1. Introduction
Approximately in July-August 2006, I published the paper entitled: "COSTS ASSOCIATED WITH CREDIT FOR MICRO-ENTERPRISES IN THE PERUVIAN FINANCIAL MARKET", aimed at demonstrating the high costs of money for micro-companies (MYPES) and Peruvians in general. Interest rates are directly related to the volume of resources destined for saving and production; fact that affects the development of the country, because it artificially increases the final prices of goods and services, making financial speculation the most "lucrative" activity.
Financial speculation is technically opposed to the economic development of a country, because its application means the absence of ethical principles and economic plunder, since with its usurious rates it strips with iniquity and injustice. Speculative economic models are pillage and rentier, they operate with a “golden rule”: those who have less must pay more; nothing more unfair, the world upside down! We see this on a daily basis: the so-called "big companies" that in the Peruvian case do not represent even 1% of the national productive apparatus, enjoy royalties, exemptions and absolute freedom to protect their profit margins. If the dollar goes down, the "big businessmen" have the Central Reserve Bank that quickly goes out to buy millions of dollars to ensure their profit rate;To amass their great fortunes, they have official organizations such as the Superintendency of Insurance Banking and AFP (SBS), which legalizes usurious rates and the multiple tricks that these financial companies use to cajole their clients. On the other hand, we have MYPES excluded from "official" Peru; According to projected figures from the Ministry of Labor, they represent approximately 99.78% of the national productive apparatus, lack any preferential treatment by the State and never participate in economic policy decisions; nevertheless they produce approximately 50% of the GDP and constitute 84% of the EAP.we have MYPES excluded from "official" Peru; According to projected figures from the Ministry of Labor, they represent approximately 99.78% of the national productive apparatus, lack any preferential treatment by the State and never participate in economic policy decisions; nevertheless they produce approximately 50% of the GDP and constitute 84% of the EAP.we have MYPES excluded from "official" Peru; According to projected figures from the Ministry of Labor, they represent approximately 99.78% of the national productive apparatus, lack any preferential treatment by the State and never participate in economic policy decisions; nevertheless they produce approximately 50% of the GDP and constitute 84% of the EAP.
Banks, by receiving money on deposit, which in turn lend it in different modalities, amass enormous fortunes; that is to say, simply for the work of intermediating between economic agents: people, state and company that manage to make some kind of savings and those who need resources to finance investments or expenses.
Key words: Financial system, banks, speculation, interest rates and spread.
2. Peruvian financial entities that grant credit
Currently, the Peruvian financial institutions that grant credit supervised by the SBS are 11 multiple banking institutions: 1) Banco de Crédito del Perú, 2) Banco Continental, 3) Scotiabank Perú, 4) Interbank, 5) Inter-American Finance Bank, 6) Citibank, 7) Banco Financiero, 8) Banco del Trabajo, 9) Mibanco, 10) Banco de Comercio and 11) HSBC Bank Perú; 39 non-bank microfinance institutions, made up of: 13 Municipal Savings Banks (CM), 12 Rural Savings and Credit Banks (CRAC) and 14 Small and Micro Enterprise Development Entities (EDPYME).
Likewise, without the supervision of the SBS, outside the financial system, without legislation that regulates its activities, countless legal entities and semi-formal natural persons operate, such as: cooperatives, associations, loan houses, commercial houses; and informal as: savings and credit associations, merchants, family units, professional lenders, agiotists among many others. Currently, there are commercial houses that offer their products financed with their own credit cards. Under these conditions, without supervision and without any control, these organizations and individuals charge interest rates whose TEA exceeds 300%; surely imitating the formal credit institutions that also make their own, as we will see when we analyze interest rates.
