The microfinance market in Mexico is especially interesting, since it is, perhaps, the Latin American market where there is the greatest interest on the part of private investors to offer microcredits, which in recent years has led to the creation of entities dedicated to this business, in which many question that commercial motivation prevails over social motivation, and where the explanation has also been found for what some consider to be clear signs of over-indebtedness in certain sectors and regions.
We present an overview of the repercussions that microfinance institutions have on the economy of other countries. Currently in Mexico there is no concrete research on the direct impact that microfinance has on the economy, the microfinance sector maintains that they are of great importance for the economic development of the country, but they have not demonstrated it, therefore the importance of this research.
Keywords:
Microcredit, Economic Development, Poverty.
Abstract:
The microfinance market in Mexico is particularly interesting as it is, perhaps, the Latin American market where the interest is appreciated by private investors to provide microcredit, which has led in recent years, the creation of
organizations dedicated to this business, where many questions the prevailing commercial motivation versus social, and where they also found the explanation for what some consider are clear signs of indebtedness in certain sectors and regions.
We present an overview of the impact that microfinance has on the economy of other countries. Currently in Mexico there is no specific research on the direct impact that microfinance has on the economy, argues that the microfinance
sector are of great importance for the economic development of the country, but have not proven, therefore the importance of this research.
Keywords:
Microcredit, Economic Development, Poverty.
Introduction
Microfinance is a general term to describe financing services for low-income people or for those who do not have access to typical banking services, since it mostly focuses on loans that are directed to people or groups with few economic means, that is to say, to the least favored sector of society and who are normally excluded from the traditional financial system.
The idea of microfinance is therefore to offer small loans to people who need them and that can really be useful, since low-income people can rarely obtain any kind of financial credit from banks and the most common way in which you can get a money loan is through family or friends, that is, informally.
It is necessary to begin any investigation, as a first point, to specify the concepts that will be used in its development, in order to better evaluate and understand the results obtained, that is why general concepts and sketches about the objects are detailed of our study, with the clarification that currently there is very little bibliography of them, so that the vast majority consist of concepts from articles by recognized authors in the sector and the generation of their own definitions, so it is intended that this research is of great value and academic contribution.
1.- GENERAL ASPECTS OF FINANCIAL ADMINISTRATION
Finance is the cornerstone of the business system, as efficient financial management is of vital importance for the economic health of businesses and, therefore, for the nation and the world.
Bringham (2005: 7) believed that “proper financial management will help any business to provide better products to its customers at lower prices, pay higher salaries to its employees, and generate higher returns for investors who have provided the necessary funds to form and operate the company ».
Next, I will start from the basic concepts of financial management to go deeper into the main topic.
1.1.- CONCEPTS OF FINANCIAL ADMINISTRATION
Financial management (or simply finance) is the management and administration of money in its various forms: cash, securities, investments or assets in general. It is an activity that adds both natural and legal persons, since money represents the most important resource for a system (company) to operate.
Besley (2001: 634) believed that “sound financial management is one of the best ways for a business to remain profitable and solvent. He claimed that good management of your business finances is the foundation of all successful businesses. In other words, any business, no matter how potentially successful it may be, could fail due to poor financial management.
Ortega (2002) comments that “financial administration is defined by the functions and responsibilities of financial administrators. Although the specifics vary between organizations, the key financial functions are: Investing, Financing and dividend decisions of an organization. The funds are obtained from external and internal sources of financing and assigned to different applications. For funding sources, benefits take the form of returns, repayments, products, and services. Therefore the main functions of financial management are to plan, obtain and use funds to maximize the value of a company, which involves several important activities.
The importance of finances lies in the fact that they are a crucial element for the success of an organization since they provide rigor for decision-making, being the catalyst for growth, the standard of excellence, and the source of knowledge, but to achieve the excellent results are necessary its correct administration.
A definition of Financial Administration should summarize all the above, so its construction is difficult: Financial administration is a part of the science of business administration that studies and analyzes, as for-profit organizations can optimize the acquisition of assets and the performance of operations that generate possible returns, financing the resources they use in their investments and operations, incurring the lowest possible cost, determining how and when to return them to creditors, and rewarding investors with profits in money and capital goods, and the administration of the organization's assets.
The central theme of Financial Management is the use of money resources to invest, finance, pay investors and efficiently manage them in the form of assets.
We can then define financial administration as the means to optimize and manage the financial resources of the company, which can be their own or obtained from an external source, its purpose is to control each input and output of the financial resources of the company.
1.2.- GENERAL BACKGROUND OF THE FINANCIAL ADMINISTRATION
In the early 1990s, when financial management emerged as an independent field of study, the greatest importance was placed on the legal aspects of mergers, the formation of new companies, and the various types of securities that businesses could issue. to obtain funds. This was a time when industrialization invaded the United States: The "big" was considered "powerful", so various and numerous business acquisitions and mergers were made to create large corporations. However, during the depression era of the 1930s, an unprecedented number of business failures caused the importance of finance to shift from bankruptcy and reorganization to corporate liquidity and regulation of assets. stock markets.
