Asset-Based Lending Colombia and Mexico

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The project aims to improve the capacity of financial institutions (FIs) to develop movable asset-based lending products and accept more broadly non-traditional forms of collateral. The project will encompass certain market level activities as well as capacity building support to selected FIs in Mexico and/or Colombia to strengthen their capacities to design and test MABL products. MABL products can include credit and debit card receivables from point of sales (POS) terminals, accounts receivables, and inventory, among others. The project will tailor support to the FIs in accordance with their specific needs resulting from the economic downturn caused by COVID-19; for example, adjustments to lending considerations and lending options may be needed in order to help MSME customers to keep their businesses running during and after the crisis, as well as helping FIs mitigate credit risks whenever possible. Based on the pre-implementation activities, the scope of work is structured with the following components: 1) contribution to the design of an eligibility methodology of movable assets as collateral security, 2) selection of financial institutions and diagnostic assessment of their capabilities, 3) capacity building to selected financial institutions, 4) pilot design and launch, and 5) non-financial services and knowledge sharing. This project is part of IFC’s corporate strategy focused on creating markets by working upstream to help identify public-sector reforms that can unlock more private investment, mobilize private capital, and provide support to countries where private capital flows are inadequate to address major development needs. In this case, this project is a result of the implementation of activities under the LAC Financial Inclusion through Collateral Registries initiative funded by Japan (Ministry of Finance) to work in Mexico and Colombia. The regulatory reforms to modernize Secured Transactions Collateral Registries (STCR) frameworks in both countries can significantly contribute to enabling the development of a new market of innovative financial products based on movable collateral that can help expand the financial services to MSMEs.