Monica Navarro
Executive Vice President
Costa Rican Microfinance Association (ASOCOMI).
The last year has been catastrophic if we talk in terms of the increase in victims of drop-by-drop loans. Public policies par excellence should seek to reinforce prevention, in order to dedicate less resources and effort to the punitive part. Likewise, mandatory compliance requirements, sanctions for non-compliance, and prosecutions normally fall on non-compliant individuals in the formal sector. The informal ones, within which the “drop by drop” lenders fall, are immune to this type of regulatory control. Likewise, the rate cap on microcredit only affects the formal sector, limiting its ability to offer them to a larger range of clients, who are now excluded due to their risk. This limit will never be met by the informal sector “drop by drop.”
The lowest percentiles of Costa Rican society are not banked and this is because their condition does not allow them to have access to credit through these types of financial institutions. Their options are limited to obtaining a microcredit, which has much more lax requirements with an accompanying system.
Microcredit par excellence worldwide is considered the first step towards banking. But there is still the option of looking for informal lenders, who are just around the corner and who do not require any requirements for the first time. These loans become unpayable due to the different tactics that these lenders use when paying the loan, such as an increase in rates without prior notice, they disappear so that they cannot make payments and then they take it as a default by changing the conditions of the loans. , increasing weekly subscriptions, etc. Everything is aimed at ensuring that the loan never ends or that your life and that of your family members are threatened or extinguished.
At the Costa Rican Microfinance Association (ASOCOMI), we are convinced that sanctions on these informal lenders must be increased and, much more importantly, the country’s microcredit system must be strengthened; having a balanced microfinance policy and aware of the differentiated cost of a bank loan loan versus a microcredit loan.
The thesis put forward by some “experts” that putting a cap on the microcredit rate is the solution has been the perfect weapon that the informals needed to grow their business. This rate cap, which was carried out without taking into account the microcredit business model, caused the exclusion of hundreds of thousands of Costa Ricans and since people’s needs are not extinguished with a law, there is only one way left for them; the drop by drop.
The microcredit rate will always be higher than that of bank credit, but that does not mean it is unfair, usurious or whimsical. It responds to the specialized management carried out by formal microcredit companies, through which they also assume a much greater risk of non-payment than other types of loans and in most cases without assets to respond for them. A well-placed microcredit, with proper support, education and information from the client, even if the rate is high, it is completely manageable by the client; which otherwise would not have the means to acquire the good or service that it intends to finance. ASOCOMI associates, in addition to being formal companies, have a trust seal and an Ethical Collection Protocol, all always in favor of strengthening prevention.
It is urgent to approve bill 23,101 in the Legislative Assembly – Law for the promotion and regulation of microcredit as a promotion for financial social inclusion in Costa Rica, hand in hand with the bills that the Security and Drug Trafficking Commission has heard. They must go hand in hand and ensure that we are not only addressing the punitive part of those who abuse and do not comply, but also opening the market so that more people can seek formal solutions. Sanctions alone will not reduce the number of people seeking this type of loan; that solution can be provided by the microcredit sector.
2024-03-14 06:25:29
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