Crowdfunding Financing Is on the Rise in Mexico

The crowdfunding sector continues to show increases in the volume of financing it has granted, according to the latest “Financial Stability Report” published by the Bank of Mexico (Banxico), this financing option had an annual increase of 11.6% and a quarterly growth of 11.7% as of September 2023.

As detailed in the report, in September, crowdfunding amounted to 344 million pesos in aggregate granted by 16 Instituciones de Financiamiento Colectivo (IFC) that are operating, out of 22 authorized under the terms of the Law to Regulate Financial Technology Institutions (Ley para Regular las Instituciones de Tecnología Financiera (Ley Fintech).

Read more about the crowdfunding sector in Mexico and find the most important financial news of the day with the Born2Invest mobile app.

The three main personal debt crowdfunding platforms by financing volume are Yotepresto, Prestadero and Doopla

“This year has been very interesting for platforms like ours, because being a crowdfunding platform, we have the advantage of balancing supply and demand,” commented Gerardo Obregón, director of Prestadero.

However, IFCs face a competitive context to attract other investors in the midst of the so-called rate war, in which entities such as Sociedades Financieras Populares (Sofipos) and banks have raised their rates of return for investors and savers.

In the case of Prestadero, Obregón detailed that they had to make adjustments in the range of rates within the platform for credit applicants, in addition to having to make changes in the algorithm they use for granting loans, in order to remain attractive compared to other entities.

“Even though we have raised the rate we continue to see a significant demand for credit. Currently, we estimate that we have the largest number of credit in funding within the platform,” he added.

The annual interest rates on loans charged by these entities currently range between 8.90 and 38.90%, taking into account the range of rates of the three main personal debt crowdfunding platforms by financing volume, which according to Banxico are Yotepresto, Prestadero and Doopla.

In the case of Prestadero, Obregón indicated that despite the upward adjustment they made, the rates remain competitive with respect to those offered by other entities, so that a good part of the loans are used for debt consolidation.

According to data from the institution, 52.8% of the loans funded are currently used for debt consolidation. While this phenomenon is also observed in the other IFCs, in Yotepresto it is the objective of 65.2% of the financings and in Doopla this objective occupies 62.37% of the loans granted.

“This year there was an upturn in debt consolidation, because just as rates were raised in investment, there were also increases in personal credit and credit card rates; however, this adjustment in the market was not comparable to the one we made,” said Obregón.

Non-performing loans

The Bank of Mexico also warned that non-compliance in the financing granted by IFCs is a relevant issue for the segment; according to the central bank’s report, some entities have an overdue portfolio of close to 30 percent.

“Their situation and the viability of their business model should be monitored,” Banxico indicated regarding the situation of these entities.

As for personal financing entities, Yotepresto’s past-due portfolio represents 3.2%, while Prestadero’s is 6.65% and Doopla’s is 10.04%.

__

(Featured image by gavinseim via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in EL ECONOMISTA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us