Some 5,800 people are left without credit each month due to rate caps | YOUR MONEY

The impact of the law that establishes caps on interest rates for loans in the financial system is already evident in a slower rate of bankarization in the country, revealed a report by the SBS.

On May 10, 2021, the regulation of the maximum interest rates that financial institutions can charge for consumer loans of up to S / 9,200 and for those destined for micro and small companies (mypes) came into force.

The SBS quantified the number of new debtors registered in its credit bureau to precisely measure the effect of this cap law on the inclusion of new credit subjects in the financial system.

Outside the system

Thus, it found that, in the second half of 2019, financial institutions banked (granted their first credit) 40,760 people per month, on average.

This figure was reduced by 5,800 in the second half of 2021, when the caps were already in force, reaching only 34,943 per month.

In other words, around 5,800 fewer people use banking services per month and are left without obtaining loans from the financial system.

This situation has been maintained in the first two months of this year, when the bank delivered its first loan to 32,896 debtors, a number 11% lower than that of the similar period in 2020 (prior to the pandemic).

“Before the law was approved, it had already been warned that the rate cap was going to reduce financial inclusion, it was going to leave many people outside the financial system, exposed to informal credit, which is much more expensive,” he told Management. Arturo García, professor of Finance at ESAN.

There are clients who do not have guarantee mechanisms and are riskier, so when evaluating them, a higher interest rate is calculated, explained Joel Siancas, president of Caja Sullana. And if said rate exceeds the limit (today at 83.7% for financing in soles) the loan can no longer be given, he said.

Greater impact

According to the SBS, the products most affected by the law are those aimed at lower-income or more vulnerable segments.

Through better customer or product segmentation, financial institutions have excluded those with higher credit risk profiles or those with smaller loans. These include loans and credit cards at socioeconomic levels C and D, group solidarity and pledge loans, as well as those aimed at women.

Although the greatest impact has been suffered by those seeking access to revolving consumer financing (with credit cards), the SBS specifies.

Products removed

These are loans in which precisely the interest rates are higher and can exceed the maximum limits set, Siancas said.

“Segments C and D are the ones with the lowest income, while 59% of micro-enterprises are led by women, many of whom are heads of households,” García commented. Likewise, it becomes more risky to lend to informal sectors, which today represent 78% of the labor force and 50% the mypes, she added.

As a result of the aforementioned law, there are products that have been eliminated from the credit offer, indicates the SBS.

“Now we are more careful about launching new products because you cannot get as close to that most needy segment, which is most affected by these types of measures,” Siancas said.

Problems

The experts agreed that financial institutions are also having problems lending to new businesses or people just starting out in the job market.

High inflation and greater informality will intensify the negative effect of the cap on rates on bankarization, García estimated.

Specialized entities are affected more

The application of the law that imposes ceilings on interest rates had an impact on 2.4% of the balance of consumer loans and mypes that were in the financial system as of April 30, 2021, according to the Superintendence of Banking, Insurance and AFP ( SBS).

Said rule affected more the portfolio of entities specialized in consumer and financial loans, followed by rural savings banks, edpymes, municipal savings banks and banks, according to the supervisor.

The rationalization of credit in regulated financial entities comes at a time when the economy is complicated and there is a greater need for financing, said Joel Siancas, president of Caja Sullana.

He warned that informal credit growth is being generated, especially for the lower income segments.

Taking such credits can involve interest rates of 600% or 700% and dangers for debtors, taking into account the extortion methods of informal lenders, he added.

–