Latin American Banks Step Up Their Work With SMEs

05/06/2007

Washington, D.C.- The Inter-American Investment Corporation (IIC), the Multilateral Investment Fund (MIF), and the Latin American Federation of Banks (FELABAN) contracted the firm D´Alessio IROL to carry out a second survey of Latin American and Caribbean banks in order to measure the willingness of these entities to finance small and medium-size enterprises (SMEs).

The results of this survey, available on the websites of the aforementioned institutions (www.iic.int/pyme; www.iadb.org/mif, www.felaban.com), demonstrate the perception of banks in the region with regard to financing SMEs.

The banks see SMEs as an important agent for economic growth in the region. Bankers have a very positive image of the economic horizons as well as the future. The banks' interest in increasing their business activity with SMEs is reflected in the higher percentage of banks that say they have policies for financing SMEs, and now have special departments for processing loans for these companies.

In order to step up their work with SMEs, banks have taken actions such as hiring loan advisors specializing in analyzing small loans, the intensive use of mass media, and the use of the Internet as a tool to promote financial services among small enterprises.

"One of the survey results shows that nine out of every ten banks questioned has an SME department; however, one out of six provide training and advisory services. The IIC and the MIF have launched the IIC/MIF SME Financing Facility, through which the IIC provides funds to SMEs and the MIF provides nonreimbursable technical assistance to strengthen the institutionality of financial intermediaries," say the survey's sponsors.

While it is true that commercial loans continue to be the primary source of financing for SMEs, the banks mention a series of additional financial products and services offered to the sector, for example: mortgage loans and secured loans, factoring, leasing, account overdraft, guarantees, and others.

The survey also identifies the primary obstacles that banks face in processing loans for SMEs, which include difficulties determining their repayment capacity, the informality of the sector, and difficulties establishing and executing guarantees.

The banks also indicate their interest in increasing operations in microenterprise and remittances, important areas for increasing banking coverage in the Region.

The Inter-American Investment Corporation, a multilateral financial institution that is member of the Inter-American Development Bank (IDB) Group, provides financing (in the form of equity investments, loans, guarantees, and other instruments) and advisory services to private enterprises in Latin America and the Caribbean. The IIC's mission is to promote the economic development of its regional member countries by stimulating the establishment, expansion, and modernization of private enterprises, particularly those that are small and medium in size.

MIF, an autonomous fund administered by the IDB, supports private sector development in Latin America and the Caribbean, focusing on microenterprise and small business. Since its establishment in 1992, the MIF has invested in equity or supported with loans and grants to many of this region's leading microfinance institutions, as well as innovative microfinance investment funds, microleasing, and factoring ventures.

The Latin American Federation of Banks -FELABAN- is a nonprofit organization established in 1965 in the city of Mar del Plata, Republic of Argentina. Through its members—banking associations and other organizations in nineteen countries of the continent—it is integrated by more than 600 Latin American financial institutions. FELABAN cooperates, within the scope of its particular activities, in the economic development of the Latin American countries and the economic integration that they seek, and uses all the means at its disposal to promote the development and well-being of its member countries and the financial systems of the region.

Contact: Carlos Roa/Tomas Miller

Telephone: (202) 623-3955/(202) 942-8212

Email: carlosroa@iadb.org