During the 1940s and early 1950s, finance was taught as a descriptive field of an institutional nature, focusing on it more from an external point of view than from a management perspective. However, with the advent of computers for general business use, the focus of attention began to shift towards the internal point of view and the importance of financial decision making in the company.
During the 1970s, a movement towards theoretical analysis emerged, and the focus shifted to decisions related to the choice of assets and liabilities necessary to maximize the heat of the company.
During the eighties, the focus on valuation remained the same, but it was broadened to also include inflation and its effects on business decisions, the deregulation of financial institutions and the tendencies that this generated towards the constitution. of large and widely diversified financial services companies, it also includes the increased use of computers for both analysis and electronic transfer of information, the increased importance of global markets and business operations and innovations of financial products offered to investors. (Chiavenato: 1993)
Although financial management began completely far from the core of a company, its importance caused attention to focus on what should be part of it. Over time, companies have realized that the basis of business success is the correct administration of finances and the proper use of financial resources, which, well focused, can generate greater positive results for organizations.
1.3.- IMPORTANCE OF FINANCIAL ADMINISTRATION
Historical trends markedly increased the importance of financial management. In earlier times, the marketing manager was in charge of projecting sales; the engineering and production staff were responsible for determining what assets were needed to meet those demands, while the financial manager's job was only to obtain money needed to purchase the necessary plant, equipment, and inventory. This situation has ceased to exist today, today, decisions are made in a much more coordinated way, so that the financial manager has, in general, direct responsibility over the control process.
For people who work in the areas of marketing, accounting, production, personnel, among others, it is becoming increasingly important to understand finances in order to be in a position to do a good job in their own fields.
Therefore, there are financial implications in the event that all business decisions, by executives from other areas, must possess a sufficient stock of financial knowledge to consider these implications within their own specialized analyzes.
In order to obtain results that can satisfy the financial needs and obligations of the company, it is necessary to identify and implement a plan that helps to manage financial resources.
We can affirm that the importance of financial administration is in the adequate management of the resources that will make each area able to develop its activities correctly.
1.4.- SOURCES OF FINANCING
Financing is the essential part in the creation, maintenance and growth of any company, and this consists simply of providing the company with sufficient resources so that it can finance its activities and make the purchase of the assets that are necessary for its main activity.
Financing can be of various types, since there is not only commercial credit, there are also other types of sources from which it can be financed, such as own resources, suppliers, partner investments, the use of profits such as continuous investment, among others. For example, Liliane (2010) in ECLAC (2011) finds that in Mexico 56.7% of companies use their own sources as the main source of financing, something that we see very contrary in countries like Costa Rica, Bolivia and Chile. But to give a first global overview of the sources of financing that are available, we will illustrate it with the table presented by a report from the Economic Commission for Latin America and the Caribbean (ECLAC) on possible sources of financing.
In fig. 1 we can find the structure of some financing sources. Among which are the self-generating sources of resources, internal sources of financing and external sources. As clearly exemplified, we have different sources to finance ourselves, micro, small and medium-sized enterprises (MSMEs) generally use those marked in a darker color, those that are in white are sources to which they do not have access, so we We will focus on those that take place for this research.
Figure 1.- Sources of financing
Source (Liliane; 2010 in CEPAL 2011)
According to data from the Bank of Mexico and as mentioned in previous lines, the main source of financing is made up of suppliers, followed by commercial banks, and in the case of companies that are dependent on a group, this constitutes a source important resource. We can see all this clearly exemplified in the table of fig. 2 where the current panorama of the companies is shown and in the table in fig. 3 where a historical data of the sources of financing of the companies is expressed.
And if we turn this same picture excluding large companies, we are left with that the financing structure of small and medium-sized companies presents a very similar behavior, only the level of penetration maintained by banks in this sector varies, which decreases to slightly less than 17% of the total participation, with everything and that these companies represent 99% of the total number of companies in the country.
Figure 2- Companies that obtained some type of financing in 2012:
Source: Survey of Conjunctural Evaluation of the Credit Market 2012. (Banco de México)
As we can clearly see in the table of financing sources represented in fig. 3, banking represents just over 19% of the loans requested by all companies in 2009, and if we look at fig. 4 banking represents 14% of the loans requested by small companies in 2009, which is a very low percentage if we compare it with other countries, although it is worth clarifying that although it is not mentioned in the table (since they are Official sources), one of the main sources of resources for small companies are the so-called lenders and in recent times, they have been replaced by companies in the process of banking regulation such as Multiple Purpose Financial Companies (SOFOMES) which are public limited companies whose main corporate purpose is the granting of credit,and / or the conclusion of a financial lease.
According to the Law, they are financial entities that do not require the authorization of the financial authorities to operate.
