Lending to small and medium-sized enterprises (SMEs) across Latin America is a tale of feast and famine. For Peruvian banks, things could hardly be brighter: they are thriving on the back of strong economic growth, low rates and savvy government moves to foster the market. Colombian bank lending has been growing fast too. SMEs in Brazil, on the other hand, face an uphill battle. They are encumbered by the world’s highest real interest rates and low economic growth together with a deadening bureaucracy. Even so, lending is growing and new laws to simplify company registration should help.
“SMEs find themselves sandwiched between microfinance and big companies. They get neglected while the others get all the attention,” says Greta Bull, programme manager, access to finance, Latin America and Caribbean technical assistance facility at the International Finance Corporation (IFC). She is helping to set up a new IFC unit to help Latin American 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 encourage those already there to expand portfolios. Using best practices from other regions, measures include strategic planning, encouraging banks to work closely with clients and benchmarking.
