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Ninety-six percent of banks in Latin America and Caribbean view small and medium enterprises as important clients

Latest MIF-IDB-Felaban poll of region’s banks reveals interest in, positive outlook for SME sector

An annual survey of banks in Latin America and the Caribbean regarding the small and medium enterprise (SME) sector shows overwhelming interest in SMEs as banking clients. Ninety-six percent of the 100 banks interviewed in 21 countries in Latin America and the Caribbean consider SMEs to be a strategic part of their business, and 92 percent have a dedicated financing policy for SMEs in place.

The sixth edition of the survey, SMEs in Latin America and the Caribbean: Closing the Gap for Banks in the Region, was commissioned by the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, and produced with support from the Inter-American Investment Corporation (IIC), the IDB’s Structured and Corporate Finance Department (SCF), and the Latin American Banking Federation (Felaban). It is the sixth in a series of banking surveys on SME finance and was again conducted by the Argentinean consulting firm D’Alessio.

Eighty-two percent of the banks surveyed have specialized loan programs for SMEs, and 67 percent consider themselves to be specialized in SME financing. Additionally, the banks’ outlook for the SME sector is optimistic. More than half of the banks interviewed (54 percent) believe that SMEs’ economic situation will improve in the next two years.  The majority of the banks forecast increases in their own SME loan portfolios—half of respondents predict a growth rate between 1 and 20 percent, and another one-fourth believe it will grow between 21 and 40 percent.

This year’s survey shows that banks in the region have begun to develop differentiated services for small enterprise and for medium enterprise clients. Seventy-two percent of the banks interviewed have differentiated services for each of the small and medium enterprise segments, such as establishing adequate marketing strategies, internal procedures, underwriting methodologies, and risk management for each segment. Eighty-five percent of the respondents have a different risk analysis tool for small enterprises from that of medium enterprises.

One in four banks cites the informality of many SMEs as the main constraint to serving SMEs. Some banks have begun to develop innovative underwriting methodologies and credit scoring models, such as “psychometric” tests, as a tool to overcome the restrictions that informality may cause. For the second year in a row, the survey included questions about the presence of SMEs managed or led by women in bank portfolios. Analyzing this issue remains a challenge, as more than half of the banks in the region (51 percent) do not collect  data disaggregated be gender. However, of the banks that do collect such data, 65 percent use it to make decisions.

Other topics explored in detail by the survey include trends in SME financing and products, credit methodology, and financing sources. Access the complete survey.

About the MIF

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, is funded by 39 donors and supports private sector-led development benefiting low-income populations and the poor - their businesses, their farms, and their households. The aim is to give them the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology. A core MIF mission is to act as a development laboratory - experimenting, pioneering, and taking risks in order to build and support successful micro and SME business models.

About the IIC

The Inter-American Investment Corporation (IIC), a member of the IDB Group, promotes private-sector development in Latin America and the Caribbean with a focus on SMEs. The IIC helps companies streamline management processes and provides them with financing in the form of equity investments, loans, and guarantees. In 2011, the IIC reached the one-billion-dollar mark in disbursements of own and third-party funds. Throughout its history, the IIC’s operations have benefited more than 1.6 million SMEs in Latin America and the Caribbean.

About the Structured and Corporate Finance Department

Through the Structured and Corporate Finance Department (SCF), IDB partners with businesses at all stages of the investment process to achieve breakthrough financial results with high development impact. beyondBanking is a program developed by the Financial Markets Division of SCF that seeks to promote sustainable environmental, social and corporate governance principles among Latin American and Caribbean financial intermediaries through financial and technical cooperation.

About Felaban

The Latin American Banking Federation (FELABAN) is a nonprofit institution, established in 1965 in the city of Mar del Plata, Argentina. FELABAN brings together - through their respective associations in 19 countries on the continent - more than 500 banks and financial institutions in Latin America.

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