Financing SMEs and Entrepreneurs 2022

9. Colombia

Key Facts on SME financing

Access to finance is one of the main conditions for the growth of micro, small and medium-sized companies. Financing allows them to make investments to increase their productivity, competitiveness, and consolidation in the market. However, when there are difficulties in accessing sources of formal financing, it is more difficult for MSMEs to make a choice between investing to modernise their operations and innovate, or face crisis situations.

During 2020, and as the COVID-19 pandemic intensified this situation got worse given difficulties in the development of markets and the impact of the pandemic on Colombian businesses (99% of which are micro, small and medium-sized companies). As a result of the pandemic, the Colombian government implemented lockdowns that led to a widespread decline in economic activity in most sectors.

Survey results from “Gran Encuesta Pyme - GEP 2020-1” for the first semester of 2020 from the National Association of Financial Institutions show a significant deterioration in entrepreneurs’ perception about the evolution of their businesses and consumer demand during the first half of the year. This was a radical change from the recovery trend experienced in the pre-crisis years. The unfavorable perception is explained by the shock caused by Covid-19 and the subsequent measures implemented to contain it, with severe negative impacts on business activity and job creation.

Although the survey “Gran Encuesta Pyme - GEP 2020-1” is as comprehensive as possible (the sample size of 1 957 companies with coverage in 18 of the 32 departments in which the country is politically divided), the informal sector is difficult to capture. Despite the fact that there are few sources for the estimates of the informal sector, from the Household Survey1 it is possible to affirm that informality constitutes about 60% of companies.

Given the impact of the COVID-19 pandemic, SMEs undertook actions to continue their operations and business obligations. Some of these actions were: (i) use of company’s cash; (ii) renegotiation of contracts with suppliers; (iii) renegotiation of debts; (iv) negotiation with employees to advance vacation periods; and (v) negotiation of layoffs with employees.

Some of the economic measures implemented for SMEs by the financial system and the government were: longer grace periods and terms of existing credits; providing access to payroll and/or employee benefits subsidies; tax benefits from national or territorial entities. The impact of the COVID-19 pandemic on production levels and the economy as a whole, required the implementation of financial measures to support companies from the National Government. This support focused on rediscounting credit lines, through Bancóldex development bank, and the expansion of guarantee lines so that entrepreneurs who did not have guarantees or collateral could make credit applications backed by the National Guarantee Fund. The application of these measures to benefit business owners influenced the volume of credit operations requested. Thus, in the industrial sector, the percentage of credit applications to the formal financial system increased to 36% during the first half of 2020, in the commercial sector it increased by 38% and in the service sector it increased by 32%, compared to the figures presented in 2019.

However, despite the growth in the volume of credit operations requested, the approvals of these requests showed a decrease in the three macro sectors of the economy. In the industry sector, the approval rate fell from 89% registered in 2019 to 72% in 2020; in the commercial sector it declined from 91% in 2019 to 71% in 2020; and in the service sector it fell from 84% in 2019 to 68% in 2020, caused by the greater perception of risk on the part of the financial system. In addition, for the cut-off of the information presented (first semester of 2021), the support that the government established to boost the supply of credit had not yet come into operation.

Regarding the use of credit, most SMEs in the three sectors used it to finance working capital. The second most frequent use of debt was the consolidation of liabilities, and the third was the purchase or rental of machinery, particularly in companies from the industry sector.

The percentage of SMEs that accessed formal credit to satisfy their financing requirements declined from 42% in 2019 to 24% in 2020. The COVID-19 crisis intensified the already low participation of alternative sources (such as leasing or factoring) in the financing of SMEs.

In 2020 due to COVID-19 pandemic, Colombia had the largest drop in production. In the second quarter of 2020, Colombia's GDP fell 15.8% compared to the same period in 2019. Likewise, for the month of April there was a drop in employment of 5.4 million people, which implies a reduction of employment of 24.5% compared to the same period in 2019 according to the National Association of Financial Institutions.

