The shrinkage of commercial bank loans in El Salvador has prompted government policy makers here to develop economic policy and payments system support for credit unions and financial cooperatives.

The commitment was made in response to a joint visit by officials last week from the Federation of Savings and Credit Cooperatives of El Salvador and the World Council of Credit Unions. The move was made to help boost sagging loan support for the small and micro-business sector.

Prior government administrations in the past had encouraged El Salvador's commercial banks and microfinance institutions to provide financing support to small and micro enterprises, WOCCU said. However, during the recent financial crisis, commercial bank loans in general shrank by 5% and the funds were redirected away from the small businesses to support larger commercial enterprises. During the same period, CU loans expanded 16%, making more money available to small businesses in need.

Currently, the 32 CUs in the FEDECACES system serve 132,000 members. Nearly 20% of the CU portfolio represents loans to small or micro businesses and agricultural producers with most business loans made to self-employed merchants or family-owned businesses, according to WOCCU.

H?ctor C?rdova, CEO of FEDECACES, and Brian Branch, WOCCU executive vice president and COO, last week met with Salvadoran government officials to support the case for increased growth and outreach by CUs to small and micro businesses.