Regulatory Approach to Promote Micro and
Small Enterprises financial access
The Peruvian case
Fiorella Arbulú Diaz
Superintendency of Banking, Insurance Companies and Pension
Funds
Regional Symposium “Best Practice Regulatory Principles Supporting MSME
Access to Finance”
June, 2011
Peruvian socio-economic context
Peru
• Population:
29´475,856 inhabitants
• Area:
1´285,215 km²
• Population density:
23 (/km²)
Macroeconomic Context
annual percentage change (%)
12
GDP per capita
Real GDP
10
8,000
Average Inflation
(Millions 1994 soles)
7,000
8
6,000
5,000
6
4,000
4
3,000
2
2,000
1,000
0
0
2004
2005
2006
2007
2008
2009
2010
2004
2005
2006
2007
2008
2009
2010
Poverty reveals a downward trend in the last
decade
Poverty rate
(as a percentage of population)
70
60
54.8
54.3
52.3
48.6
48.7
50
44.5
39.3
40
36.2
34.8
31.3
30
20
10
0
2001
2002
2003
2004
2005
2006
Source: National Institute for Statistics and Information (INEI)
2007
2008
2009
2010
Peruvian business is predominantly composed by
microenterprises. However, a great percentage of these
firms is still within the informal sector
Pequeña
Small
Enterprise
empresa
1.5%
Compositon
of Small
& Micro
Business
according
to taxing
Composición
de la Mype
según
formalidad
tributaria
formality
Big &
Mediana
Medium y gran
Enterprise
empresa
1.4%
30.7%
73.3%
72.6%
Informal
Formal
69.3%
26.7%
Micro Enterprise
Microempresa
97.1%
Source: INEI-ENAHO 2007, SUNAT 2007.
Microempresas
Micro
Enterprise
27.4%
Pequeña
Empresa
Small Enterprise
MYPE
SME´s
Peruvian Microcredit Supply
Peruvian Microcredit Supply
The Supply of Microcredit in the Peruvian Financial System
March 2011
Non-specialized banks, finance and leasing
companies
Participation in
Number of MSE loans
total gross loans
entities (US$ million)
(%)
18
3,416
8.4
MICROFINANCE SYSTEM
Specialized banks and finance companies
Non-banking Microfinance Institutions
Municipal Savings and Loans Institutions
Rural Savings and Loans Institutions
Micro & Small Enterprise Development Entities
38
5
33
13
10
10
4,586
1,755
2,831
2,080
468
283
74.7
87.9
68.3
66.7
70.3
79.4
Total Financial System
56
8,002
17.1
More than 50% of the micro and small enterprise credit
supply is explained by specialized institutions
Municipal
Savings and
Loans
Institutions
26%
Non-specialized
banks, finance
and leasing
companies
43%
Rural Savings
and Loans
Institutions
6%
Specialized
banks and
finance
companies
22%
* As of March 2011.
Micro & Small
Enterprise
Development
Entities
3%
MFI account for more than 70% of micro and
small enterprise debtors
Nonspecialized
banks, finance
and leasing
companies
18%
NBMFI
47%
* As of March 2011.
Specialized
banks and
finance
companies
35%
Recent Trends
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
1,000
Jun-08
2,000
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
Micro and Small Enterprises Loans
9,000
18.0
8,000
16.0
7,000
14.0
6,000
12.0
5,000
10.0
4,000
8.0
3,000
6.0
Loans (US$ million)
% of Gross loans
4.0
2.0
0
0.0
Micro and Small Enterprise Loans/
Gross loans (%)
Micro and Small Enterprise loans have grown
significantly
During the last five years, the number of micro
and small clients has notably increased
Number of borrowers according to debt size
Range
(US$)
0
500
500
1 000
1 000
3 000
3 000
7 000
7 000
10 000
10 000
30 000
Más de US$ 30 000
T otal
Source: SBS.
N° borrowers
Dec-05
Dec-10
266
123
157
67
19
23
1
656
447
260
392
216
68
146
50
1 578
Var. Dec10/ Dec05
N° borrowers
%
181
138
235
148
49
123
49
922
19.59
14.95
25.46
16.11
5.30
13.29
5.29
100.00
Microcredit interest rates have experienced
a downward trend
MFI: Interest rate for microcredit granted in local
MFI: Interest rate for microcredits and consumption
currency
loans granted
in domestic currency
(In percentage)
60
50
40
30
20
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
10
Role of the Regulator in promoting
greater access to financial markets
Role of the Regulator in promoting financial
access

Improving transparency of information:



Provides detailed information about interest rates and
commissions of credits and deposits, such as characteristics
and costs of each product.
Credit bureau.
Supporting consumer protection:



Promotes transparency and diffusion of relevant information
regarding contracts (price transparency, fair disclosure).
Promotes an adequate customer service (transparency of
information, adequate resolution of consumer complaints).
Determines and corrects unfair contract’s terms.
Role of the Regulator in promoting financial
access

