SMEs see mixed fortunes across Latin America

“SMEs find themselves sandwiched between microfinance and big companies. They get neglected while the others get all the attention,” says Greta Bull, pillar manager, Technical Assistance Facility for Latin America and the Caribbean at the International Finance Corporation (IFC). She is helping set up a new IFC unit to help Latin banks get to grips with the market. It aims to galvanise banks involved in lending in the micro and large company sectors to move into the middle ground and get those already there to expand portfolios. Using best practices from other regions, measures include strategic planning, getting banks to work closely with clients and benchmarking.

It’s going to be a long haul to help out in Brazil. The benchmark interest rate is a hefty 13%. “Very few Brazilian SMEs can borrow at all,” according to Fabio Lacerda Campos, manager, access and financial services at the São Paulo arm of Sebrae, a government agency to promote SMEs. According to a proprietary survey, in the last five years just 36% of companies in the state had taken out a loan. That compares to a full 57% that said they would do so were it cheaper and easier. The lack of bank financing has led to the flourishing of supplier-customer loans, the survey found: that market experienced 70% growth over the period while bank lending actually shrunk, by 8%.

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