The impact of the COVID-19 pandemic on production levels and the economy as a whole required the implementation of financial measures to support companies from the National Government. This support focused on rediscounting credit lines, through Bancóldex development bank, and the expansion of guarantee lines so that entrepreneurs who did not have guarantees or collateral could make credit applications backed by the National Guarantee Fund.

Table 9.1. Scoreboard for Colombia

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Debt
Outstanding business loans, SMEs	COP billion	25.61	28.59	26.58	29.12	39.97	46.76	51.6	55.23	58.17	62.09	64.88	68.50	63.9	68.0
Outstanding business loans, total	COP billion	78.4	94.7	95.9	113.8	134.8	152.8	171.3	197.2	226.3	243.2	251.8	253.6	261.2	272.4
Share of SME outstanding loans	% of total outstanding business loans	32.67	30.19	27.70	25.58	29.66	30.61	30.11	28.01	25.70	25.53	25.77	27.01	24.48	25
New business lending, total	COP billion	67.7	76.0	77.2	79.0	77.7	95.4	104.0	117.0	117.7	117.3	153.3	160.09	118.6	112.5
New business lending, SMEs	COP billion	13.2	13.5	15.22	16.91	21.09	23.53	23.57	24.69	25.53	25.3	34.11	35.48	29.68	25.44
Share of new SME lending	% of total new lending	19.50	17.76	19.71	21.39	27.13	24.67	22.65	21.10	21.70	21.57	22.25	22.05	25.03	22.6
Outstanding short-term loans, SMEs	COP billion	4.98	7.52	6.14	6.41	10	11.55	12.36	12.93	13.8	13.59	14.44	12.86	11.39	11.26
Outstanding long-term loans, SMEs	COP billion	20.63	21.07	20.44	22.71	29.97	35.22	39.24	42.3	44.37	48.5	50.44	55.63	52.62	56.77
Share of short-term SME lending	% of total SME lending	19.45	26.30	23.10	22.01	25.02	24.70	23.95	23.41	23.72	21.89	22.26	18.78	17.69	16.6
Government loan guarantees, SMEs	COP billion	0.56	1.39	1.82	1.94	5.46	6.19	7.14	7.51	7.72	10.52	11.53	9.40	11.48	15.20
Government guaranteed loans, SMEs	COP billion	2.23	2.59	2.98	3.16	7.26	9.12	10.81	11.96	12.69	15.37	16.51	15.22	16.27	23.66
Non-performing loans, total	% of all business loans	0.95	1.27	1.59	1.07	1.00	1.03	1.08	1.33	1.34	1.51	2.36	2.61	2.51	3.1
Non-performing loans, SMEs	% of all SME loans	2.52	3.66	5.05	3.68	1.76	1.81	1.99	2.45	2.25	3.12	3.71	3.84	3.44	3.6
Interest rate, SMEs	%	20.09	23.13	20.43	18.66	14.34	14.68	13.24	13.54	14.69	16.87	15.37	13.03	13.34	12.3
Interest rate, large firms	%	12.61	14.74	9.41	7.16	8.90	8.61	7.54	8.02	8.66	11.02	9.16	6.32	6.05	5.3
Interest rate spread	% points	5.13	5.43	5.45	5.06	5.64	6.24	5.77	6.02	6.92	7.20	6.21	6.71	7.30	7.0
Collateral, SMEs	% of SMEs needing collateral to obtain bank lending	79.25	87.54	86.28	87.31	90.04	90.12	90.02	89.30	91.04	91.71	92.15	91.75	91.92	93.3
Percentage of SME loan applications	SME loan applications/ total number of SMEs	49	53	44.6	49.6	47	44	43.3	39.6	42.6	34	40	40	25	35
Rejection rate	1-(SME loans authorised/ requested)	2	4	9	5	3	4	7	3	7.5	4	8	7	26	30
Utilisation rate	SME loans used/ authorised	98	96	91	95	97	96	93	97	92.5	96	92	93	88	70
Non-bank finance
Venture and growth capital	COP billion	..	..	..	..	..	..	..	..	1.83	2.91	4.23	5.61	5.70
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	..	..	..	..	..	..	..	..	59 .3	45 .5	32.69	1.57
Leasing and hire purchases	COP billion	..	..	..	..	..	..	..	..	33.34	39.45	41.98	50.17
Factoring and invoice discounting	COP billion	5.77	6.04	7.15	7.01	12.85	10.55	17.56	23.75	31.47	25.77	25.53	26.58
Other indicators
Payment delays, B2B	Number of days	49	50	61	62	59	55	56	65	66	85	95	101	80.01
Bankruptcies, SMEs	Number		1	12	18	40	59	76	83	85	131	193	443	608	661
Bankruptcies, SMEs (growth rate)	%, Year-on-year growth rate	..		1100	50	122.2	47.50	28.81	9.21	2.41	54.12	47.33	129.5	37.25	8.72