Fig. 3. Structure of financing sources for all companies (percentages)
Source Survey of the Economic Evaluation of the Credit Market 2010. (Banco de México)
If such financial entities maintain equity ties with credit institutions or holding companies of financial groups of which credit institutions are part, they will be called "Regulated Multiple Purpose Financial Company" (SOFOM ER), which must be subject to: the corresponding provisions of the General Law of Organizations and Auxiliary Credit Activities and of the Law of Credit Institutions; to the provisions issued under the terms of said Laws by the CNBV (National Banking and Securities Commission) and the Ministry of Finance and Public Credit (SHCP), and to the supervision of the National Banking and Securities Commission (CNBV).
If financial entities do not maintain the aforementioned links with credit institutions or holding companies of financial groups, they will be called "Unregulated Multiple Purpose Financial Company" (SOFOM ENR), which must be subject to the corresponding provisions of the General Law of Organizations and Auxiliary Credit Activities, as well as those issued under the terms of said Law by the CNBV and SHCP. The Sofomes ENR are not subject to the supervision of the CNBV, and by all the other members of the Popular savings and credit sector.
Fig. 4. Structure of sources of financing for small companies Mexico (2000-2009, percentages).
Source Survey of Economic Evaluation of the Credit Market. (Bank of Mexico)
1.4.1.- BASIC TYPE OF FINANCING SOURCES
There are different types of financing which serve to promote the development of the micro-enterprises that acquire them.
Short-term financing
They are all the obligations contracted by the company with third parties and that expire within a maximum period of one year. They are recognized in the Balance Sheet under the heading of “Current Liabilities”. A company should always try to obtain as much short-term unsecured financing as it can before seeking out someone else with collateral, as collateral itself already means a cost (for example, opportunity cost of tied up money).
Short-term financing is very suitable for companies, but first we must establish the objective for which said financing will be used, if for example you want to buy new equipment and machinery for the creation of a new product, this type of financing is not the correct one, because it is talking about a high investment that can be paid over the years as the profits are generated.
Short-term financing benefits us when there is no solvency for the daily operations of the company. Said operations can be, payment to suppliers, maintenance, purchase of stationery, etc.
Medium-term financing
Medium-term financing is all the obligations contracted by the company with third parties and that expire in a term of no less than 1 year and no longer than 5 years. During this time, periodic payments or installments (monthly, quarterly, semi-annual, annual) are made that cover the amortization of the loan capital, interest and commissions and expenses.
It is recognized in the Balance Sheet under the heading of “Liabilities No
Stream". Medium-term financing can be classified into two large groups: loans and financial leasing.
This type of financing is called medium-term because it meets a limit in the term, which is from one to five years and in the same way there is a payment obligation that the company contracts when it becomes a creditor of said financing.
Long-term financing
Long-term financing is all the obligations contracted by the company with third parties that expire in a term greater than 5 years, payable in periodic installments.
The effect on the Balance Sheet is the splitting of this debt into two parts: current (installments that expire within one year) and non-current (installments that expire after one year).
While long-term financings are those high funds that can only be paid over 5 years onwards. These credits are useful to get expensive machinery that cannot be paid in very short times or for investment in the development of companies.
Each of the types of financing will be used by the companies according to their needs.
2.- COMPOSITION OF THE FINANCIAL SYSTEM IN MEXICO
The Mexican Financial System (SFM) can be defined as the set of organizations and institutions that capture, manage and channel investment, savings within the legal framework that corresponds in the national territory.
Some authors detail their activities and define it as one that «… groups together various institutions or interrelated bodies that are characterized by carrying out one or more of the activities aimed at attracting, managing, regulating, guiding and channeling economic resources of national origin such as international »(Ortega, 2002: 65).
2.1.- INTEGRATION OF THE MEXICAN FINANCIAL SYSTEM
The Mexican Financial System (SMF) is made up of:
- Financial intermediaries, which are institutions that capture, manage and channel savings and investment to lend them to those who need money; Financial authorities, which are a set of public institutions which regulate, supervise and protect our resources from financial authorities.
Understanding the structure of the SFM gives us a general notion of the great financial apparatus that exists in our country.
The two guiding pillars of the Mexican Financial System are, the Bank of Mexico (Banxico), and the Ministry of Finance and Public Credit (SHCP). Banxico is an autonomous body, and its purpose is to provide national currency to the country's economy and coordinate, evaluate and monitor the payment system in the country and the SHCP is a dependency belonging to the federal government and is in charge of planning the Financial System Mexican. The following diagram shows you the Mexican financial authorities:
Within the SFM we find various institutions, such as regulatory, coordinating and operating institutions, among which we have:
- Banco de México (BANXICO) Ministry of Finance and Public Credit (SHCP) National Commission for the Protection and Defense of Users of Financial Services. (CONDUSEF) Banco del Ahorro Nacional y servicios Financiero (BANSEFI) Cajas de Ahorro y Crédito Popular (CACP) Multiple Purpose Financial Societies (SOFOM) Limited Purpose Financial Societies (SOFOL) Microfinance Institutions (IMF) Community Banks Governmental institutions and programs (BANMUJER, BANCHIAPAS etc.) Integrating organizations (Prodesarrollo, AMUCCS etc.)
