The bank announces the largest democratization of credit in the entire history of the country. low credits for those who have no way to guarantee them. Small amount credits to favor the informal economy. Loans that will be backed by official organizations before private banks, to facilitate them. Credits that seek to put an end to the terrible ‘drop by drop’.
This great program to support the popular economy fines will be officially launched this month by President Gustavo Petro, with the support of all private banks, and is anticipated by the president of Asobancaria, Jonathan Malagon, in this dialogue with the chronicler for EL TIEMPO. Malagón also reveals that the drop in interest rates for the entire banking sector is a measure to face the current slowdown in the economy and avoid a recession.
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Malagón, former Minister of Housing, came to the Asobancaria by meritocracy. He is a man of very humble origins, a peasant, educated in Valledupar, who through effort and sacrifice was able to graduate as an economist at the National University and later did specializations at Columbia University and Tilburg University (in the Netherlands), one of the the best and most features in the world.
It is the moment in which the financial sector has to help those most in need and the most vulnerable population.
The manager opens his dialogue stating the following: “It is expected that despite the good growth last year, this year the Colombian economy will slow down. For the second semester of the year we are going to have negative growth rates. So, this is the moment in which the financial sector has to help those most in need and the most vulnerable population. And one of the measures that we have taken is to lower interest rates. It’s not the only one. There is also strong support from the financial sector for the popular economy goals that President Petro has proposed”.
What is it about?
The President wants, and it is one of the central axes of his development plan, that we make a great leap forward in terms of financing the popular economy.
What does that mean?
Colombia is a country that has good levels of bank access. When we talk about transactions, nine out of ten Colombians have financial products, but from the point of view of credit, only one out of three Colombians have credit. The President wants these levels of credit not only to increase, but to do so particularly for those who live in dispersed rural areas and those who earn less than two minimum wages. And those who are also small entrepreneurs.
But what is the goal of what you call ‘popular economy’?
The great financing goal of the popular economy is that we can give many loans of less than 2 million pesos to people who have not been banked in the last five years. Not only do we have the decision to support that goal of popular economy, but we believe that This reduction in interest rates that we are seeing through competition is going to be very favorable for the economy in this context of slowdown.
And how are these small credits going to be guaranteed by those who receive them?
The National Guarantee Fund supports these people.
Only?
The second thing is that there will be a rediscount rate, and for that the second-tier banks, like Banco Agrario, will be injecting capital into the banks. And the third piece is the private bank, which together with the first-tier public bank is going to disperse these credits. We want to disperse these credits throughout the national territory. The Government will launch this program at the end of March and will launch it hand in hand with the private sector. And we accompany it, we subscribe to it and we will make it a reality.
With all the private banks?
Yes, private banks. We are going to participate actively, like the public banks, actively, in the goal of Financing to the economy.
What is the credit situation in the country today?
In Colombia, 33,000 daily credits are delivered. That is like filling El Campín, every time the sun rises, with people who have credit. And this is not including credit cards. The figure of 33,000 daily loans is very important, but it is a figure that is concentrated in only 34 percent of Colombians. We want more Colombians to have access to credit. That is a great purpose of the Government and we are also in the same line.
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But will they be credits of what amount?
We want more Colombians to have access to credit. That is a great purpose of the Government and we are also in the same line.
They are low amount credits, because it is the first financial experience. They can be up to 2 million pesos, and have a productive vocation, for people who want to start a business. With this, for example, leverage farmers who are in scattered areas, who will have some working capital. It is a policy that the Government will be launching at the end of March and we have already activated it. We have been working hand in hand with the Government for many weeks, closely coordinated with the public Opportunities Bank, which serves as a hinge between the Government and the private sector to coordinate these efforts.
Is this the credit or the ideal system to combat the ‘drop by drop’?
That’s how it is. Because? Because this segment of the population that today does not have access to the formal financial system is facing rates of the order of 15 or 20 percent daily. So someone who pays 10 percent daily ends up paying at the end of the day rates that exceed 1,000 percent effective per year.
Is this credit aimed precisely at informal people?
