SUGEF: Usage & quality of financial services key to microcredit success

In August 2016, over 200 practitioners and policymakers gathered in Costa Rica for a workshop on the impact of microcredit and the regulatory response to these trends in formal finance. Eight experts from the AFI network were on hand to share their experiences on provision and supervision of microcredit.

Known for its pristine lands, and cutting edge green policies, Costa Rica may not seem like a country for which financial inclusion would be a priority issue. But according to Findex 2014, only 65 percent of the adult population have a bank account, just 13 percent took out loans or accessed credit and only 25 percent had savings with any formal financial institution. So although the level of banking access in Costa Rica is making good progress, the real use of credit and saving products in the formal financial system is low, indicating that the real problem in the country is not access, but rather financial products which are not meeting the needs of potential consumers.

While a number of specific regulations for promoting credit to small and medium enterprises had been issued in Costa Rica in the recent years, the financial service providers in the country have been reluctant to develop products to cater the MSMEs. There are funds available to support new products, but there is a lack of expertise in this area, and a generally poor understanding of microfinance.

Concerned by the risks informal lending poses to the broader financial system, the General Superintendency of Financial Institutions (SUGEF) of Costa Rica consulted with the experts in the financial system to organize a three-day Forum. SUGEF hoped the forum would to improve and increase the knowledge and practical skills of the policymakers, and encourage an increase in the number of financial products and service providers offering microcredit in Costa Rica.

Taking advantage of the presence of several high-ranking officials of the local government, the Forum started with a broad overview about the interrelationship of Microcredit with other aspects of financial inclusion, including the development of the national strategies for financial inclusion and the creation of financial education programs.

Participants engaged in insightful discussions concerning regulatory frameworks and microcredit supervision policies on a variety of issues including; financial infrastructure, digital financial services (DFS), credit risk management, the role of development banking and the financing of agriculture. Very interesting discussions about the International practices and consumer´s right protection in the granting of microcredit were also held during the event.

The Forum served its purpose of raising awareness and increasing understanding, but it is only the first small step in what SUGEF hopes will be an ambitious and comprehensive program. Over the next months, SUGEF intends to conduct quarterly surveys to determine if supervised institutions are offering microcredit products. In addition, based on the feedback provided by the supervised institutions through these surveys, new regulations will be developed that will aim to promote microcredit, and increase the use and quality of financial services for all the people of Costa Rica.

The official homepage for the “International Forum on Microcredit Granting, its Impact and Regulation”, which includes video recordings of all key sessions, can be accessed by through the following link: Conference Homepage