Credit to large companies increases, but lags behind for SMEs

Credit granted to large companies remained in positive territory during 2020 in annual terms.
But Small and Medium Enterprises (SMEs) describe a clear negative trajectory.
Credit to people for consumption is also in negative territory, in terms of consumption and personal loans.

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The pandemic has closed many businesses and affected millions of workers. But the country’s large companies have sustained obtaining credit during 2020, unlike Small and Medium Enterprises (SMEs), which remains in negative territory, reported the Association of Banks of Mexico (ABM).

In November, credit to large companies was around 2.2 trillion pesos. And despite the fact that this financing has registered a negative monthly trend since April, this segment reported an annual increase of 0.5% in the penultimate month of 2020, which kept large companies on positive ground during this economic crisis.

Meanwhile, SMEs have reported annual falls in negative territory since July 2019. This downward trajectory reached its lowest point with a 5.5% annual fall in November of last year. SMEs only obtained less than a quarter of what large companies receive when reporting 414,000 million pesos.

The ABM warned in a virtual conference that SMEs could be again affected by the contingency in various entities such as CDMX, which is on a red light. In his last conference it was indicated that they closely follow the issue to reactivate credit to SMEs, hand in hand with the government and development banks, however he omitted to give more details about it.

Likewise, the ABM reported that the sectors that most request bank loans in 2020 are those considered essential or that are recovering and need liquidity for their operations.

Consumer credit decreases in November

big enterprises — Many businesses have closed during the Covid-19 pandemic. Reuters

In addition to SMEs, consumers also registered falls in the granting of credit. Consumers are more cautious about borrowing, and the effect of the economic crisis is already being felt on people’s incomes.

In November, consumer credit fell more than 7% annually in the eleventh month of 2020. Personal loans fell almost 18%. Meanwhile, payroll loans fell 3% in the same period.

The ABM indicated that because the pandemic is reaching its highest point of contagion, this did not allow a full economic recovery in the second half of 2020.

The association assured that banks are serving all levels of customers, and that the problem of granting credit has to do with customer demand, not with their financing offer. Large companies also account for almost half of the loans restructured by banks.

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