The adjustment of internal interest rates to avoid greater credit restrictions due to the international context of rising money prices is one of the challenges of the country’s financial policy, agree experts from the Association of Private Banks of Ecuador (Assobanca), who presented this November 9, Credit X-ray report.

The effect of the increase in interest rates abroad is reflected in greater financial exclusion, says Marco Rodríguez, executive president of Asobanco.

“Private banks are making efforts to maintain the pace of credit growth, but there are public policy measures that must be taken urgently. One of them is the review of the methodology of interest rates, which causes financial exclusion today,” he says.

One of the mistakes, he adds, is to calculate the number and then think about the methodology to make it work. “What has to be done is to build a scenario so that all the people who need it can access credit.”

The idea is to create a financial system that can recognize each person’s risk and include them in an official financial market with an interest rate that recognizes that individual risk. “There is no credit more expensive than the one that doesn’t exist,” says Rodríguez.

The goal would be to prevent them from being usurously exploited, like market traders. Studies show that the interest repayment on these loans is 1200% per year.

The proposal of private banking is to think about inclusive ranges, which allow people to build a credit history, payment habits and formalize their activity.

There is absolute control over the price of money due to the policy of interest rate ceilings, says Andrea Villarreal, economic director of Asobanco. One goal would be: “to make interest rate policy more flexible so that it can adapt to the international panorama.”

The publication Asobanca is in alliance with Aval Buró and concludes that every month this year almost six thousand people joined the formal financial market, mostly women and young people under 25 years of age.

From the total number of users with formal loans from January to September this year, 49,805 clients accessed financing for the first time. They received a $195 million loan.

So, It can be concluded that an average of 5,534 new clients join banking through lending every month.

Private banks placed 21,646 million dollars in new loans between January and September 2023, through 1,324,453 operations. The money went to a total of 739,975 clients (people and companies) across the country.

However, this is an annual decrease of 5%, while the reduction in the number of operations was 8%.

Between January and September 2023, the bank placed – on average – 80 million loans every day or the equivalent of 3.3 million dollars every hour, reports Asobanca.

By September 2023, a total of 721,885 people received 6,982 million dollars in loans from private banks, of which 51% were women and 49% were men.

Of the total number of surgeries performed on natural persons (1,063,924), young people under 25 years of age had 109,007 surgeries in the first nine months of this year, or 10% of the total surgeries.

“The delivery of credit is slowing due to temporary factors of uncertainty in the economic situation in the country and uncertainty affecting the operations of various companies and industries, factors that are reinforced by regulations on the upper limits of interest rates that prevent the flow of credit to adapt to these challenges,” the report says.

In the midst of this unfavorable context, 366 thousand women accessed 2.912 million dollars in loans, through 534 thousand operations. “Users allocated them mainly to microcredits with 34% of the total equivalent value of 976 million dollars, through 219 thousand credit operations,” the report says.

Microcredits significantly contribute to the creation of jobs in the country. In Ecuador, there were 863,681 enterprises in 2022, of which 93.9% were microenterprises, which created 56% of jobs, according to the National Institute of Statistics and Censuses (INEC).

The publication of Asobanc and Aval Buró also analyzed the credit score of Ecuadorians, one of the elements that financial institutions analyze in the credit evaluation process.

The score is a score whose value ranges from 1 to 999. The higher the score, the lower the probability of default, and the closer to 1, the higher the probability.

Women recorded an average score of 705 points, showing better payment behavior than men, who reached 694 points on average between January and September 2023.

18,090 companies applied for financing

Between January and September 2023, private banks granted 14,663 million dollars in new loans to 18,090 companies, through 260,529 operations.

38% was set aside for companies engaged in wholesale and retail trade, 24% for the processing industry and 10% for agriculture, animal husbandry, forestry and fishing.

The rest of the loan was delivered, among other things, to companies dealing in real estate, construction, and transportation.

Nine out of every ten dollars of approved new loans to companies come from private banks, according to Asobanca.

At the business level, the three main activities that are credited in the first nine months of this year are trade, manufacturing and agriculture.

In the case of agriculture, livestock and fisheries, it is the third activity that received the most bank funding with a total of $1466 million between January and September 2023 (10% of the total).