Source: See Table 9.3.

SMEs in the national economy

Micro, small, and medium enterprises are the main engine of economic growth, transformation of the economy and generation of employment and income in Colombia. In fact, in the country, MSMEs represent 99% of the business community. According to the records of the chambers of commerce, the formal business structure of Colombia is made up of 93.2% by microenterprises (equivalent to 1.4 million establishments out of a total of 1.5 million), 6.4% by SMEs (97,000) and a 0.4% by large companies (6,000) (Confecámaras, 2018). It is estimated that MSMEs generate about 40% of GDP and 65% of employment.

Table 9.2. Distribution of firms in Colombia by firm size, 2020

Enterprise size	(%)	Manufacturing Industry		Service Sector		Commerce Sector
Micro	93,20%	≤ 23.563		≤ 32.988		≤ 44.769
Small	5,30%	> 23.563	≤ 204.995	> 32.988	≤ 131.951	> 44.769	≤ 431.196
Medium	1,10%	> 204.995	≤ 1.736.565	> 131.951	≤ 483.034	> 431.196	≤ 2.160.692
Big	0,40%	> 1.736.565		> 483.034		> 2.160.692

Note 1: From the issuance of Decree 957 of 2019 the classification of the size of the companies is made by economic sector and by volume of sales measured in Units of Tax Value – UVT, the value of the UVT is determined each year by the tax office of Colombia – DIAN.

Note 2: UVT = $34.270 COP = $ 9,984 USD

The economic crisis caused by the COVID-19 pandemic had strong negative effects on the businesses of the country, especially on micro and small enterprises. The mandatory quarantine that was established by the Government of Colombia as of March 2020 forced many companies to suspend their activities, which affected their financial situation.

Survey results of the GEP 2020-1 (Anif - Asociación Nacional de Instituciones Financieras, 2020) reflect a high concern on the part of employers with respect to the economic crisis. 66 % of business owners reported a decline in sales volume, 68% indicated that the general economic situation of the company had worsened.

On the other hand, according to the survey results, regarding the main difficulties experienced during the health crisis, 46% of businessmen indicated that it was the cessation of activities, 41% stated that it was the lack of demand and, 28% reported that it was the delay in customer payments.

However, entrepreneurs also took actions to try to face this situation and continue with the operation of their businesses. The GEP 2020-1 Survey measured the main measures taken by them with the following results: 54% use the company's cash; 37% renegotiate supplier contracts; 37% renegotiate debts; 30% renegotiate with employees their vacation periods; 27% renegotiate dismissal processes with employees; and 25% seek to renegotiate wages with employees.

Additionally, the survey also evidenced measures taken to mitigate the impacts generated by the pandemic caused by the Covid-19 disease. Thus, related to employment, 48% indicated that the working day was reduced, 40.1% said it reduced the staff of their business, 36% implemented collective vacations, and 52% opted to continue with their business teleworking or partially in person.

