The population not served by commercial banks, but which receives financial services from savings and loan cooperatives (socaps), has maintained stability in its savings despite the effects of the coronavirus health contingency (Covid-19) .
At the end of 2021, the traditional deposits of the sector stood at a balance of 172,422 million pesos, that is, an annual growth of 4.4%, where immediate demand deposits represented 58.1% of total savings, followed by time deposits , which made up 41.4% of total deposits, while loans from other agencies represented just 0.2% of total deposits.
This stability in capturing savings in the cooperative sector, made up of 155 entities in operation, means that these entities have a low need for funding sources to lend, especially in rural communities, since currently 99.8% of the union’s sources of financing come from of raising resources from its more than 8.2 million members.
“The socaps operate under the Law to Regulate the Activities of Savings and Loan Cooperatives (LRASCAP) and are part of the economic activity of the social sector, with the objective of meeting the demand for financial products and services of the population not served by the banking sector”, can be read in the latest report of the Financial System Stability Council (CESF).
For the CESF, although the issue of savings is stable within the sector, a risk of concentration in depositors has been identified, so it is something that should be worked on in the future.
In the report, prepared by the authorities of the Mexican financial system, it is highlighted that although the sector has sufficient estimates for its credit risks, and thus cover overdue portfolio and losses associated with it, given the nature of its operations, the sector is exposed to factors that may impact an increase in credit risk.
These factors are mainly:
- Weakness in the actions designed for the evaluation and continuous monitoring of the payment capacity of its borrowers, guarantees and joint and several obligors, which limits the timely application of measures in the event of events that erode their income.
- Lack of quality in the formalization of real guarantees, associated with financing of qualification and avío, and spare parts, which limits the collateral mechanism to be constituted as a true tool to reduce its exposure.
Consolidation process
The socaps sector has experienced a consolidation process since 2000, which intensified as of 2014 when the deadlines for requesting authorization from the financial authorities, specifically the National Banking and Securities Commission, expired.
Currently, there are 155 authorized socaps, which account for 96% of the total assets of the sector and 91% of the partners.
The rest are in cooperatives waiting to be authorized, basic level entities that do not require authorization due to their size of assets, and entities that are awaiting an orderly exit.
The benefit for people who are members of an authorized socap is that they have deposit insurance coverage of up to 25,000 udis, which is about 170,000 pesos.
“The insurance account to protect the deposits of the saving members of the cooperative societies authorized by the CNBV ensures that 98.18% of the members are covered in all of their savings under the terms of the applicable provisions”, highlights the Supervisory Fund Auxiliary of Socaps and Protection to their Savers.
Although progress has been made in the consolidation process of the cooperative sector, there are still close to 100 entities that are waiting for an orderly exit plan to be applied to close their operations, which serve just over 482,000 people, mainly located in areas with little presence of other financial services entities.
Behavior
The CESF highlights that the economic effects of the current pandemic were felt in the behavior that the sector had during the first half of 2021; however, from the second half of the previous year there was a recovery.
In accordance, the Focoop also highlights the behavior of the sector during this pandemic period:
“In the year 2021, the socaps sector continued to work intensely; on the one hand, the authorized socaps complying with their obligations under the LRASCAP and other legal regulations, with their financial foundations, and the advantage of the cooperative identity link between their associates and the experience of the cooperative government, to adequately solve the crisis derived from the Covid-19 pandemic, showing resilience and on the other hand trying to conclude the process of five that have not obtained their authorization”.
At the end of last year, the sector registered a credit portfolio of 117,490 million pesos, that is, an annual growth of 1.7% with a delinquency rate of 4.59 percent. The profit of the sector was 3,343 million pesos, that is, a real growth of 2.2% compared to the same period in 2021.