Credit unions with the capacity to support essential sectors for the economy

Playa Mujeres, Qroo. The Credit Union sector emerges from the Covid-19 pandemic with the best possible situation, Luis Morales Robles, president of ConUnión, considered it during his presentation at the XV National Convention of Credit Unionswhose motto is “the strength of the union, protagonist of the reactivation”.

Morales said that the sector has a high capacity to generate credit flow in areas, sectors and segments essential for the economy, “with the support and trust of all third parties interested in our figure of Credit Unions, we wish to state that we have extraordinary power to contribute to the current economic recovery”.

According to data from the National Survey of Business Financing 2021published in August by the National Banking and Securities Commission (CNBV) reveals that 47% of companies in Mexico have requested credit at some time since they started operations, the main source of financing is commercial banks.

Morales pointed out that “it is important to remember that there are segments that banks do not attack directly and can do so in a strategic alliance with this sector, and it is also important to identify other sources of financing that can be replaced by Credit Unions.”

He explained that there is potential for Credit Unions, despite the fact that they are in a process of either conservation or capital restitution. “The Capitalization Index (ICAP) of the sector is 23.22% at the end of June 2022, with which the sector in general has the capacity to leverage its balances for an amount that could amount to up to 40,000 million pesos more in addition to the almost 50,000 million pesos of the portfolio that it currently has, this without violating the solvency indicators and thus leveraging the balances in a more efficient way”.

Luis Morales said that the sector maintains a Delinquency Rate (IMOR) below 6% which, although high by usual averages, remains contained and is explained by the current environment, with an ICOR of 50% and adequate returns that average an ROA of 1.67% and an ROE of 8.53% from 1.27% and 7.58% respectively in the pre-pandemic stage.

CNBV

For his part, Jorge Pellicer Ugalde, Vice President of Supervision of Development Banking and Popular Finance of the National Banking and Securities Commission, mentioned that in the last 10 years, the Credit Union sector has registered a growth in the credit portfolio and partner loans, as well as a reduction in entities in operation.

“A purge of the sector can be seen during the last decade, however, the Credit Unions that have managed to consolidate a sustainable business model, also increased their level of assets”, said Pellicer Ugalde.

He added that during the last 18 months the CNBV revoked the authorization of 4 Credit Unions and 1 more obtained voluntary revocation.

He said that the 2022 regulatory agenda provides for the issuance of regulations on: capital, liquidity, IFRS9 and Cybersecurity.

Regarding capital, so that the credit unions maintain adequate capitalization in the face of the credit, market and operational risks to which they are exposed.

“Regarding liquidity: in order for entities to have the necessary liquid resources to meet their short-term obligations.

“Regarding IFRS 9: which will allow financial assets to be valued based on expected loss, so that estimates for loss of value or impairment are timely recognized.

“Regarding cybersecurity: The CNBV is working on a regulation project regarding cyber risks that is expected to be of transversal application.

“The medium-term regulatory agenda contemplates environmental, social and governance (ESG) factors, so the CNBV will incorporate the management of said factors into the regulation it issues, through the requirement of disclosure and evaluation of environmental risks”, concluded Pellicer Ugalde.

patricia.ortega@eleconomista.mx