Fig. 5 Financial authorities.
Source (CONDUSEF 2012)
The purpose of the integration of all these organizations is to grant credits to the lower sector of the population, under the supervision and surveillance of the system authorities and under an established legal framework. It can then be said that it is a set of institutional bodies and agencies that administer, capture, regulate, regulate and direct the investment of the country's low population.
2.1.1.- BANCO DE MÉXICO (BANXICO)
Banco de México is the central bank of the Mexican State and is constitutionally autonomous because it manages itself in its functions and administration.
The CONDUSEF (2012) in its online diploma on financial culture maintains that the Bank of Mexico has, mainly, the attributions of supplying the country with national currency, promoting the proper functioning of payment systems, and ensuring the stability of purchasing power of the coin.
Its autonomy was declared in 1993 (in the decree published in the Official Gazette of the Federation of August 20, 1993, where article 28 Section "B", section XIII Bis of the Political Constitution was amended) and, since then, has the responsibility of designing and controlling the monetary and exchange policy of the Mexican economy.
The autonomy of Banco de México is based on three pillars as shown in the following figure. 6.
Fig. 6. The pillars of the autonomy of Banxico.
Source (CONDUSEF 2012)
Banxico is run by the person designated by the President of the Republic with the approval of the Chamber of Senators or the Permanent Commission of the Congress of the Union, as the case may be. Upon being appointed, this person becomes the Governor of Banco de México. Banxico's work is also regulated by the Bank of Mexico Law (LBM).
2.1.2.- SECRETARIAT OF FINANCE AND PUBLIC CREDIT (SHCP)
The Ministry of Finance and Public Credit is the agency that directs the economic policy of the federal government in financial, fiscal, expenses, income - public debt
In financial matters, it is the main authority of the SFM because, among other things:
- Projects and coordinates national development planning and draws up, with the participation of interested social groups, the corresponding National Development Plan, and projects and calculates the revenues of the Federation and parastatal entities, considering the needs of federal public spending, the reasonable use of public credit and financial health of the Federal Public Administration.
2.1.3.- NATIONAL SUPERVISORY COMMISSIONS
The national supervisory commissions are decentralized bodies of the Ministry of Finance and Public Credit, they regulate and supervise the specific actions of financial institutions.
National Banking and Securities Commission (CNBV)
The National Banking and Securities Commission is the decentralized body of the SHCP in charge of supervising:
- Banks (commercial and development) Sofoles Credit information companies Popular savings and credit institutions Organizations and activities auxiliary to credit Sofomes Regulated Entities (ER) Brokerage houses Investment companies.
The CNBV seeks the stability and correct functioning of financial institutions, maintains and promotes the healthy and balanced development of the financial system as a whole, to protect the interests of users, supervises and regulates individuals and companies when they carry out planned financial activities In the law. The task of supervising financial institutions is justified because they perform functions of great importance in promoting growth and economic development in Mexico.
National Insurance and Surety Commission (CNSF)
From an extract of the General Law of Institutions and Mutual Insurance Companies (LGISMS) we take into consideration that the
The National Insurance and Bonding Commission is the decentralized body of the SHCP that is dedicated to supervising the insurance and surety sectors. This Commission is in charge of supervising that insurance and surety companies adhere to the framework of the law, performs the task of preserving the solvency and financial stability of said institutions, promotes their healthy development with the purpose of extending coverage of its services to the largest possible part of the population. (LGISMS: 2011)
National Commission of the Retirement Savings System (CONSAR)
The CONSAR is a Decentralized Body of the SHCP in charge of coordinating, regulating, supervising and monitoring the retirement savings systems. The institutions it supervises are the Afores, Siefores and the operating companies of the national SAR database, as well as - at the time - the Pensionissste.
In figure 7 we can find the 3 main functions with which the work of the National Commission of the Retirement Savings System is developed, within which the protection of the interests of the workers stands out, it also regulates, coordinates, supervises and monitors retirement savings systems.
Fig. 7. Functions of the National Commission of the Retirement Savings System
Source (CONSAR; 2012)
National Commission for the Protection and Defense of Users of Financial Services
The National Commission for the Protection and Defense of Users of Financial Services (CONDUSEF) is a public institution dependent on the Ministry of Finance and Public Credit. It is mainly dedicated to guiding, informing, promoting financial education, as well as addressing and resolving complaints and claims from users of financial services and products.
CONDUSEF is also a decentralized public body of the Federal Public Administration that has a double mission: to promote financial culture on the one hand, and to protect and defend the rights and interests of people who use or contract a financial product or service, by the other.
In accordance with its Law (Law for the Protection and Defense of the User of Financial Services, published on January 18, 1999 in the Official Gazette of the Federation), the CONDUSEF carries out actions with a double aspect of strategic, preventive and corrective function:
- Promote financial culture Resolve disputes between users and financial institutions, always seeking to achieve a respectful understanding of the parties and agree with whoever is right, Inspect and supervise the Sofomes Unregulated Entities (ENR).
