Financial sector and analysts criticize the new rate methodology for not supporting financial inclusion

The new methodology for setting interest rates made public yesterday by the Financial Policy and Regulation Board, together with the Central Bank, generates reactions against from the financial sector and analysts. Among the observations it is indicated that will affect financial inclusion, generates uncertainty and that ultimately does not generate a significant change towards a technical treatment from the same.

This Monday the 13th, the manager of the ECB, Guillermo Avellán, and the president of the Financial Board, Paulina Vela Zambrano, explained the new methodology that manages to slightly lower interest rates, in eight of the thirteen credit segments.

For Alberto Acosta Burneo, editor of Weekly Analysis, the changes made served “So that nothing changes.” Explain what the current methodology fixed by finger the rate, but the new methodology uses a collection of criteria that are not related to interest rate formation, and this creates uncertainty.

In the explanation that the financial authorities gave yesterday in a discussion held at the Central Bank, it was said that the components that have been taken into account to set the rates are: funding cost, credit risk, operating cost and cost of capital. For Acosta it is a mistake to add up these components and consider that this is the cost of the fees. Explain that the technical thing is to set the prices of money according to supply and demand.

In a recent study by Weekly Analysis It was established that the issues to be taken into account were the intertemporal preference to consume or save, the risk of the operation and the expectation of inflation. Acosta warned that in the coming months there will be an impact on smaller entities, especially those that have higher operating costs and that it will be difficult for them to keep up with large entities.

For Patricio Chanabá, executive director of the Association of Microfinance Institutions (Asomif), the new Methodology for the Calculation of Lending Interest Rates carried out by the ECB and approved by the Financial Policy and Regulation Board “It will not support financial inclusion in Ecuador.”

By reducing the cost of money in microcredit operations, the technical parameters and reality of this sector are not being recognized. “Here and in all the countries of the region, microcredits are more expensive operations because they serve people with incomes vulnerable to external situations, without the capacity to deliver guarantees, frequently without experience in handling formal financial products and with no or bad credit history ”, he explains.

In this sense, he explained that financial entities must allocate greater resources to cover much higher operating costs (the advisor goes to where the client is to analyze the situation of their productive activity), funding costs and the risk of bad debts. If the interest rate does not cover these costs, it is difficult that these loans can continue to be delivered to the smallest microentrepreneurs in the country.

For Chanabá, the people who will stop accessing these credits, unfortunately They will only have the option of resorting to usury, with stratospheric rates and that also puts your personal safety at risk.

Meanwhile, The Association of Private Banks of Ecuador (Asobanca), for its part, agreed that the new methodology is not a mechanism that helps to solve the problem of financial exclusion that afflicts the country. In Ecuador, five out of every ten Ecuadorians are outside the formal financial system.

The data on the granting of credit in Ecuador since 2007, when interest rate ceilings were set, without considering market reasons or through regulatory decisions, show that such actions only cause financial exclusion, says the entity.

In a statement he assures that people who do not have access to credit in the financial system, unfortunately, opt for informal financing mechanisms such as the chulco, where they can pay average interest rates of 1,238% per year, according to a study conducted by Equifax.

Asobanca ratified that are willing to contribute technical criteria on the best alternatives that allow more Ecuadorians to access the financial system and thus avoid falling into the hands of usury.