The Challenge of Insufficient Financing
During a recent banking meeting, one of the most significant issues highlighted was insufficient financing. The President of Mexico acknowledged, “Yes, we have a problem with access to credit. If we want growth and well-being for the population, the goal of both the banking sector and the government is to improve access to financing.”
Credit as a Percentage of GDP
According to data from the World Bank and reported by El Economista, credit to the non-financial private sector in Mexico by the fourth quarter of 2024 was only 33% of the Gross Domestic Product (GDP).
Comparatively, Japan and the United States had much higher figures at 196% and 192% of GDP, respectively. Even when compared to developing countries like Chile and Brazil, Mexico falls short at 110% and 72% of GDP.
The SME Sector’s Financing Needs
In Mexico, the sector most in need of financing is small and medium-sized enterprises (SMEs), which account for 90% of production installations and are the largest job creators.
Successful Experiences and Future Actions
There have been valuable experiences in supporting SMEs through development funds, particularly from the development bank sector, specifically Nafinsa. The difficulty lies in private banking. Therefore, the proposals made during the recent banking meeting to lower interest rates on loans and expand credit opportunities are positive signs.
Regional Disparities in Financing
However, the situation varies across states. Only a few have development funds supported by the development bank, which explains the limited growth of private sector economies. For instance, 19 states have shown a decline in industrial activity this year.
Credit Unions as a Solution
In some states, credit unions have emerged, composed of businesses from the same economic sector acting as co-debtors to support companies in obtaining credits.
Leveraging International Resources
There is a potential for SME credit access through World Bank resources that lend at low-interest rates to development banks in countries, which then channel these funds through private banking. This formula has been successful in Mexico.
Key Questions and Answers
- What is the main issue discussed? Insufficient financing, particularly for small and medium-sized enterprises (SMEs).
- What percentage of GDP is credit to the private non-financial sector in Mexico? 33%
- Which sectors are most in need of financing in Mexico? Small and medium-sized enterprises (SMEs) account for 90% of production installations and are the largest job creators.
- What proposals were made during the banking meeting to address this issue? Lower interest rates on loans and expand credit opportunities.
- How do regional disparities affect financing in Mexico? Only a few states have development funds supported by the development bank, limiting private sector economic growth.
- What role do credit unions play in supporting SMEs? Credit unions composed of businesses from the same economic sector act as co-debtors to support companies in obtaining credits.
- How can international resources be leveraged to improve SME financing in Mexico? World Bank resources lent at low-interest rates to development banks can then be channeled through private banking, a successful formula in Mexico.