3. Interest rates in the Peruvian financial market
We must first specify what we understand as the interest rate. Investment or financing opportunities determine the existence of the interest rate (i), represented by a percentage (%). Seen this way, the interest rate is a price, since it expresses the value of a resource subject to exchange, it is the rent paid for the use of resources loaned for a determined period. It is a balancing factor, it makes money have the same value over time. In turn, it can be periodic, that is, charged or paid in each period (weekly, monthly or annual); this rate is simultaneously nominal and effective. The periodic rate when multiplied by the reference period of the financial operation gives us the so-called nominal rate. The annual effective rate or TEA, we obtain it with the nominal rate applying the INT function.CASH from Excel or from the periodic rate with the following formula: (1 + i) n - 1. The TEA or equivalent annual rate, globally represents the payment of interest, taxes, commissions and any other type of expenses that the financial operation involve. In the world of finance, the TEA is calculated from the final fee that the financial institution sets, this fee contains all the costs, freight, commissions, insurance that the banker additionally charges the customer. In countries such as the USA, Europe and some of Latin America these costs are transparent and public knowledge.In the world of finance, the TEA is calculated from the final fee that the financial institution sets, this fee contains all the costs, freight, commissions, insurance that the banker additionally charges the customer. In countries such as the USA, Europe and some of Latin America these costs are transparent and public knowledge.In the world of finance, the TEA is calculated from the final fee that the financial institution sets, this fee contains all the costs, freight, commissions, insurance that the banker additionally charges the customer. In countries such as the USA, Europe and some of Latin America these costs are transparent and public knowledge.
In our beloved country things do not work as established by reason or the norms of a civilized world. Let's see it with a real life example:
A person who has a credit card negotiates with his bank the purchase of an obligation for S /. 1,380 from another bank that charges you about 4% monthly interest, the bank representative does the calculations and tells you that the monthly rate the bank charges is 1.20% and your fee to be paid is S /. 85.70 for 18 months. So far, things are going well, the problem arises when your statement arrives, there is a figure that you have to pay: purchase of debt S /. 1,380 and a fee of S /. 85.70 more… ITF 0.08 + Int. Credit to be financed 5.84 + Tax credit / carriage 12, less interest refund 0.52, that is, a final fee of S /. 103.10 monthly. What happened ?, is the lack of transparency, we see that from a TEA of 15.39% offered to the client, with the final quota it goes to a TEA of 41.92%, the growth is exponential.This case has possibly been experienced by a high percentage of the more than 4'300,000 Peruvians, who use credit cards and the many other millions of Peruvians who in one way or another use credit.
With a legislature that only benefits bankers and a supervisor like SBS, the financial market is no man's land. During the government of Mr. Alberto Fujimori, which they say "liberalized" the Peruvian financial system by eliminating development banking (instead of correcting it) and other micro-credit institutions; The BCR through Circular No. 027-2001-EF / 90 in force since November 21, 2001 and signed by Henry Barclay Rey de Castro, General Manager of the issuing entity, stripped this institution of its regulatory function regarding interest rates; considering that the interest rate should be determined by "the market"; a real paradox, for the implausible and absurd.
Luis Abugattás Majluf, Director of Economic Studies of the SNI, maintains: “When setting a ceiling, interest rates are not fixed, because it will fluctuate between zero and the maximum limit; the market will determine how much. This will prevent abuse. Currently the interest rate for consumer credit is 4.99% per month, which has no explanation in an economy without inflation. ” That is, a TEA of 79.38%; With this figure, Mr. Abugattás falls short, as we will see below.
Now let's see how banks applying the rates they charge for loans and the rates they pay for savings obtain their profits.
3.1. Interest rate spread
What is the “spread” or financial margin ?, I finish English, which in our language means differential. An interest rate spread is the difference between the passive rate (the rate that banks pay for deposits to savers) and the active rate (that banks charge for loans or loans granted); becoming one of the main sources of profit for bankers.
In this utility, the cost that the entity pays to savers (passive rate), less (active rate): administrative and operating costs of the bank itself, costs arising from the regulations issued by the regulatory entity, that is, the costs of intermediating resources. Consequently, the spread must cover the entire cost chain until the credits are placed and generate a profit for the banker.
Well, with this explanation we are already in a position to express what the projected spread at the end of 2006 of the Peruvian banking sector has been: 21% in national currency and 8.5% in foreign currency. This spread, according to many experts, is very high. We have a reference in the Latin American spread, at the end of 2005, it was 10.1%, according to the Latin American Federation of Banks (FELABAN).