On June 25, 2009, the Decree that Reform, Addition and Repeal Various Provisions of the Credit Institutions Law, the Law for Transparency and Organization of Services was published
Financiers and the Law for the Protection and Defense of the User of Financial Services.
Fig. 8 Diagram of the functions of the CONDUSEF
Source (CONDUSEF; 2012)
It is a fact that, the greater the knowledge of the loan about the operation of the different financial products and services, the latter will be able to have certainty about their rights and obligations, will be able to make better financial decisions, and reduce the risks of having problems with the institutions that provide the services to you. Therefore, within its preventive functions, the activities carried out by the Condusef are basically:
- Promote financial culture in Mexicans; that is, to educate through courses, workshops, this Diploma and related cultural events. To make the information about the most widely used financial products and services transparent, thus providing the population with tools to make decisions in financial matters; It does this through magazines, brochures, its website and press releases.
However, within its corrective functions, the Condusef protects and defends the rights of users before the country's financial institutions.
However, his line of action is always focused on seeking conciliation without having to reach the claim and the legal process as such.
When the user has a problem or disagreement with the financial institution, it is recommended that they first approach the Specialized User Service Unit (UNES) of said institution; In case the answer you get does not satisfy you, then ask the Condusef for assistance. Additionally, and in accordance with the reforms to the General Law of Credit Organizations and Activities, it will supervise and inspect very specific functions of the Sofomes ENR.
On the other hand, the Condusef can reject an inappropriate claim, which implies an analysis prior to its admission; In other words, not all claims are admissible, and the Condusef may request additional information and documentation related to the claim. Once the conciliation hearings are concluded and if the parties do not reach an agreement, in the case of Mutual Insurance Institutions and Societies, the Condusef will order the constitution of a specific reserve for pending obligations, the amount of which should not exceed the sum insured.
2.1.4.- INSTITUTE FOR THE PROTECTION OF BANKING SAVINGS (IPAB)
The Institute for the Protection of Bank Savings (IPAB) is a decentralized body of the Federal Public Administration that has legal personality and its own assets. It was created in 1999 (based on the Bank Savings Protection Law) to maintain the confidence and stability of the banking system and establish the necessary incentives for greater discipline in the market.
Being in charge of protecting bank deposits in Mexico, the IPAB created a fund that ensures, for up to 400 thousand Investment Units (UDI), the money that savers have deposited in multiple banking institutions, only in the following products:
- Savings and checking accounts Deposits in checking accounts Deposit certificates withdrawable on pre-established days Promissory notes with yield payable at maturity, and Bank acceptances.
Since 2004, the limit of this bank deposit insurance is 400,000 Investment Units (UDI), per individual or legal entity and per Banking Institution; The value of the UDI is published by the Bank of Mexico in the Official Gazette of the Federation, which as an example as of today (February 24, 2011), is 4,567782, which must be multiplied by 400,000 UDIS and the result will be the amount in pesos of the protection that concerns us, that is, $ 1,827,112.80.
The two most important governing bodies in the Mexican microfinance system are Banco de México and the Ministry of Finance and Public Credit. From this, a series of organizations that complete the integration of the SMM are broken down, all of them with relevant importance. Decentralized organizations have the CONDUSEF and IPAB, and as concentrated organizations are the CNBV, the CNSF and the CONSAR.
2.2.- INSTITUTIONS DEDICATED TO MICROFINANCING IN MEXICO.
The Secretary of Economy, through the National Microentrepreneur Financing Program (PRONAFIN), defines Microfinance Institutions (MFIs) as a legal entity or public or private trust, which has among its objectives the development of micro-businesses and / or financing for productive projects, with operational technical capacity to channel to the target population (poor men and women) the support contemplated by the Trust for the National Microentrepreneur Financing Program (FINAFIM), such as, but not limited to, intermediaries non-bank financials.
Prodesarollo (2011: 10) states that “microfinance institutions have a distinctive characteristic, they are aimed at people with an independent productive activity, that is, they are entrepreneurs or owners of a micro-business. Although the destination of the credit can be used to purchase inputs or implements, financial products are designed for entrepreneurs.
As such, MFIs do not have their own legal status or characteristics, they can be Civil Organizations (CA), Public Limited Companies, SOFOMES, SOFOLES (Limited Purpose Financial Companies are public limited companies specialized in granting credits to a certain activity or sector, for example: mortgage, consumer, automotive, agro-industrial, microcredits, SMEs, capital goods, transportation, etc.), SOFIPOS (Popular Financial Societies are microfinance entities, constituted as joint-stock companies with variable capital, which operate through authorization from the CNBV), Cooperative Societies, Mercantile Societies and even Banks. There is also great diversity in the size of MFIs, almost 21% of these have less than 5 million pesos in their portfolio and most are of recent creation.
Fig. 9. Distribution by size of institution (Mexico portfolio).