Improving the regulatory and supervisory framework:





Municipal Savings and Loan Institutions were allowed to
operate in other regions (even in the Capital).
SBS expands the operations undertaken by non-banking
institutions. Currently, NBMFI are allowed to offer factoring,
leasing, rebates, financial consulting.
Additionally,
services
of
non-banking
microfinance
institutions were expanded by allowing greater access to
capital markets.
Improves prudential regulation.
Promoting the use of new technologies to deliver financial
services at lower costs:



Improves financial outreach through banking agents (from
1,689 to 9,204 banking agents in the last years).
Relaxes anti money-laundering conditions for the use of
agents to open deposits.
Promotes mobile phone banking (E-money law proposed).
Role of the Regulator in promoting financial
access

Promoting financial literacy:


SBS has launched a financial literacy program for training
school teachers about the financial and insurance systems
and pension funds (in coordination with the Ministry of
Education).
Virtual classroom available online.
Microfinance Regulation
Regulatory Framework for Microfinance
Institutions
Equal
regulatory
institutions:



treatment
to
all
financial
General Law of the Financial and Insurance Systems (Law N°
26702).
Rules for evaluation and classification of debtor (SBS
Resolution N° 11356-2008).

No special treatment for Microfinance Intitutions
(create a level playing field).

Regulation of microfinance activity
regulation of microfinance institutions.
instead
of
Credit Types
Credit Types
Corporate
Big enterprise
Medium enterprise
Small enterprise
Micro enterprise
Revolving Consumer
No Revolving Consumer
Real estate
(*) Effective since July 2010.
Criteria to define
Sales higher than US$/ 71 MM
Sales from US$ 7 MM to US$ 71 MM
Debt higher than US$ 109 M
Debt from US$ 7 M to 109 M
Debt lower or equal to US$ 7 M
Up to US$ 109 M
Up to US$ 109 M
Not applicable
Main issues of Prudential Regulation
 Entry regulations.
 Feasibility study, suitability and solvency of organizers and
shareholders.
 Minimum regulatory capital required
 Financial Intermediation is the only allowed activity.
 Requisites for directors and managers (experience, know-how).
 Regulation of specific risks:
Minimum capital ratio:
 Regulatory capital must be greater than 9.8% of total riskweighted assets and contingents (market, operational and
credit risks).
 Prudential capital adequacy: 14.3% for NBMFI (10.5% for
banks)
Main issues of Prudential Regulation
Credit risk:
 Debtor classification and loan-loss provisions based on loan
status
procyclical provisions
Rules for managing over-indebtedness risk of retailer borrowers
(SBS Resolution N° 1237-2006).
Liquidity risk:
Minimum requirements of liquidity ratios: National currency 8%,
Foreign currency 20%
Reporting requirements of assets and liabilities mismatching, by
maturity, under regular and stress scenarios and a contingency
funding plan.
Main issues of Prudential Regulation
Market risk:
Adequate administration systems of market risk
Limits for foreign exchange risk exposure:
Long net position < 60% of capital, Short net position < 15%
of capital.
Operational risk:
Adequate administration systems of operational Risk
Specific regulation to manage technology risk
Information Safety Plan
Business Continuity Plan to ensure an acceptable level of
operation of critical processes in case major internal or external
failures occur.
Thank You
www.sbs.gob.pe
Entry Regulation
Minimum Capital requirement for entry
April- June 2011
Type of Institution
Banking entities
Financial entities
Municipal Savings and Loan Institutions
Rural Savings and Loan Institutions
Micro & Small Enterprise Development Entities
US$ million
8.74
4.39
0.40
0.40
0.40
Minimum Capital Ratio
Capital ratio exceeds international standards and
prudential requirements
25
1,000
20
800
15
600
9.8%
400
8%
200
0
10
5
0
Equity (Mill. US$)
MFI Capital Ratio (%)
Banking Law Minimum Requirement (%)
International Standard (%)
Capital ratio (%)
1,200
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Equity (mill.$ )
Microfinance System Equity and Capital Ratio
Credit Risk Regulation
Debtor risk rating according to the number of days
overdue
Type of Credit
Corporate, Medium Micro and Small
and Large
Enterprise and
Risk Category
Enterprise
Consumer
Normal
0
8
With Potential Problems
60
30
Deficient
120
60
Uncertain
365
120
Loss
+365
+120
Mortgage
30
60
120
365
+365
MFI liquidity ratios remain well above the
minimum required by regulation
Microfinance System Liquidity Ratio
(In percentage)
60
Domestic currency
Foreign currency
50
40
30
20
Minimun ratio (foreign currency): 20%
10
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Dec-05
Mar-06
Minimun ratio (domestic currency): 8%
0