The current status of microlending in Colombia

Central Bank of Colombia and Asomicrofinanzas

A report on the current situation in the microlending sector in Colombia was published on 30 January. The report gives the results of the survey conducted by the Central Bank of Colombia and Asomicrofinanzas, who looked at the sector in the last quarter of 2017 in Colombia and the outlook for microfinance institutions in 2018.

According to the intermediation institutions that took part in the survey, in the final quarter of 2017 there were virtually no applications for new microloans, because of the economic slowdown.

The report cites the factors that have an impact on the process for approving new microloans and the reasons for refusing them, or for only granting smaller amounts. The institution must have some prior knowledge of the client, their credit history, and the low risk level of the credit granted to grant such microloans. The main reasons for refusal are customers’ lack of ability to pay and their existing level of indebtedness.

As regards restructuring microcredit -based mainly on applying for a loan extension and a reduction in the installment payment- the report revealed that 75.9% of the institutions surveyed had refinanced part of their existing microloans in the previous three months. Most of the refinancing agreements were for loans in the trade, agriculture and personal finance sectors.

Finally, the report anticipates an upturn in economic activity in 2018, albeit a slow one. Against these expectations, 82% of intermediation entities stated during the survey that they had put strategies in place to manage the credit risk; of these, 75% include financial education plans or programs.