Regional commercial banks show growing confidence in SMEs

Commercial banks in Latin America and the Caribbean are demonstrating increased confidence in the viability of small and medium-sized entrepreneurial pursuits in the region, a development which is likely to see an increase in the level of credit by up to 77 per cent of commercial banks in Latin America and the Caribbean, a recent survey by the Inter-American Develop-ment Bank (IDB) says.

The survey says that most financial institutions in Latin America and the Caribbean are set to provide more investments and longer term loans to boost credit availability for SMEs next year. The survey was undertaken by the IDB in collaboration with the 106-member Latin American Federation of Banks.

The sampling reveals that across Latin America and the Caribbean all of the large banks, 87 per cent of midsize banks and 72 per cent of small ones have SME departments set up to deal specifically with servicing the financial and other business services needs of small and medium-sized enterprises. The survey says that 77 per cent of financial entities in Latin America and the Caribbean anticipate an increase in their SME portfolios as a share of their total lending portfolio.

The circumstance applies as much to Guyana as to anywhere else in the region where most of the country’s traditionally conservative commercial banks have, in recent years, been unveiling suites of services for small and medium-sized enterprises including start-up capital ventures. Over the past two years particularly, local commercial banks have been spending increasing amounts of their marketing budgets on their SME services, a trend which the IDB says is also visible among commercial banks elsewhere in the hemisphere.

The IDB survey highlights a significant increase in investments made by commercial banks in media advertising targeting SMEs. This year, the investment total practically doubled over 2011.

A new indicator in the 2012 survey shows that 89% of banks approved loans with maturities of three years or more to SMEs.
It highlights a jump in investments made by banks in media advertising to reach SMEs. This year’s investment total practically doubled since 2011.

Despite evidence of growing commercial bank confidence in SMEs the survey also alludes to obstacles that affect the current trend, the biggest one being the level of informality that attaches itself to SMEs.

Fifty-six per cent of banks engaged in the survey alluded to a lack of trustworthy information which they said rendered it difficult for banks to assess credit risk. Internal administrative costs are another drawback indicated in 41% of cases.

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