Source (PRODESARROLLO; 2011)
In figure 9. The development of companies is shown according to the loan portfolio placed and in figure 10 we can see how in recent years the legal figure has been evolving towards others that are recognized by the financial system, going from public limited companies mostly to SOFOMES mainly.
Fig. 10. Distribution of the SMM by legal entity.
Source (PRODESARROLLO; 2011).
Mexico has a strong sector of micro, small and medium enterprises (MIPYMES), which participate in economic activities such as services, commerce and industry. For this reason, the Government has promoted financing to this sector through microfinance institutions through the Development Bank.
2.2.1.- TARGET POPULATION OF MICROFINANCIAL INSTITUTIONS
As we have already mentioned, the objective of microfinance institutions is to be able to give access to financial services to the entire population that, due to their low income, is not bankable, that is, they cannot have access to resources from the institutions of the Mexican financial system. The granting of these resources is comprehensive, from providing training and advice for the proper use of them, to the granting of credits with the corresponding monitoring of the application of the resource, it is a complete cycle that must be met and all institutions Members of this system are contributing their part in the constitution of the entire great chain of credit value.
Although it has been mentioned in all the research that microfinance is aimed at the lower sector of the population pyramid shown in figure 11, this population covers a large part of the total. Microfinance institutes are the ones in charge of granting loans to this sector that, due to their low income, are not suitable for channeling into the Mexican financial system, the fact that these loans are directed to a low sector does not mean that it is a poor quality service, on the contrary there is a comprehensive system and monitoring of the credits granted.
Fig. 11 Population Pyramid in relation to Family Income
Source (Santander Serfin, 2009)
2.2.2.- MICROFINANCE PRODUCTS.
Microfinance products are those services that the Mexican Financial Sector offers through its microfinance institutions, because it is understood that the set of microfinance institutions are not only microcredits, it is much more than that, it is the diversification of services and providing access to people with fewer resources to all the services that traditional banking could offer, which is why it is also necessary to know what services the microfinance institutions offer, in order to understand these terms more widely.
Just as manufacturing companies offer us a product as such, microfinance offers us a service that gives us a series of products, which, depending on the situation and the acquisition of payment, we will be creditors, which will be described below.
Microcredit
For some economists, such as J. Stuart Mill, they define credit as the permission to use someone else's capital; Federivo Von Klein tells us that it is the confidence in the possibility, will and solvency, to fulfill an obligation contracted; Roscoe Turner says it is the promise to pay in money;
«It is also an agreement established on a bilateral basis between a creditor and a debtor, based on the reputational and solvency attributes that the latter has, which satisfy the creditor to entrust the use of goods and wealth for a specified period, to which term can recover them »(Ibarra, 2005: 193)
These concepts allow a brief understanding of the nature of credit, however, we must also take into account what application the person who receives the capital will give it, as this factor is important in the study of credit.
It is normal to think that the capital of others that is granted through a credit, is used only to be spent, it is logical to think that if the destination of the capital is only the expense, there will be no way of being repaid, that is why to avoid that the credit is distort, it is necessary that there is a base on which to support the possibility of recovering the capital, either through future resources or through guarantees. If the capital is used for productive purposes then the credibility of being recovered increases because it is based on the confidence that the debtor will increase his resources, therefore he will have the economic power to repay the credit.
As it is almost impossible to find a single definition, it is important to at least try to give some precision or approach, for which we can determine that all definitions generally center and revolve around several criteria, which it is necessary to specify. in order to get closer to a precise definition of the concept, which would be:
- Loan size. These are small amounts, that is, “micro” loans, which are not very attractive for traditional banks, due to their high operating cost and low profitability. Objective Segment. Microentrepreneurs, generally members of low-income families, who do not have access to traditional banking services. Destination of funds. Activity that generates value or productive activity. Income generation and development of the microenterprise, whose main characteristic is the degree of its informality. However, the funds may also be for community use. Loan terms and conditions. Short terms, frequent repayments and absence of guarantees of legal execution. Most of the terms and conditions for microcredit loans are easy to understand,and appropriate to the local conditions of the community or target group. Credit Technology. Process of promotion, information, selection, evaluation, placement, monitoring and recovery of unconventional credit, intensive in the use of human resources and, therefore, intensive in the cost associated with each of the transactions.
Taking into account the aforementioned criteria, at the Microcredit Summit that was held in February 1997, the following definition was adopted:
"Microcredit, is the name given to those programs that grant small loans to poor people, for projects that are income generators and self-employment, allowing the care and maintenance of them and their families" (Retrieved from EAN magazine, Microcredit, Successful stories and experiences of its implementation in Latin America).
That is, microcredit is the placement of small loans to very poor people or entrepreneurs (Very poor microentrepreneurs are defined as those who do not have all their basic needs satisfied. However, some institutions that work in the field of microfinance do not share the same same poverty criterion) as to qualify or be able to meet the requirements demanded by traditional bank loans.
