This type of credit is not only used for luxury expenses, but also for productive and entrepreneurial activities; but not everyone can access it.
LThe interest rate for consumer loans and credit cards in Ecuador is established, from the public sector, at a maximum of 16%. This is one of the lowest rates in Latin Americaaccording to Marcos Rodríguez, executive president of the Association of Private Banks (Asobanca).
The consumer segment is the most comparable, due to the fact that it has a very similar granting methodology, among all the countries in the region.
If compared to Colombia, for example, the rate for consumer loans and credit cards exceeds 40%. In other dollarized countries there is also a big difference with Ecuador.
So, in Panama there is liberalization; and the rate fluctuates between 20% and 29%; while in El Salvador, the rate fluctuates between 24% and 35%
“In these two dollarized countries what happens is that prioritize financial inclusion through instruments such as a credit card or consumer credit“, Rodríguez pointed out.
In other words, unlike in the Ecuadorian economy, there is more space for people of all economic conditions to access a credit card because with more flexible interest rates it is possible to absorb the risk.
In the Ecuadorian case, the system does not allow absorbing risks and a large part of the people is left out.
This is negative because those who do not have access to formal credit, in most cases they end up going to the chulquero or to informal financing, which is much more expensive and risky.
utility and impact
If political constraints are set asidethrough maximum ceilings, could be found lower interest rates and also higher, but in relation to the level of risk of each client.
In the midst of the current campaign for early elections, several presidential candidates mention lower interest rates almost by decree to finance entrepreneurs, but that would cause, according to Andrés Merino, economist and business adviser, less credit and for larger amounts rather than more credit for more Ecuadorians.
More people should be encouraged to access consumer loans and even credit cards because they have been shown to be effective instruments for financial inclusion and, furthermore, they also boost production.
According to Rodríguez, it has been possible to determine that “consumer credit is not only used for luxury expenses such as buying clothes or going on a trip, but is also used for education and productive activities”.
This type of credit, in this sense, serves to fund working capital for entrepreneurs or to support professional training.
Like microcredit, consumer loans reach the bottom of the economic pyramid, and have grown by around 18%, but could have a greater impact in a country where only two out of ten people have access to formal financing.
Eliminate rigidities
In the case of the latest resolution of the Board of Financial Policy and Regulation, which establishes a different methodology to calculate the interest rate of the business and corporate segments, it seeks to make it more flexible so that credit can be adjusted, at least a little, to economic reality.
It is not the definitive solution, but Rodríguez assured that it allows the current ceiling to be increased or lowered by 0.7% and that more companies and people can access financing.
Otherwise, the result is, as LA HORA already published, less financing, less investment and less economic growth.
This type of easing mechanism, or even liberalization, should also be considered for consumer credit. (JS)
Increase savings to improve access to credit
Outside of the formulas by decree, hand in hand with liberalization, you can have lower interest rates if you increase the amount of savings in the economy.
According to Alberto Acosta Burneo, economist and editor of Weekly Analysis, the recipe should point to the following:
1 Liberalize the flow of capital: To attract abundant savings in the developed world the Exit Currency Tax (ISD) and tax obstacles must be completely eliminated.
2 Open the Ecuadorian market to international financial competition: This is achieved by modernizing monetary and financial legislation.
3 Improve the legal framework to guarantee the property right of investors; and prevent any political and judicial decision from derailing ongoing projects and investments.
Before going for demagogic measures such as taking the reserves of the Central Bank, one should think about how to provide better conditions for access to credit in the private sector.
Late payment is not a problem in Ecuadorian banks
Aggregate delinquency is currently 3%. In December 2022, the emergency measures to control the increase in delinquency due to the effects of the pandemic were completed, however, the past-due portfolio has not skyrocketed and is under control.
This indicates that the financial system, but especially Ecuadorians, has tools to take advantage of a system of liberalization and flexibility of interest rates to increase formal activity and economic growth.
The credit portfolio in the banking system reaches around $39,000 million, but the country should aim to double that to boost employment.