Municipal banks in trouble: microfinance profits fall between 30% and 70%

The Municipal Savings and Credit Banks (Fepcmac) face a reduction in their profits that ranges between 30% and 70% due, in part, to late payments and non-payment by some clients who had rescheduled their debts.

According to a magazine report Microfinancethe majority of these microfinance institutions are going through an adverse scenario for their profitability in the last two months, as a consequence of a notable increase in their financial expenses.

This is the case of Caja Cusco. According to the Superintendency of Banking, Insurance and AFP (SBS), the financial income of the institution based in the Imperial City had a growth of 22.72%. However, this progress was offset by a 75.59% increase in its financial expenses.

Among the most important financial expenses is the high cost of money that Caja Cusco has had to pay to place loans on the market, due to the progressive increase in the BCRP interest rate.

“Some of these costs have been transferred to customers, not entirely, and many financial institutions have assumed part of the burden. In the case of Caja Cusco, it has directly impacted its financial income,” he said. Walter Rojas Echevarría, central business manager of Caja Cusco.

They are not the only harmful components. The new provisions to cover losses in portfolios rescheduled due to social conflicts (at the request of the SBS) now add to the delinquency and non-payment of payments by some clients who had rescheduled their debts.

“In a broader context, Caja Cusco is not alone in this difficult financial situation. Other Municipal Savings Banks have also faced a reduction in their profits, with decreases ranging between 30% and 70%. In the case of Caja Cusco, the reduction was 30%,” said Rojas.