At a regional level, nearly 16 million people are looking to purchase financial services online. Of this group of consumers, approximately 11% are exploring options for acquiring a credit card.
The interactive information system developed by CentralAmericaData, monitors in real time the changes in consumer habits in all markets of the region, with fundamental information to understand the new commercial environment that has emerged in an accelerated manner.
The coronavirus has left an economic impact in several countries. For this reason, some governments are developing exceptional measures to mitigate its effects. For example, the suspension of tax and mortgage payments to lessen the economic pressure on small businesses and households.
In the United States, interest rates were reduced to almost zero and a US$700 billion stimulus program was launched in a bid to protect its economy, says Mario Miranda, director of finance at MonederoSMART.
For the last four years the loan portfolio of the Salvadoran financial system has been growing at an average rate of 3.5%, below the 11% growth average in the rest of the region.
A report produced by the rating agency Moody's notes that growth in El Salvador's financial sector has been stagnant since 2010, as the total loan portfolio has not achieved growth rates above 3.5% per year.
Under an agreement between the Davivienda Bank and U.S. AID long-term loans to small and medium enterprises will be enabled.
The U.S. Agency for International Development (USAID) and Banco Davivienda Salvadoreño S.A. signed an agreement pledging to promote access to finance for Salvadoran SMEs in order to improve productivity and exports, one of the goals of the Partnership for Growth between El Salvador and the United States.
Wires received in the most remote areas of the country are a major factor for the growth of microfinance institutions (MFIs).
Where traditional banking does not exist due to operating costs preventing requests for credits of $ 200 or less, there is fertile ground for small banks and credit unions, which now amount to about 250.
The regularity of wires received, in particular from relatives in the United States, enables the concept of "install your business and pay your credit with the wire", as indicated by Mercedes Llort, acting chairman of the Foundation for Microfinance Training and Consultancy, allowing the money coming from abroad to be used in productive developments.
A study by a Salvadoran consumer rights organization found that most store cards charge annual interest rates of between 36% and 91%.
El Salvador's Credit Card Law, approved last November by the Legislative Assembly, regulates transactions made using credit cards. However, cards offered by shops and stores that use a contract as confirmation of the agreement fall outside this law.
Consumer budgets are still healing from the economic crisis, delaying a recovery in credit card lending.
Almost 60.000 credit cards were cancelled during 2008 and 2009, half of them for delinquency by their owners. Many others maxed out their credit and cannot use their cards anymore.
The new credit card law seems to make things even worse, as it requires consumers to have a certified income of at least $500 in order to apply for a credit card.
An agreement between international organizations will provide up to $250 million in loans for Latin America's micro-financing entities.
The agreement was signed by Multilateral Investment Fund (Fomin), part of Inter-american Development Bank (IDB), Inter-American Investment Corporation (CII), Andean Development Corporation (CAF), Overseas Private Investment Corporation (OPIC) and Blue Orchard Finance.
According to ABANSA, the proposed maximum 22% rate would affect credit cards with a $1.000 limit or less, 59% of the market.
The Salvadoran Banking Association, known as ABANSA, warned of fewer supply of credit cards with less than $1.000 limit, if the credit card law proposal being studied is approved. With the 22% maximum interest rate, according to them, banks would not be able to cover the costs of providing this service for small amounts, as operative and irrecoverable costs increase significantly in this market segment.
The management of micro-financing in the context of the global financial and economic crisis implies challenges, but also opportunities.
With the title "The World Crisis and Micro-Finance," the Academy of Central America organized a discussion for legislative advisors and journalists, where a professor of Ohio State University, Claudio González Vega, analyzed the role of the micro-finance in the current situation.
It is necessary to prevent the governmental assistance to less solvent debtors from destroying the payment culture.
The micro-finance sector globally has a very low level of default, a product of a culture that is important to preserve by restructuring contracts in risk instead of granting direct financial assistance to debtors.
The Social Housing Fund announced that it has increased its credit coverage to attend to other Salvadoran segments.
These include Salvadoran abroad, retirees, IPSFA members and workers with variable income, independent workers and professionals, business people, people with businesses at home and micro, small and medium sized business owners.
At the same time, the FSV has increased the loan amount from $14,285.71 to $50 thousand.
Guatemala's "people's banks", that lend to the likes of small shopkeepers, aim to take their business model to the rest of Central America.
G&T Continental and Banco Industrial (BI) run mini-branches where low-income customers can cash cheques, open savings accounts and pay public-service bills.
Boosted by their success, each of the banks is aiming to reach 2,000 branches by the end of the year, some of them in Honduras, Nicaragua and El Salvador.
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