Yes Yes. This credit wants to reach those who traditionally have not been financially included.
In Colombia, some people say that to obtain a bank loan, the first thing to do is show that you do not need it…
Yamid, today one in three Colombians already has credit. That is a significant number. Of course we still have a long way to go, but we have already reached figures of the order of 33 percent of adults who now have credit.
With respect to the drop in interest rates, there are those who believe that there is apparently a contradiction. While the Bank of the Republic raises them to combat inflation and curb consumption, the banks lower them to stimulate consumption…
Inflation, which is still high, seems to have peaked. So what is envisioned is a reduction in prices in the second half of the year. This bank measure in a certain way reflects the interest rate perspective that will come in the next six months and anticipates an eventual correction in which the bank will inject much more liquidity into the economy for a much more expansive monetary policy . It is not a contradiction, what we are seeing is that the banks are anticipating a monetary policy correction, given that inflation is already being controlled.
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But isn’t it a bit irresponsible or rash on the part of the banks to lower rates, stimulate consumption, without clearly knowing what will happen to inflation?
Of course, banks are very responsible in granting credit at this time according to the level of indebtedness that each of the households has. This does not mean that the liquidity faucet is opened indiscriminately, but it does send a very clear signal: the purpose of changing these interest rates is to make more income available. So that? For the rest of consumption, the financial burden on households is lower, and a lower financial burden on households will be essential so that in this context of slowdown we can move the economy forward.
And why did all the banks agree to lower rates?
That is not like that. It was a sample of how the competition operates. This is a sector where there is no price agreement, where entities cannot talk to take a position regarding how much the interest rate will be, but through competition the consumer does end up benefiting. So we saw how a bank moved, then another bank, then another bank under different conditions, because it is not the same offer. The financial sector is a competitive sector to help the consumer.
Was the measure not taken due to delinquency?
No. In fact, the behavior we see today in banking makes us happy because the non-performing portfolio levels are better than those used before the pandemic. Before the pandemic, 4.3 percent of Colombians had hung up on their obligations. Today that figure is of the order of 3.6, which is very good. It means that Colombians are paying their debts and that we do not have a structural alert from the point of view of overdue obligations.
In the last few hours, you had an exchange of messages with President Petro as a result of the banks’ decision on rates. How was this?
A complimentary language that he has captured through his trills. He has understood that this effort by the bank gives wings. The increase in the cost of liquidity that we have had means lower profitability, lower returns. Despite the fact that in January some financial entities lost losses, the President understands that we are making an extraordinary effort, that it goes against the profits of the banks and that it has the purpose of supporting the economy at a time that is complex. So, the fair recognition of the President is very welcome by the financial system and it seems to us that it also sets a tone of conversation that is very favorable between the Government and the private sector.
Is the country’s economy doing very badly?
We are entering a deceleration cycle. Growth last year was frankly very good, one of the best in the emerging world. And this year there is a consensus among analysts that the estimates for the second semester are between zero and 2 percent. At Asobancaria we are optimistic, we think it may be 1.5 percent. Which means that, although at this moment we are not in a technical recession, a complex year is coming, a year of lean times.
Is this drop in rates an instrument to avoid a recession?
Sure, of course it helps. Household consumption is a very important part of our GDP on the demand side. So, to the extent that financial pressure is eased, disposable income is produced, and that income enables greater household consumption, this will allow the economy to perform better this year and that ghost and that shadow of deceleration manage to conjugate.
Let’s say, a bank fighting against the risk of recession?
As in the pandemic, banks do not want to be part of the problem, but rather part of the solution. In the pandemic we help the Colombian economy to get ahead and at this time we will also be up to the historic challenge that corresponds to us.
Avoid recession…
Yes, so that the deceleration is less intense.
Now look, one final question: how did you come to be president of the association?
It was an intense, meritocratic selection process, with a headhunter firm. I had worked at the Banking Association as vice president. I was at another point in my life working in consulting and working abroad and this opportunity arose. I participated in the process and, finally, they chose me. I am very happy to return.
YAMID AMAT
Special for EL TIEMPO