MY GUARANTEE

Colombia 2014 | ECONOMY | VIP INTERVIEW

TBY talks to Juan Carlos Durán, President of the Fondo Nacional de Garantías (FNG), on improving the lending environment for SMEs, export guarantee provisions, and its role in the housing sector.

How would you assess the development of the Colombian economy?

Currently, our main economic partners, namely the US and Europe, are growing very slowly. In addition, with regard to commodities, we observe that China, despite impressive growth in recent years, has seen its economy grow at lower rates than before. However, we should highlight that one of the commodity prices that has remained pretty stable is that of oil, which is one of the most important ones for our economy. This global economic context has had a negative impact on our economy; nevertheless, it has been expanding at a moderate pace of 3.5%-4%. We are optimistic that positive economic prospects for 2014 at an international level will give us a further boost, as rising demand in markets such as the US and Europe will allow us to take advantage of recently signed free trade agreements (FTAs).

What role does FNG play in generating further economic activity among SMEs in Colombia?

We have been a key economic agent for SMEs in Colombia for the past 10 to 12 years, providing financing tools to such companies. We have to keep in mind that a decade ago, credit lines for SMEs in our country were rather restricted, and we have worked with financial institutions in order to open new financing possibilities for these companies. In general terms, I can say that micro and small companies in the country are the main users of our guarantees, given that medium-sized companies tend to have easier access to credit from financial institutions. For example, in 2012 we issued guarantees for over 500,000 credits that amounted to around $4.5 billion. New technologies play a major role in our activities, as we have a rather small workforce of 109 people who manage a large volume of operations. This is only made possible by technology.

“We have been a key economic agent for SMEs in Colombia for the past 10 to 12 years."

In which sectors are your clients most active?

They basically come from all the economic sectors, with the exception of agriculture, a sector that has its own institution for the same purposes, the Agricultural Guarantee Fund (FAG). Our clients come from sectors such as commerce, services, industry, tourism, construction, small-scale mining, transport, and some agribusiness, a sector that already implies some industrial engagement.

Which trends do you see in the development of the national economy?

From our own statistics, it is difficult to guess, since we serve a segment the output of which is mostly focused either on generating sufficient economic income to make a living or on generating profits in traditional activities (rather low on technology or innovation). For this reason, we do not identify special trends in the segments in which we work; however, from a broader perspective, we believe that the most interesting growth is taking place in the sectors that are being promoted under the Programa de Transformación Productiva, which has been developed by the Ministry of Commerce, Industry, and Tourism.

What's the impact and significance of your Colombia Exporta program?

We believe it has been a very useful program for companies, allocating guarantees worth approximately $50 million. These guarantees are only for loans aimed at improving companies' productivity, such as the purchase of fixed assets. I only wish we had additional funding resources in order to extend the program's duration, as this has proved to be a very successful tool for the modernization of Colombian SMEs, as well as their competitiveness.

What is your take on the housing market?

Our institution was established in 1982 to support small enterprises in Colombia. In around 2003, the government decided to boost the expansion of social housing, and we were directed to step into that particular segment by providing guarantees to people who wanted to purchase these housing units. Ever since then we have focused on the lower end of the market and the Vivienda de Interes Prioritario program. Nevertheless, our participation in this segment is rather limited: it only represents 3% of our overall activity, whereas the remaining 97% is business activity. From 2014, we will also most likely have subsidies available through a special program in cooperation with the Ministry of Housing called “86,000 housing units," so that the cost of our guarantees will be covered by the government, rather than being paid for by the borrower. Also, this program has other types of subsidies and economic support for people making use of it. For example, it provides economic support to cover the down payment, and the interest rate on the loan will be below market levels.

What are the general requirements when applying for guarantees from FNG?

It is very easy, actually. If you are an SME that would be entitled to obtain a bank loan, you simply have to comply with the bank's requirements. In fact, banks have the last word on whether to grant guarantees within a maximum amount assigned by FNG to each institution. The whole process is done over the internet between the bank and FNG and the SME does not have to do any paperwork.

Which groups are you targeting specifically?

We mainly target banks, because we believe that by doing so we can facilitate access to credit for many people. Basically, we meet with bank branch directors to talk them into granting loans to SMEs with FNG guarantees. We know that they have the last word, and we want to influence them positively since each of them has a potential multiplier effect in granting access to credit for many SMEs.

What are your expectations for 2013 and beyond?

In 2013 we are going to guarantee loans in excess of $5 billion. In terms of future prospects, FNG has been growing along with SMEs in Colombia and the dynamic is working well. In this context, we believe the future is brighter, because these types of enterprises are set to play an even bigger role in the national economy.

What is your general outlook for the Colombian economy in the coming years?

I would say that we will close 2013 on around 4% growth, but that this figure should improve in 2014. In the longer term, I foresee a sustained growth scenario for the national economy. In order to meet our real potential, I think we must keep investing in infrastructure and also invest more in innovation, as I consider these two of our weakest points today. We have made significant progress over the past few years regarding the business environment, but more must be done.

© The Business Year - December 2013