Lending to SMEs

During the first semester of 2020, financing to SMEs, in relation to loan applications, increased by 10pp (percentage points), going from 25% in 2019 to 35% in 20202. In contrast, loan approval rates declined by 17pp, going from 87% of applications approved in the first half of 2019 to 70% of applications approved in the first half of 2020. This, as a result of a greater perception of risk from the financial system. In addition, as of the first semester of 2021, the support that the government established to boost the supply of credit had not yet come into operation.

The increase in credit applications presented in the previous paragraph corresponds to measurements obtained through surveys carried out directly to small and medium-sized companies. However, when comparing with survey data from the supply side, that is, with the information collected through the June 2020 Quarterly Survey on the credit situation in Colombia, in which credit institutions participate3; the general perception of the demand for credit shows a significant drop as a result of COVID-19; credit operations for consumption and housing present historical minimum levels. The microcredit portfolio has a negative trend, as opposed to the commercial portfolio which registered a positive trend, but at very low levels.

In relation to the approved terms, 60% were medium-term, from 36 to 48 months; 21% in the long term, 60 or more months and 17% in the short term, up to 12 months.

In relation to the destination of resources, 68% of the companies used the credit resources to finance the working capital, 29% of the companies used these resources to restructure debt and the remaining 3% used it for the purchase or lease, machinery, this was the case in particular for companies that belong to the industrial sector.

Credit conditions

In relation to the requirement of collateral or guarantees for the requested loan, only a low percentage of entrepreneurs were required these guarantees. On average 12% of the requests presented by entrepreneurs were asked for collateral or guarantee.

In relation to the percentage of coverage of the required collateral on the requested credit, 51% of surveyed companies that applied for credit and were required to guarantee, the requested coverage was between 1% and 20% of the value of the loan, 23% of the companies were asked for coverage between 81% and 100% of the value of the loan requested. Regarding the type of guarantee, 31% of the companies were asked for company assets as collateral, 23% were asked for mortgages and pledges on real estate and personal property, and 21% were asked for monetary collateral.

According to the answers given by the surveyed entrepreneurs, for the interest rates, the most common rate range in the loans granted on average was: 73% of the companies had the interest rate up to the DTF 4 + 4 points5; the next range of interest rate applied was the rates between DTF + 4 points to DTF + 8 points. This range was applied to 20.6% of the surveyed companies; finally, above a DTF + 8 rate, this was applied to 2% of the companies. However, these interest rates are granted to formal companies that were part of the survey of SMEs carried out by the National Association of Financial Institutions - ANIF (Anif - Asociación Nacional de Instituciones Financieras, 2020)

From the supply side, when reviewing the average interest rates reported by financial entities to the regulator in Colombia6; the average interest rate granted by banks was 17.15% for loans granted to micro-enterprises and was 13.64%for small and medium-sized companies7.

Alternative sources of SME financing

From SMEs that were financed with alternative means of financing in the last year, 43% of companies turned to their suppliers to finance themselves and 40% used their own resources or capitalization, 9% used leasing and 3% went to factoring; the remaining 5% turned to unregulated credit sources or the extra-bank market.

Bancóldex Fund of Funds:

The private equity fund Bancóldex Capital - Fund8 of Funds, with its initiative “Venture Capital “, aims to invest in Colombian and regional venture capital funds and invest in ventures of high - impact, scalable and transverse to the sectors of trade, industry, tourism, services, and creative industries.

This initiative amounted, by the end 2020, resources for COP $ 116,091 million, where Bancóldex acts as an anchor investor with an amount of COP $ 45,000 million, also with the participation of the Ministry of Commerce, Industry and Tourism, the Ministry of Science, Technology and Innovation, a multilateral entity, and a Japanese corporate investor.