The Director of Economic Studies of the SNI, Luis Abugattás Majluf, tells us: “… the big problem is the cost and the conditions to access the long-term financing that the investment demands. Currently in the country we have few long-term credit instruments and extremely high interest rates compared to international standards, making it impossible to obtain credit. Reality shows that banks have excess liquidity and companies are in serious trouble due to lack of money to invest. "
In this scenario, Banco de la Nación must enter with much greater force to place resources; operating with the same coverage of multiple banks making use of the free market, throughout the national territory and not only "… where there is no bank offer"; capturing savings and placing these resources in the same conditions as it is currently doing, with TEAs of 16.08%. Opening their placements with a strategic approach that favors the feasibility profiles or projects associated with long-term credit.
4. Analysis of interest rates for MYPES
For the analysis of the cost of money in the Peruvian financial system, I have selected 4 financial products of the Microenterprise Credit. First, for working capital (economic resource intended for the initial and permanent operation of the business, which covers the natural gap between the flow of income and expenses) S /. 1,000 and S /. 10,000 with repayment at 9 months; second, for fixed assets (those assets and rights that a company needs to function durably) S /. 2,000 and S /. 20,000 with repayment in 24 months; Third, for being very illustrative, I have selected a product of the Consumer Credit for S /. 500 with 12-month repayment, for people with an income less than S /. 800 monthly. All the figures have been taken from the SBS portal, which includes Multiple Banks, Financial Companies, Municipal Savings Banks, Rural Savings Banks and Edpymes;According to the SBS, "… the information presented in this section is registered directly by the companies, being themselves responsible for the accuracy of said information."
For the calculation of the TEAs I have used the final fee that the institutions of the financial system report to the SBS. According to this institution, the monthly reference fee is consistent with the Annual Cost Effective Rate (TCEA), which includes the payment of the TEA, the return of the principal, compulsory insurance, monthly charges and one-time charges. Applying Excel's TASA financial function, we obtain the periodic rate; then, by multiplying the rate obtained by 12 we obtain the nominal rate and from the nominal rate applying the function EXECTIVE CASH of Excel, we obtain the TEA. Now let's look at the cost of these loans:
CONSOLIDATION OF THE COST OF MONEY IN FOUR PRODUCTS OF THE PERUVIAN FINANCIAL SYSTEM AS OF 01/20/2007
| FINANCIAL COMPANIES | Working capital | Fixed Assets | C. Consumption | ||
| S /. 1,0009 months |
S /. 10,000 9 months |
S /. 2,00024 months | S /. 20,00024 months | S /. 50012 months | |
| MULTIPLE BANKING | TORCH |
TORCH |
TORCH |
TORCH |
TORCH |
| BBV BANCO CONTINENTAL | 61.49% | 46.69% | |||
| INTER-AMERICAN BANK | 74.08% | 43.64% | 76.62% | ||
| COMMERCE | 54.62% | 36.88% | 44.06% | 35.89% | |
| CREDIT | 42.30% | 36.44% | |||
| MY BANK | 68.23% | 57.11% | 67.07% | 47.17% | 82.36% |
| SCOTIABANK PERU | 43.32% | 31.16% | 149.97% | ||
| JOB | 128.50% | 74.18% | 138.26% | ||
