Bank Financing to SMEs in Colombia
The objective of this paper is to shed light on current trends and policy challenges in the financing of small- and medium-sized enterprises (SMEs) by banks in Colombia. The paper is motivated by the welldocumented financing gap for SMEs, whose causes are
complex and multi-dimensional.
Authors: Constantinos Stephanou (cstephanou@worldbank.org) is a Senior Financial Economist in the World Bank’s Financial and Private Sector Development Vice Presidency, and Camila Rodriguez (crodriguez@worldbank.org) is a consultant in the World Bank’s Latin America and the Caribbean Region.
World Bank Policy Research Working Paper 4481
The purpose of this policy paper is to shed light on current trends and policy
challenges in the financing of small- and medium-sized enterprises (SMEs) by banks in Colombia. In particular, the paper, which forms part of a broader World Bank regional project on this topic, has the following two objectives:
• to describe the evolution and characteristics of bank financing to SMEs in
Colombia in recent years
• to identify remaining constraints that impede further growth of this market,
and to develop relevant policy implications.
The paper is motivated by the well-documented financing gap for SMEs in many countries, whose causes are complex and multi-dimensional. A number of other studies have highlighted the importance of SMEs in overall employment and economic growth, as well as their financial constraints and perceived lack of access to finance.
Among other things, the paper highlights that:
• Credit institutions’ exposure to SMEs has grown significantly in recent years and currently comprises an important part of their commercial loan portfolio.
• The SME market is becoming a strategic sector for Colombian credit institutions, primarily due to its perceived profitability and growth potential.
• Banks are optimistic about the prospects of this market segment, as it is still relatively immature and not saturated.
• There has been a significant growth of leasing in recent years, which represents an important source of longer-term SME funding.
• A substantial proportion of all SME credits is supported by government programs.
• SMEs represent a sizeable portion of the lending business of most Colombian credit institutions, particularly leasing companies.
• There are virtually no banks that currently specialize exclusively, or even predominantly, in SME lending.