During 2020, three (3) new venture capital funds were approved, one is managed by a Colombian professional manager and two by international professional managers, all with a focus on Colombian entrepreneurship. Likewise, an investment of USD 9.5 million was achieved by a Japanese corporate investor.

In terms of investments, by the end of December, the “Capital for Entrepreneurship” sub-fund had current commitments for COP $ 20,595 million in an underlying fund, FCP ALLVP Fund III, which has invested in nine companies, two of them Colombian startups that received resources worth COP $ 43,250 million (Bancóldex, 2021).

Provision of guarantees:

Through the National Guarantee Fund – FNG9, guarantees were provided to support ordinary portfolio (working capital, fixed investment, and business capitalization) aimed at small and medium-sized companies. Within the traditional products there are also other modes of use or destination, such as Global Rotating Quotas, Financial Leasing and guarantee for Business Microcredit, designed with special characteristics for this segment.

Crowdfunding A2censo:

A2censo is a collaborative financing platform “crowdfunding” where SMEs and investors are contacted. With this financing alternative based on financial debt crowdfunding, a space has been created where several investors make small contributions to finance their companies. This investment platform is administered by the Colombian Stock Exchange - BVC.

Business Angels:

Business Angels are all those natural persons who invest their surplus liquidity in early-stage companies but with scalability potential, in exchange for equity participation and / or financial returns. These investments are made through vehicles such as convertible notes, equity, and simple agreement for future equity (SAFE). Business angels can be grouped and form network of angels with the aim of helping with their expertise and their relationship with the entrepreneur, accompanying the process and making the investment in the best possible way.

Business Angels’ investments are aimed at companies that are in early stages and have not received large amounts of investment from third parties. The investment amounts both minimum and maximum were grouped into the categories in Table 9.3 because it does not yet exist a rule of how much should be invested on the market, however this classification shows a reference to consider at the time to invest (Rockstar Aceleradora de StartUp, 2020)

Table 9.3. Investment amounts

Minimum investment		Maximum investment
Values in COP	Percentage %	Values in COP	Percentage %
$ 10.000.000	5,41	$ 40.000.000	2,7
$ 20.000.000	8,11	$ 100.000.000	8,11
$ 25.000.000	2,7	$ 120.000.000	2,7
$ 30.000.000	10,81	$ 150.000.000	5,41
$ 35.000.000	8,11	$ 180.000.000	5,41
$ 40.000.000	10,81	$ 200.000.000	5,41
$ 45.000.000	8,11	$ 250.000.000	16,22
$ 50.000.000	24,32	$ 300.000.000	24,32
$ 55.000.000	2,7	$ 350.000.000	8,11
$ 60.000.000	8,11	$ 400.000.000	8,11
$ 70.000.000	2,7	$ 450.000.000	2,7
$ 100.000.000	5,41	$ 500.000.000	2,7
$ 500.000.000	2,7	$ 1.000.000.000	2,7
		$ 1.500.000.000	2,7
		$ 4.000.000.000	2,7

Source: Study of Investors Angels in Colombia. June 2020. Rockstart

Government policy response

During 2020 given the situation presented by the Covid-19 pandemic, most of the policies that were established during the year were framed in the government's response to mitigate the economic and social impacts caused by the crisis and aimed for the reactivation of the country's economy. However, within this difficult context, there was room to strengthen support policies for MSME financing. The following paragraphs will summarise these policies, taking into account the economic recovery measures established by the national government to mitigate the effects caused by the COVID-19 pandemic, as these measures correlate with the long-term policies established to provide financial support to MSMEs.

a) Law 2069 of 2020. Entrepreneurship Law (Congreso de la República de Colombia, 2020)

This is a comprehensive law, tailored to all entrepreneurs regardless of the size of their businesses, which seeks to provide a modern regulatory framework that facilitates the birth of new ventures and the sustainability of smaller companies. The approved law enables a favorable environment to help the growth of collective and individual initiatives, facilitates formalization, enable advances in productivity improvements, and generates a greater number of formal jobs.