| FINANCIAL COMPANIES | TORCH |
TORCH |
TORCH |
TORCH |
TORCH |
| FINANCIERA TFC SA | 122.14% | ||||
| MUNICIPAL BOXES | TORCH |
TORCH |
TORCH |
TORCH |
TORCH |
| CMAC AREQUIPA | 59.19% | 46.79% | 59.18% | 39.29% | 58.28% |
| CMAC CUSCO SA | 53.74% | 47.30% | 51.98% | 47.13% | 34.47% |
| CMAC DEL SANTA | 60.10% | 46.79% | 60.10% | 42.41% | 60.13% |
| CMAC HUANCAYO | 69.86% | 43.44% | 36.12% | 43.08% | 70.00% |
| CMAC MAYNAS | 63.62% | 53.61% | 52.90% | 35.01% | 82.49% |
| CMAC PAITA | 62.00% | 60.11% | 51.13% | 51.11% | 75.60% |
| CMAC PISCO | 59.85% | 43.90% | 58.10% | 43.51% | 71.81% |
| CMAC PIURA | 57.43% | 51.99% | 57.40% | 50.23% | 60.25% |
| CMAC SULLANA | 56.45% | 42.58% | 56.45% | 32.92% | 58.28% |
| CMAC TACNA | 63.83% | 51.11% | 58.26% | 45.93% | 47.61% |
| CMCP LIMA | 28.37% | 71.56% | |||
| RURAL BOXES | TORCH |
TORCH |
TORCH |
TORCH |
TORCH |
| CAJA NOR PERU | 79.75% | 51.25% | 205.21% | 51.19% | |
| CAJASUR | 67.67% | 51.11% | 60.10% | 60.10% | 54.98% |
| CRAC SIPAN SA | 63.43% | 64.48% | 64.46% | 64.58% | 22.91% |
| CREDINKA | 52.86% | 55.86% | |||
| SAN MARTIN | 69.61% | 81.32% | 52.59% | 52.47% | 82.55% |
| LORD OF LUREN | 60.09% | 60.10% | 60.10% | 60.10% | 61.20% |
| EDPYMES | TORCH |
TORCH |
TORCH |
TORCH |
TORCH |
| EDPYME CONFIANZA SA | 74.53% | 59.18% | 74.53% | 59.18% | 67.65% |
| EDPYME CREATE TACNA | 61.97% | 52.87% | 61.96% | 52.87% | 56.45% |
| EDPYME CREATE TRUJILL | 125.23% | 69.59% | 69.58% | 69.59% | 69.57% |
| EDPYME CREDITS AREQ | 73.95% | 48.00% | 70.19% | 47.31% | 90.56% |
| EDPYME CREDIVISION | 83.32% | 71.63% | 76.01% | 70.84% | 34.47% |
| EDPYME EDYFICAR | 80.41% | 80.14% | 70.28% | 70.27% | |
| EFFECTIVE EDPYME | 95.61% | 95.60% | 95.60% | 95.60% | 144.91% |
| EDPYME NEW VISION | 91.39% | 61.17% | 91.17% | 60.99% | 91.30% |
| EDPYME PRO NEGOCIOS | 77.17% | 52.87% | 67.37% | 46.73% | 61.81% |
| EDPYME PROEMPRESA | 64.75% | 53.75% | 59.92% | 50.23% | 69.40% |
| ROOT EDPYME | 80.01% | 70.19% | 80.01% | 60.67% |
Source: SBS - Own elaboration
A. Loan for Working Capital for S /. 1,000 with repayment in 9 months, as of 01/18/2007:
- The average TEA of 4 banks that operate with this product is 81.36%, with the Labor Bank that charges the highest TEA with 128.50%. The average TEA of 10 Municipal Savings Banks that operate with this product is 60.61%, being the CMAC of Huancayo the one that charges the highest TEA with 69.86%. The average TEA of 6 Rural Savings Banks that operate with this product is 60.61%, being Caja Nor Perú the one that charges the highest TEA with 79.75%. The average TEA of 11 EDPYMES that operate with this product is 82.58%, being the EDPYME Create Trujillo the one that charges the highest TEA with 125.53%.
B. Loan for Working Capital for S /. 10,000 with repayment in 9 months, as of 01/20/2007:
- The average TEA of 7 banks that operate with this product is 51.27%, with the Labor Bank that charges the highest TEA with 74.18%. The average TEA of 11 Municipal Savings Banks that operate with this product is 49.55%, being the CMAC Payta the one that charges the highest TEA with 60.11%. The average TEA of 5 Rural Savings Banks that operate with this product is 61.65%, being Caja San Martín the one that charges the highest TEA with 81.32%. The average TEA of 11 EDPYMES operating with this product is 65.02%, being the Effective EDPYME the one that charges the highest TEA with 95.60%.
