Most regional bankers see finance crisis lasting 1 to 3 years –poll

A majority of Latin American and Caribbean bankers expect the crisis in financial markets to last between one and three years, according to the results of a poll released yesterday by the Inter-American Develop-ment Bank (IDB) and the Latin American Bank Federa-tion (FELABAN).

According to a press release from the IDB, more than 100 executives from large, mid-size and small banks from 19 Latin American and Caribbean countries took part in the survey conducted at last year end, after the global financial crisis started to hit this region. The poll was commissioned by the Multilateral Investment Fund (MIF) and the Inter-American Investment Cor-poration (IIC), which are affiliates of the IDB group, and by FELABAN, which represents more than 500 financial institutions in Latin America.

The release stated that two out of three bankers surveyed said the financial crisis would affect their domestic markets between one and three years though Mexican bank executives were somewhat more optimistic than their Central American and South American counterparts.

Regarding the effects of the crisis, six out of 10 executives forecast a decrease in the availability of funding for their financial institutions. Other expected effects were a decline in remittances and in trade financing, the IDB said.

According to the statement, the survey, which on previous occasions was conducted to gauge banks’ views on small and mid-size enterprises (SMEs), found that bankers anticipate that these businesses will face higher interest rates and stricter lending requirements.

In Latin America and the Caribbean, SMEs range from 10 to 250 employees, the Bank said. It added that nevertheless, nine out of 10 bankers said their institutions remain interested in working with SMEs, providing them services such as working capital loans, credit lines, advice on export deals and payroll and payments management.

As in past polls, bankers underscored the importance of positive cash flows and good credit track records among their requirements for approving loans for SMEs. Less importance was assigned to the availability of collateral or credit guarantees, the release asserted.

It said that an “auspicious trend” arising from the poll was the increased interest expressed by bankers in microfinance, which caters to businesses with fewer than 10 employees. Large banks see this activity as an attractive alternative, more so than small financial institutions. Four out of 10 executives said their banks are already involved in microfinance, while three out of 10 said they had plans to expand into that activity in the short or medium term, the IDB stated.