Real Credit case – El Financiero

The financial authorities could not have been clearer on Monday night. Credito Real’s financial position is unfavorable and is shaping up to become a tremendous headache for the financial sector, despite the fact that they insist that it does not represent a systemic risk.

Just as in the past there were problems with homeowners, to mention one of the most significant issues for the financial sector, since it affected and impacted several banks and companies, that of Crédito Real will be an example of what should not have been done.

For now, the authorities are trying to distance the firm’s problem from the rest of the financial sector, which, in the case of banking, came out of the bankruptcy of two institutions well, but with this unregulated Sofom, it can open the door to leave It is clear that greater supervision is needed in these figures, that the self-regulation and surveillance that they expected the market would provide was sufficient, but reality seems to say that this was not the case.

So far in 2022, the shares of Crédito Real have already accumulated a drop of 82 percent and with debt maturities totaling 14 thousand 639 million pesos, of which 52 percent corresponds to revolving credit lines; With these official data the perspective does not look positive.

The Ministry of Finance and Public Credit explained in a statement that Crédito Real is a company dedicated to granting loans to low-income population and payroll loans (nominera) and in the fourth quarter of 2021, the company reported a net loss of 359.4 million of weights. In February 2022, Crédito Real defaulted on a CHF170 million bond payment.

Although the company is restructuring its portfolio and is considering filing for Chapter 11 of the United States Bankruptcy Law, the panorama, all analysts acknowledge, does not look easy at all and in view of this, the authority preferred to draw its line and remind all that Crédito Real is not a systemically important institution at the local level, despite being one of the largest payroll companies in Mexico and in the case of default of the institution does not imply a risk for the stability or operation of the Mexican financial system, nor is a cascade effect anticipated for other institutions, is it?

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And on the other side of the coin, the work that Village Capital has been doing to help entrepreneurs to carry out their projects, has allowed that since 2009 more than 1,110 entrepreneurs have been prepared to receive investments; The affiliated fund, VilCap Investments alone, has invested in more than 100 program alumni, including nine early-stage companies in Latin America such as ePesos (2016), Fintual (2017), and Huli (2017).

I am telling you this because for Daniel Cossío, who is the regional director for Village Capital Latin America and who has worked with at least 130 startups from across the region helping to fuel its growth, recognizes that there is a major problem with finances in Latin America and that is lack of financial health; that people do not know what their true financial situation is, and at that point, he considers that technological innovation is already creating alternatives so that Latin Americans can have financial stability with the arrival of more startups “financial health” technology, which includes the fact that people can access a loan when they need it, manage their personal finances and plan for a stable future with cash flow and job benefits. Of course, care must be taken not to fall into those who abuse with high rates. Without a doubt, the startups of services that now work on alternative approaches will be one more element of competition in the financial sector, we will see which traditional entities face it better. For now, the currency is in the air.

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