With this law, together with the National Entrepreneurship Policy10 approved on November 30, Colombia promotes the transformation of its entrepreneurial ecosystem through regulations designed to favor the birth, growth, and consolidation of MSMEs and thus encourage productive, economic, and social development.

Main aspects included in Law 2069 of 2020.

• Reduction of burdens and procedures for entrepreneurs in the country, with the aim of facilitating their creation, formalization, and development.

• Better conditions in the public procurement market for the participation of entrepreneurs and microentrepreneurs.

• Incentive for growth with the arrival of more players in the investment and financing ecosystem.

• Optimize the management of resources, reducing their atomization by improving the functionality, impact and use of the resources of the intervention instruments.

• Facilitate the appropriation of entrepreneurship and entrepreneurial culture in Colombian youth through schools and higher education institutions.

This Law has been structured through five axis that include aspects of registration and tax fees, access to expanded markets, facilitation in obtaining financial resources, strengthening, and updating institutions and education curricula to train and develop skills for entrepreneurship.

• Axis 1: Differential rates and tax simplification.

  This axis seeks to guarantee a reduction in tariffs and measures that facilitate the constitution and operation of companies.

• Axis 2: Public procurement.

  Expand markets and promote MSMEs and enterprises by facilitating their access to the public procurement market.

• Axis 3: Financing.

  Facilitate the acquisition of resources and encourage better conditions for entrepreneurs to access financial instruments.

• Axis 4: Institutionalist.

  Update the regulatory framework around the institutional framework for entrepreneurship, which adjusts to the needs of entrepreneurs and strengthens the National Competitiveness and Innovation System and regional ecosystems.

• Axis 5: Education and development of skills for entrepreneurship.

  Facilitate the appropriation of entrepreneurship and entrepreneurial culture in the country through schools and institutions of higher education.

b) Conpes 4011 – National Entrepreneurship Policy (National Planning Department, 2020)

On November 30, 2020, Conpes Document No. 4011 "National Entrepreneurship Policy" was approved, which aims to generate enabling conditions in the entrepreneurial ecosystem for the creation, sustainability and growth of enterprises that contribute to the generation of income, wealth and increases productivity and business internationalization.

This policy has five specific objectives:

• Strengthen skills development and foster an entrepreneurial culture.

• Improve access to and sophistication of financing mechanisms.

• Strengthen networks and marketing strategies.

• Facilitate technological development and innovation in entrepreneurship.

• Strengthen the institutional architecture to achieve an articulated, efficient, timely and evidence-based public offering that provides enabling conditions to the entrepreneurial ecosystem.

To fulfill the objectives of this policy, the entities involved in its implementation will manage and prioritize, within the framework of their competences, resources for the financing of the activities proposed in the policy. The policy will be funded considering the Medium-Term Fiscal Expenditure Framework11. It is estimated that the total cost of the policy is COP $212,961 million pesos, which will be executed over a period of 5 years.

c) Conpes 4005 – National Policy of Inclusion and Economic and Financial Education (Departamento Nacional de Planeación, 2020)

The Conpes document formulates a National Policy for Inclusion and Economic and Financial Education. This policy aims to integrate financial services into the daily activities of citizens and micro, small and medium-sized enterprises (MSMEs), meeting their needs and generating economic opportunities to contribute to the country's financial growth and inclusion.

Despite the efforts made by national, regional and local governments, as well as those made by the private sector, to improve the economic and financial education of individuals and businesses and to improve the infrastructure to enable these services to be brought to businesses and individuals; there are still incomplete credit markets for MSMEs and people in rural areas. In addition, there is asymmetric information between banks and potential users, due in part to the impossibility of making visible the traceability of transactions.

