The microfinance sector faces a complex panorama marked by the high level of customer’s debt, delinquency ratios, considering the back and high -risk portfolio could exceed 10%, according to Oscar Vílchez, regional regional manager Nor East of Caja Piura, who said that the situation increases the vulnerability of the system and limits the sustainability of thousands of microenterprises in the country.
“The products most associated with over -indebtedness come mainly from credits for working capital granted without a rigorous analysis of cash flow, consumer credits used to cover personal expenses and reprogramming or cumulative refinancing that postpone the problem without solving it. These bad practices end up weakening the payment capacity of entrepreneurs and generating negative chain effects,” said the executive.
For Caja Piura, financial education becomes an indispensable tool for entrepreneurs to learn to differentiate between productive debt and consumer debt, prepare budgets and plan financing as a development engine.
“From our institution we promote programs that include personalized advice to structure adequate loans, staggered products that grow together with the business, free training and the promotion of business savings accounts,” said Vilchez
The difference between a healthy loan and a risky over -indebtedness is clear: the first allows the entrepreneur to pay their fees with the flow of the business, maintain savings capacity and grow; While the second is characterized by fees that, according to the credit institution, can exceed 30% or 35% of the available flow, need for new loans to cover previous debts and progressive decapitalization of the company
Dangers of borrowing
Caja Piura specialist warns that direct impact is reflected in the loss of liquidity of the businesses, because much of its income is destined for debt service which causes decapitalization, inventory reduction, breaches with suppliers and, in many cases, the definitive closure of companies. “When the credit is not well planned, instead of being a growth pillar, it becomes an obstacle to the sustainability of entrepreneurship,” Vílchez said.
According to Caja Piura, the most common mistakes of microentrepreneurs when borrowing are to request credits without a clear investment plan, allocate money from the business to personal expenses, superim up future income, accept loans without comparing conditions and resort to several entities without measuring their real payment capacity.
Finally, microfinance recommends SMEs to apply practical measures to strengthen their capital sustainability in a challenging economic scenario: rigorously control their cash flows, separate personal and business finances, maintain an emergency fund of at least two months, invest in digitalization, diversify suppliers and customers, and access credits only when the expected profitability exceeds the financial cost.
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