- - SCALE AND SCOPE OF MICROFINANCE INSTITUTIONS.
Related to the concept of financial self-sufficiency (or as sustainability is often called) are the concepts of scale and scope. Regarding the first, scale refers to the size of the clientele of a microfinance institution. The scope refers to the degree of poverty of the clients served by a Microfinance Institution.
In order to determine the scope of a microcredit program, indirect indicators or proxies are used as imprecise but simple measures. Predominantly, the size of the loan is a measure used to determine the scope of an institution, the poorest being the client who receives a smaller loan.
Other indicators used are: amortization periods (the shorter, the poorer the clientele); the percentage of women in the portfolio; the rural location of the program; the education level of the clients, the race or ethnicity of the clients; materials for clients' homes; or access to basic services by the population served.
2.3.1.- NATIONAL COVERAGE OF MICROFINANCIAL INSTITUTIONS.
Mexico represents a great challenge for microfinance in terms of coverage; It is a very large country with great variations in the distribution of the population, on the one hand it has a high concentration of population in urban centers and on the other, a very dispersed population throughout the national territory.
The urban population is divided into nine large metropolitan areas with more than one million inhabitants, in which 50% of the urban population (35% of the country's total population), eighty-one cities with populations between one hundred thousand and one million inhabitants in which almost twenty-eight million inhabitants reside and two hundred and seventy-three small cities where almost nine million inhabitants live.
Faced with that 70% urban concentration, the remaining 30% live in rural areas. According to data from the year 2000, six and a half million people live in 45,000 localities with less than 2,500 inhabitants, these are located in areas near cities and regional population centers. There are more dispersed areas; Just over 13.2 million people live along Mexico's highways, distributed in almost eighty-seven thousand communities.
The greatest challenge for all types of services is offered by the little less than sixty-four thousand isolated communities that are home to almost five million people, the vast majority living in poverty and extreme poverty. The conditions of isolation are directly related to the level of poverty of the population.
For the analysis of geographic coverage, the information of seventy-nine institutions practicing Prodesarrollo has been compiled, including the AMUCSS network, the branches of Admic, Finsol, Fondo 5 de Mayo and Pronegocio14. It is estimated that this coverage represents 80% of the total of existing branches in the country of microfinance institutions focused on microenterprises:
- Total branches mapped 1,282 Estimated total existing 157,415 Percentage collected 81%
In Mexico there are almost three (2.8) branches or microfinance service centers for every two hundred thousand inhabitants, but this coverage is not the same throughout the country, in Chiapas, Chihuahua, Tabasco, Veracruz and Campeche there are an average of 6.7 branches for each two hundred thousand inhabitants, while in twelve states, the proportion is less than two branches or service centers.
In terms of coverage, in all states there are branches of institutions associated and not associated with ProDesarrollo, with a greater concentration in the south central states. From the municipal point of view, the branches or service centers are located in four hundred and fifty-six municipalities, 19% of the total number of municipalities in the country.
There are states that have a greater presence of microfinance institutions, but which are concentrated in the capitals and the main urban centers, while in other entities of the country, there are a smaller number of institutions, but which are more distributed among their municipalities. On the other hand, there are entities in the country that have little presence and little coverage, especially in the northern states where the concentration of the population is also lower.
The states of the Mexican Republic with the highest number of branches are Veracruz with one hundred and sixty-nine, Chiapas with one hundred and fifty-eight, the State of Mexico with two hundred and twenty-two, and Puebla with 96. The number of branches does not necessarily mean geographic coverage; In Chiapas, only 50% of the municipalities are covered, in the State of Mexico it increased from 40% to 70% of the municipalities covered in less than 2 years, in Veracruz, 32%, and in Puebla, 19%. (fig. 12)
The states with the highest number of branches increased an average of thirty-four branches compared to the last two years.
Fourteen states have a municipal presence percentage of less than 20%, eleven states have between 20% and 50%, and seven states have branches in 50% of the municipalities.
Fig. 12. Areas with the highest concentration of MFIs in Mexico.
Source (PRODESARROLLO; 2011)
It should be noted that the absence of branches in the municipalities does not necessarily mean a lack of coverage, since from one branch several municipalities can be served, depending on the geographical conditions and the methodology.
2.3.2.- STATE AND REGIONAL COVERAGE OF MICROFINANCIAL INSTITUTIONS.
In figure 12 it can be seen that the state of Chiapas is the third state with the largest number of microfinance institutions, in terms of branches (158), and in figure 2.14 it can be seen that it is number one in terms of Different companies are involved (30), despite there being so many institutions in our state, it is not possible to have even coverage of 50% of the state's municipalities, so there is still much to do in this regard.
Regarding the metropolitan area of Tuxtla Gutiérrez, it has coverage in all its municipalities, clarifying that coverage does not indicate that it has the presence of a branch, since most of the microfinance institutions are concentrated in the municipal head and capital of the Tuxtla Gutiérrez state, a place from which all the municipalities in the area are served.
