addressing the issue of self-exclusion where 11% of SMEs do not trust banks, and 8.3% are unsure how to request financing.
- Digitalization and Payments: Promote additional measures to encourage the adoption of digital payments and expand internet coverage, particularly in rural areas.
- Legal Certainty and Regulatory Simplification: Propose modifications to existing bank circulars to boost SME credit, such as enabling digital credit opening.
- Credit and Formalization: Offer incentives for large companies to strengthen SMEs, as well as enhance the bank development’s guarantee programs like Nacional Financiera (Nafin), Banco Nacional de Comercio Exterior (Bancomext), and others.
- Formalization Incentives: Create tax incentives and stimuli to encourage formalization of SMEs, which currently have an average lifespan of 7 to 8 years and 63% are informal.
Current Credit Distribution to SMEs
According to data from the Mexican National Banking and Securities Commission (CNBV), as of April, out of nearly 3.6 trillion pesos in the banking sector’s credit portfolio, only 14% (506 billion pesos) goes to SMEs. The remaining 86% (over 3 trillion pesos) is allocated to large companies.
Next Steps
Emilio Romano, President of ABM, mentioned that an initial meeting with the Secretariat of Finance and Public Credit had already taken place, with another scheduled in the coming weeks.
Key Questions and Answers
- What is the goal of these working groups? To increase credit access for SMEs, which currently receive only 14% of the total credit despite generating eight out of ten jobs in Mexico.
- Which areas are the working groups focusing on? The five key areas are financial education, digitalization and payments, legal certainty and regulatory simplification, credit, and formalization of SMEs.
- What percentage of the credit portfolio goes to SMEs? Only 14% of the total credit portfolio, amounting to 506 billion pesos, is allocated to SMEs.
- What is the target for banking small businesses by 2030? The aim is to bank 30% of small businesses by 2030 with an annual growth rate of 3.5%.
