El Salvador, WOCCU to Build Business Loan Support
Government policy makers in El Salvador have taken steps to develop economic policy and payments system support for credit unions and financial cooperatives prompted by the shrinkage of commercial bank loans here.
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 chief operation officer, last week met with Salvadoran government officials to support the case for increased growth and outreach by CUs to small and micro businesses.
"We saw the crisis as an opportunity to help our members grow and to grow our credit unions," C?rdova said.
C?rdova and Branch were executing lobbying steps discussed during the recent International Seminar on Best Practices and Credit Union Operations, an event jointly sponsored by and part of the ongoing relationship between the Iowa Credit Union League and Corporaci?n Fondo de Estabilizaci?n y Garant?a de Cooperativas de Ahorro y Cr?dito de Panam? R.L., originally brought together in 2005 through WOCCU's International Partnerships Program. The April meeting in Panama City, Panama, attracted participants from throughout Latin America and the Caribbean.
According to Marta Evelyn de Riviera, vice president of El Salvador's central bank, only 5% of the country's financial sector is locally owned. During the global financial crisis, the country saw both restriction and withdrawal of services by the larger foreign-owned commercial banks. The banks' withdrawal for small business paved the way for government policy support for increased credit union participation in financing micro and small businesses, according to Mario Cerna, El Salvador's vice minister of economics.
During the civil war of the 1980s, credit unions in El Salvador maintained their operations, often as the only local institutions to provide loans to small agricultural producers, self-employed merchants and family-owned businesses, Branch said.