Bold proposal by an economist to streamline financing for SMEs

Eduardo Levy Yeyati, founding partner of the consulting firm Elypsis, assured that banks are not the best channels to distribute this liquidity.

The diagnosis is on the table: in the midst of the pandemic, micro, small and medium-sized enterprises (MSMEs) are the ones that suffer the most from the forced quarantine. As is logical, the smallest remain as the most exposed to the crisis.

The Government presented a set of measures to ease the burdens on those MSMs burdened by the situation. Do they reach to stabilize them? Are they safe from an upcoming skid?

The economist Eduardo Levy Yeyati – founding partner of the Elypsis consultancy and knowledgeable about the operation of the financial system – assures that it is not. That the special lines launched by the Central Bank will help, at best, large companies.

“Only a minority of SMEs access bank credit. We must stop saying that this money goes to small businesses; I think it is confusing,” says Levy Yeyati.

The economist exposes what is already known to the vast majority of small entrepreneurs and entrepreneurs when asked about the special lines that the Central Bank has just launched. “Banks will lend them to their best clients, as is often the case with subsidized loans,” he says in dialogue with iProfessional.

Levy Yeyati goes one step further in his diagnosis: “Banks are not the best channels to distribute that liquidity,” he says.

Refers to the announcements just released by the BCRA. The loans in question are directed to MiPyMEs at a fixed rate never higher than 24% per year to cover working capital.

To achieve this, the BCRA will provide new incentives to entities to increase loans to MSMEs for the payment of salaries, as long as those entities are payment agents of the company that requests it.

Central sources commented that there will be no less than $ 130,000 million that per year are invested in Leliq but that, since that stock will not be renewed, then the banks will have no better alternative than to lend them to the private sector.

The reduction in reserve requirements will also be in force for the banks that promote this credit line.

The question is whether these funds will actually go to MSMEs, which are the ones that need them most.

For Levy Yeyati, there are more efficient alternatives to achieve the goal.

One of the ways, says the expert, would be by enabling a deeper market for check discount. So that it is cheaper and with immediate liquidity.

It also proposes the creation of a special fund for rejected checks. “I would give an automatic rollover to companies that ask for it,” he says.

What would that be like? He asks iProfessional.

A trust, for example. Banks could feed it with rejected checks; the trust pays that check and the bank pays the depositor. For the system, the check is formally rejected and the trust in turn has a claim against the drawer.

Financial trusts are widely used by commercial chains when financing their clients.

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