MONTERREY, Mexico--(BUSINESS WIRE)--Mexican credit unions, a specific sector of non-bank financial institutions (NBFIs), are of high economic importance to the country's overall operating environment, according to Fitch Ratings.
Credit unions provide financial services mainly to segments underserviced by banks such as specialized groups of agricultural producers, cattle raisers, farmers, small merchants, independent professionals and also micro and SMEs (small and medium-sized enterprises) with specific and relevant economic activities in the country.
As of December 2015 there were 98 Mexican credit unions with 67,000 members, providing loans for approximately USD2.230 billion.
The local regulator, CNBV (Banking and Securities National Commission), recently published financial information for these entities through December 2015. Fitch estimates that most credit unions exhibited balance sheet and income statement growth with loan portfolios growing in the double digit territory (close to 10% YoY). Funding base, which is mainly composed of member deposits and credit facilities from banks and other organisms, grew around 6%.
Credit unions operate widely within the region, providing lending activities in 24 out of 32 Mexican states. However, the larger entities are concentrated in just a few states.
Although the sector is concentrated in a few credit unions (48% of loans in the Top 5) and growth was underpinned by them, overall growth was overseen at most entities. This signals a good dynamism of lending activities under a challenged economic environment in 2015 with slow growth.
In accordance with a reform mandate to increase financial inclusion in Mexico, development banks (especially Trust Funds for Rural Development, FIRA) have continued supporting the activity of credit unions in the form of direct loans or liquid guarantees.
2015 was a relevant year for NBFIs in Mexico, as a consequence of the financial reform that drove the non-regulated Sofomes (Multiple Purpose Financial Entities) in the country to formalize their registration and certifications with the authority. This reduced the number of competitors and drove a consolidation of market participants (from more than 3,000 to nearly 1,500). As seen in that segment and in many others of the NBFIs in the country, Fitch does not discount possible consolidation in the foreseeable future for the Credit Union segment. However, given the stability and long track record of the entities, it is likely to be less than that observed in other niche entities.
Additional information is available on www.fitchratings.com