C. Loan for Fixed Assets for S /. 2,000 with repayment in 24 months, as of 01/20/2007:
- The average TEA of 2 banks that operate with this product is 55.57%, with MIBANCO charging the highest TEA with 67.07%. The average TEA of 10 Municipal Savings Banks that operate with this product is 54.16%, being CMAC DEL SANTA the one that charges the highest TEA with 60.10%. The average TEA of 4 Rural Savings Banks that operate with this product is 59.21%, being CRAC SYPAN SA the one that charges the highest TEA with 64.46%.
In this group we highlight that the Caja Nor Perú charges the highest TEA in the system with a TEA of 205.21%. Therefore, it is excluded from the average.
- The average TEA of 11 EDPYMES that operate with this product is 74.24%, with the Effective EDPYME charging the highest TEA with 95.60%.
D. Loan for Fixed Assets for S /. 20,000 with repayment in 24 months, as of 01/20/2007:
- The average TEA of 5 banks that operate with this product is 39.47%, with MIBANCO charging the highest TEA with 47.17%. The average TEA of 11 Municipal Savings Banks that operate with this product is 41.73%, with CMAC Payta being the which charges the highest TEA with 51.11%. The average TEA of 5 Rural Savings Banks that operate with this product is 56.68%, with CRAC SYPAN SA charging the highest TEA with 64.58%. The average TEA of 11 EDPYMES that operate with this product it is 62.21%, being the Effective EDPYME the one that charges the highest TEA with 95.60%.
E. Consumer Loan for S /. 500 with repayment in 12 months, as of 01/20/2007. This product is aimed at people with incomes less than S /. 800 monthly, that is to say to the segment of the poor:
- The average TEA of 4 banks that operate with this product is 111.80%, with SCOTIABANK PERU charging the highest TEA with 149.97%. The TEA charging by FINANCIERA TFC SA for this product is 122.14% The average TEA of 11 Savings Banks Municipalities that operate with this product is 62.77%, with the CMAC MAYNAS charging the highest TEA with 82.49%. The average TEA of 5 Rural Savings Banks that operate with this product is 55.50%, with CRAC SAN MARTIN collecting the Highest TEA with 82.55%. The average TEA of 9 EDPYMES that operate with this product is 76.23%, with the Effective EDPYME charging the highest TEA with 144.91%.
As we can see from the previous figures, there are no uniform criteria in the collection of interest rates by the supervised financial entities, each of them charges what they want; If this is how the entities supervised by the SBS proceed, what can we expect from the unsupervised ones?
5. Distortions of the Peruvian financial system
One of the main distortions of the financial system represents the lack of transparency of interest rates when they sell their products, due to the absolute freedom they have to set their interest rates, commissions and expenses of active, passive and service operations, in accordance with the provisions of article 9 of the Law on the Financial System and the Insurance and Organic System of the Superintendency of Banking and Insurance, Law No. 26702.
Another element is the high degree of bank concentration, since more than 77% of the deposits of multiple banks are in only three banks (Banco de Crédito more than 35%; Banco Continental more than 25% and Scotiabank Perú more than 16 %), that is, the system lacks necessary competence. The other distortion is also represented by the fact that in our country the employer is the one who decides the bank where he will pay the wages of his workers and not the owner (worker) of those resources.
Finally, the restrictions on Banco de la Nación promoted by the Association of Banks (ASBANC) and regulated at the request of a party, which prevent this State entity from capturing and placing resources using the free market. The law of the funnel!
6. No to the official and orthodox "theory"
To the native Orthodox (MEF, BCR and financial technocrats) and those of the IMF, who maintain that inflation is only controlled with credit restriction, we respond by turning to Professor Theodonio Dos Santos who maintains: “… the countries with the lowest inflation the world at the present time: United States, with 2.2% inflation per year; Japan with -0.1%, Great Britain with 3.1%, France with 2.0%, Germany with 1.1%. Let us still take some developing countries so that they do not say (they who deny the structural difference between developed and underdeveloped or dependent economies) that we do not include the so-called emerging or developing economies, Chile has an inflation of 4.0%, Mexico of 5, 3%, South Korea 3.7%, India 4.1%. ”
According to the orthodox “theory”, “… these would be the countries with the lowest proportional volume of credit, measured by the ratio of the volume of credit and the Gross Domestic Product”.