Fig. 13. Number of MFIs by states.
Source (PRODESARROLLO; 2011)
2.4.- GENERAL CONDITIONS OF ACCESS TO CREDITS.
The participation of banks in the financial structure of companies, from the crises that occurred in recent years, which have created uncertainty in financial markets, has decreased, because now, despite needing the resources, companies are trying to avoid borrowing due to the instability of the financial markets, and the federal government together with the AMB have tried to stimulate financing with various programs to avoid a slowdown in our economy, which has had good results, since levels have been maintained. growth above the countries in the area.
Another of the main reasons for not using bank loans is that of high interest rates, compared to countries in the area, because while the average for the region is 8%, Mexico maintains rates of between 10% and 18%, according to the study carried out by the Bank of Mexico on the banking sector in Mexico, the main reasons why businessmen shy away from them.
The table in fig. 14, shows how there is an evident appreciation that the economic situation is deteriorating, although according to the latest unofficial numbers published by the SHCP and by BANXICO, people's perception of the economic situation has begun to decline, and according to According to the Mitofsky Consultation figures, people observe that if there is a real reactivation of the economy and they already see the possibility of real growth in both their businesses and the country in general.
Fig. 14 Reasons for companies not to use bank credit (Percentages 2000-2009)
Source: Credit Market Evaluation Survey (Banco de México)
We can clearly see that in the same way, access to bank credit is not given due to the conditions they offer and the amount of cumbersome and laborious procedures that are encountered, this is how we can see that this represents one more problem, although banks In general, they are quite homogeneous in the requirements, they are not so for the rates and credit conditions, making an analysis of the main banking institutions in our country, we can obtain the following summary:
Regarding the destination of the financial resources used, this is very diverse, and is generally used for working capital, and in some cases also to refinance the debt or the purchase of equipment, the avio credit (for working capital) is the most used by all companies in any of their sizes, followed by investment generally in fixed assets of the company, to increase its production plant, according to data published by the Bank of Mexico, the composition of the final destination of the financing of the companies in our country, is structured as follows.
As can be seen in fig. 15 Working capital is undoubtedly the destination with the highest demand, which is generally short or medium-term financing, but the one that can bring about real change and greater growth to transform a small company into a larger one is investment in fixed assets, which are generally represented with machinery or equipment that can help achieve better processes, mostly efficient, or increases in production, and this is generally a medium or long-term financing, which is easier to obtain given the purpose and guarantees that by themselves constitute investments.
Fig. 15 Structure of the destination of financing in companies.
Source: Short-term Evaluation Survey of the Credit Market (Banco de México)
CONCLUSION
This is a subject of profound relevance for the business and social sector as it turns out to be a true means of trying to achieve economic development, for this reason it is a fascinating and very broad topic, but so far it does not have enough bibliography.
The remarkableness of the Mexican financial system is that it is a means by which merchants are given the opportunity to achieve growth in their businesses, however the system is too thick and this may affect the true impact that said system has on the sector. analyzed.
Through the development of research where we analyze the Mexican financial system, we find that there is a direct relationship between the development of micro-businesses and their passage through financing granted by microfinance institutions, however, not in all cases in which a micro-enterprise accesses the microcredit is reflected in its development.
It is also possible to perceive that as a whole, the Mexican Financial System is in constant search of new tools that facilitate the development of microenterprises, however there is still a problem since microfinance institutions are increasingly demanding in the requirements that They apply to be able to provide microcredits. This in turn means that some of the companies cannot access the necessary resources to grow their businesses.
BIBLIOGRAPHY
- Bringham, EF (2005). Administration Fundamentals. Cengage Learning Editors. Besley, E. (2001). In S. Besley, Fundamentals of Financial Management (p. 919). Mexico: McGraw Hill.Ortega (2002) article retrieved from http://articulosfinanzas.blogspot.mx/ Chiavenato, I. (1993). Initiation to financial administration. Mexico: McGraw-Hill. (2011). Statistical Yearbook of Latin America and the Caribbean, United Nations, BANXICO (2010) Survey on the Economic Evaluation of the Credit Market. (Bank of Mexico) http://www.banxico.org.mx (2013). The financial system. Obtained from Banco de México: http://www.banxico.org.mx Ortega (2002) retrieved from the Asociación Mexicana de Asesores Independientes de Inversiones, AC (AMAII) http://www.amaii.com.mx/(April 2012). Diploma in financial culture. Obtained from condusef: http://www.condusef.gob.mx (2011). General Law of Institutions and Mutual Insurance Companies. Federation Journal. (1999). Law for the Protection and Defense of the User of Financial Services. Official Gazette of the Federation. (2011). An industry report. Benchmarkin of microfinance in Mexico, 55, Alonso Patiño, O. (2008). Microcredit: History and successful experiences of its implementation in Latin America. EAN.Cornelio (2009) Thesis "Comprehensive Diagnosis of the Financing of micro, small and medium enterprises" Autonomous University of Chiapas - FCA1.
