Background and Context
This week, the reduction of interest rates on bank loans for Small and Medium Enterprises (SMEs) will be a key topic of discussion among bankers and governments. Mexico’s President, Claudia Sheinbaum, recently urged banks in the country to lower their profit margins on SME financing to increase support for these businesses.
She specifically tasked the Secretary of Finance, Edgar Amador, to negotiate with bankers to reach an agreement on this matter. The official program for the 88th Banking Convention indicates a planned agreement between the Mexican Banking Association and the federal government to boost SME financing.
Preliminary bases for achieving this goal are reportedly established, with details to be disclosed during the banking summit. This will be President Sheinbaum’s first attendance at the Banking Convention, setting the tone for her administration’s relationship with Mexican bankers.
Previous Administration and Banking Sector
The previous six-year term was a “golden era” for Mexican bankers, marked by extraordinary profits. Under former President Andrés Manuel López Obrador, banks earned over one trillion pesos in profits. Despite López Obrador’s harsh criticism of bank bailouts via Fobaproa and his threats against bankers before taking office, he maintained a smooth relationship with them during his tenure.
López Obrador kept his promise not to alter banking rules, allowing banks to operate under absolute legal certainty. Despite the slowest growth in 36 years, banks remained strong with capitalization indices exceeding regulatory requirements and ample resources for productive sectors.
Current Scenario and Expectations
As President Sheinbaum interacts with bankers, it will be crucial to observe if she reaffirms legal certainty and guarantees no rule changes. The focus will also be on the formula bankers and authorities agree upon to reduce interest rates and increase SME credit volume.
Bankers have shown their ability to collaborate with various governments. New ABM president Emilio Romano, who began his financial career in government, must now demonstrate his understanding of official levers and apply his negotiation skills to navigate the new administration.
SMEs and Clear Rules
Juan Antonio Pérez Simón González, Bankaool’s director, believes that increased SME financing and potential interest rate reductions depend on the rules set by the Mexican government.
- High informality degree in the SME sector presents a challenge.
- Activation and collaboration of development banking with private banks are crucial.
- Government should consider a differentiated treatment for medium and small banks compared to large ones, enabling smaller banks to capture a larger share of the SME business.
Pérez Simón aims to transform Bankaool into a leading financial technology giant with investments of 2 billion pesos, moving from a D- to a triple B+ credit rating in just two years. His strategy focuses on digitalization and artificial intelligence, leveraging technology as a core component of the Grupo Omni, Bankaool’s parent company.
Traditional banks, according to Pérez Simón, are not adapting quickly enough to the rapid digital transformation of banking operations, giving Bankaool a competitive edge.