However reality shows otherwise, we continue with Professor Dos Santos: “The Japan that has the lowest inflation (in fact, an open deflation) has the highest debt ratio (credit / GDP ratio) in the world: 186%! The United States comes close with 145.2%. Britain is not far behind with 138.8%. Germany has a credit to GDP ratio of 121.0%. France has 89.8%. Among emerging countries, Chile has a ratio of 65.9%, Mexico, 11.5%, South Korea, we do not have the data but we know that it has a high debt ratio, India has 29.1% ”.
“As we can see, the inflation / volume of credit ratio is exactly the opposite of what the theory says (with the exception of Mexico, which has a very high volume of liquidity due to clandestine remittances of money from migrants and the money laundering factor. money, among other factors that distort this credit / GDP ratio) ”.
Professor Dos Santos continues: “It does not take many turns to understand the phenomenon. High interest rates play an inflationary and non-deflationary role as claimed by the "laws" deduced (and poorly deduced, let it be clear…) of the "exact" economic science that these incompetent technocrats handle. High interest rates provoke violent cost inflation, raising profit rates in general and prices accordingly. The high interest rate increases (rather, creates) the fiscal deficit by dramatically increasing inflationary pressures. This explains why Brazil is among the highest inflation rates in the world, having the highest interest rate and one of the worst credit / GDP ratios. ”
Finally, Professor Dos Santos tells us, "… that the neoliberal-style orthodox economic science thesis plays a similar role to that of scholastic philosophy in the Middle Ages."
7. Conclusions
5.1. Regulation and supervision of all the companies, institutions and people that provide credit is urgent.
5.2. The SBS must be a technical body at the service of the country and not just for bankers.
5.3. Workers freely choose the bank where they want to put their wages, as they do in Argentina, the US and Europe.
5.4. There must be transparency in the advertising of interest rates, these must be what the client actually pays. The rates of active and passive operations must be clearly expressed, both the periodic rate and the annual effective rate; that is to say, the client must know the real cost or benefit of the financial product when signing the obligation or depositing his savings.
5.5.: “I think the problem is the attitude of the financial system, since there is a high concentration and in a market with these characteristics there is not much competition. It is important to analyze the high percentage of the item "other income", other than interest on loans, within the income structure of the financial system, which is around 25 percent. In other words, there are other costs in financial operations that make them more expensive. Furthermore, the bank spread is extremely high, for which they do not have any economic explanation. ”
5.6. Correct that companies in the financial system can freely indicate the interest rates, commissions and expenses for their active, passive and service operations. The BCR in accordance with article 52 of its Organic Law could exceptionally set maximum and minimum interest rates; for this, Circular No. 027-2001-EF / 90 must be null and void.
Referenced URLs:
THE + ECONOMIC & meta = lr% 3Dlang_es
ON + O + EXPOLIATION & meta = lr% 3Dlang_en
matematicasfinancierascag.blogspot.com /. "FINANCIAL MATHEMATICS FOR MAKING BUSINESS DECISIONS", Author César Aching Guzmán, Chapter 1, section 4.2.2.
matematicasfinancierascag.blogspot.com /. "FINANCIAL MATHEMATICS FOR MAKING BUSINESS DECISIONS", Author César Aching Guzmán, Chapter 5, number 2.
matematicasfinancierascag.blogspot.com /. "FINANCIAL MATHEMATICS FOR MAKING BUSINESS DECISIONS", Author César Aching Guzmán, Chapter 4, number 2.
* Thedonio Dos Santos, full professor at the Federal Fluminense University and Coordinator of the UNESCO Network and Chair - United Nations University on Global Economy and Sustainable Development. His most recent book is "Dependence Theory: Balance and Perspectives", Editora Plaza & Janés.
