- Last week, the Ministry of Finance and Public Credit (MinHacienda) and the country’s Financial Superintendence published the Decree 222;
- It authorizes all regulated institutions that usually work with microcredit, such as cooperatives, credit societies and fintechs, to grant loans of up to four minimum wages to people without a credit history.
Colombia wants to accelerate the financial inclusion of its population, today at 83.3%, according to the Banca de las Oportunidades program, linked to the public bank Balcondex. This means that almost 29 million of the 35 million Colombian adults have some financial product in the country. But Colombia wants more than that.
Last week, according to the newspaper La República, the Ministry of Finance and Public Credit (MinHacienda) and the country’s Financial Superintendence published the Decree 222. It authorizes all regulated institutions that usually work with microcredit, such as cooperatives, credit societies and fintechs, to grant loans of up to four minimum wages (something around 3.51 million Colombian pesos, or just over $1,000) to people without a credit history and at lower interest rates than those of the parallel and illegal market in the country.
In this illegal market, that was born decades some ago in cities such as Medellín and Bogotá, criminal groups and loan sharks charge more than 10% interest per day for loans called “gota a gota” or “pago diario”. This market lives on the blackmail of poor communities, which do not have access to financial services, and has already spread to other countries in Latin America, such as Argentina and Chile, according to BBC news network. With the new decree, the Colombian government also hopes to combat this type of criminal practice.
The microcredit authorized by the new decree is aimed mainly at self-employed professionals and formal and informal small entrepreneurs with no credit history.
Credit institutions that offer this type of microcredit in Colombia will be able to use different credit assessment mechanisms, other than the traditional ones, such as the analysis of grocery shoppings and expenses with telephone, internet and digital services.
Under the new decree, Colombians who fit the profile described above will also be able to deposit an amount equivalent to up to eight minimum wages in an account, and move it through one or two previously defined instruments: personally, with an identity document; or remotely, through codes sent by messaging service.
For these cases, customers will be able to make two withdrawals and one balance check per month without having to pay any fees. For any additional service, the financial entity will need to clearly state whether it is charging a fee or not.