Responsible Investment Management and Advisory Services

Microcredit in Mexico

It is a privilege for Triple Jump to support the production of a study on interest rates in Mexico. As a social investor with a local presence, Triple Jump has observed the historically high levels of interest rates in the country with concern, and consequently has sought to understand this issue and adapt its investment strategy. Triple Jump identified the opportunity to initiate this project, together with the International Finance Corporation, the Inter-American Development Bank and the German Sparkassenstiftung in Mexico in order to contribute to a better understanding of the determinants that prevent the decrease of the cost of credit, and with the aim of offering greater financial access under responsible conditions. This will allow clients to take advantage of their potential and thus improve their quality of life.

By using public databases available between 2006 and 2015, the study’s key findings on the supply side show a minimum decrease in the interest rates during this time period, with the operating costs accounting for 57% of its structure. Personnel expenses are 70% of the operational costs and further examination of causation is recommended given concerns regarding high disparity in salaries, particularly in small MFIs with low transparency and weak governability systems. Low levels of productivity and high levels of staff turnover are also listed as contributors to high personnel expenses. Even though the scope of the study does not allow a deeper analysis on the demand side, some considerations that influence the level of the interest rate include: excess demand for credit that pushes prices up, limited adoption of microcredit, low level of financial education, and the importance of other costs different than the interest rate.

The outcome seeks to outline the discussions about which actions or policies may have the greatest impact on reducing interest rates. At Triple Jump, we are satisfied with the collaboration that has been undertaken for these initial stages and expect that these represent the start of a longer-term process to continue to promote the interest of public and private sector entities in the development of an efficient and competitive market. At Triple Jump we are ready to continue supporting these efforts, with the aim of building a more inclusive Mexico.

Read the full study here in English, and click here for Spanish.