Therefore, this policy proposes an action plan to improve the provision of relevant financial services to the entire population, through four strategies, namely: (i) expansion and relevance of the offer of tailored financial products and services; (ii) generation of greater skills, knowledge and confidence in the financial system; (iii) strengthening of the financial and digital infrastructure for greater access to and use of formal financial services and, finally, (iv) presentation of a proposal for institutional governance that allows greater articulation in the implementation of financial education and inclusion strategies.

The policy will be implemented over a horizon of 5 years, with an approximate value of COP $13,681 million pesos and will be implemented by the Ministry of Finance and Public Credit, the Ministry of Commerce, Industry and Tourism, the Ministry of National Education and the Ministry of Agriculture and Rural Development, among other government entities.

d) Financial support measures established in the context of the crisis generated by the covid-19 pandemic.

The Colombian Government declared a State of Economic, Social and Ecological Emergency due to the COVID-19 pandemic; this allowed the implementation of mechanisms and financial instruments that enhanced the productive activities of companies of all sizes and mitigate the negative economic impact of the crisis.

Through the development bank Bancóldex, rediscount credit resources were channeled to the business sector, which through financial intermediaries it was available to companies of all sectors and sizes. In most cases such financial intermediaries were subject to the inspection, control and supervision of the Financial Superintendency of Colombia. However, support was also channeled through unsupervised microenterprise credit-oriented entities, such as financial NGOs, cooperatives with savings and/or credit activity, financial foundations, compensation funds, employee funds and Fintech entities, were

Below is a summary of the main features of the rediscount credit lines that were created to respond to the crisis, as well as the collateral coverage products.

Table 9.4. Special lines of credit for Covid-19 emergency care

Name Line of Credit	Resource by line	Destiny	Sectors	Term	Grace period	Preferential Rate
Colombia Responds	COP 72,833,212	Working capital and replacement of liabilities	Tourism, aviation, and live shows	Up to 3 years	Up to 6 months	Reduction between 2% and 5%
Colombia Responds for All	COP 101,966,497	Working capital and replacement of liabilities	All productive sectors	Up to 3 years	Up to 6 months	Reduction between 2% and 5%
Colombia entrepreneur and innovates	COP 4,544,792	Working capital and replacement of liabilities	All productive sectors	Up to 3 years	Up to 6 months	ND
Transport Responds	COP 27,676,621	Working capital	Non-air transport	Up to 3 years	Up to 6 months	2% reduction
Reactivation	COP 2,214,130	Working capital to implement biosecurity measures	MSMEs all sectors	Up to 3 years	Up to 6 months	2% reduction
Competitive MSMEs	COP 87,399,854	Enterprise Modernization	MSMEs all sectors	Between 3 and up to 7 years	Between 12 and up to 18 months	2% reduction
ICT reactivation	COP 27,385,288	Working capital	ICT Sector	Up to 3 years	Up to 6 months	ND
Micro	COP 22,724	Working capital	MSMEs all sectors	Up to 3 years	up to 12 months	ND
SME Support	COP 116,533,139	Working capital	SMEs in all sectors	Up to 3 years	up to 12 months	ND
Delta 3.0	COP 1,747,997	Structuring of R&D	MSMEs all sectors	Up to 3 years	up to 12 months	ND
Companies in the growth stage	COP 8,416,606	Working capital	MSMEs all sectors	Up to 3 years	up to 12 months	ND
Transport Responds Version 2	COP 208,302,986	Working capital	Non-air transport	Up to 3 years	Up to 6 months	Reduction between 2% and 5%
High-impact companies	COP 1,631,464	Working capital	MSMEs sectors with high growth potential	Up to 3 years	up to 12 months	ND

Note: Resources expressed in US dollars, converted with the official rate of December 31, 2020.

Likewise, through the National Guarantee Fund - FNG (Fondo Nacional de Garantías, 2020) special guarantee lines were established so that entrepreneurs who did not have guarantees or collateral to guarantee their credit applications had the support of the coverage granted by the FNG as guarantor of the credit applications that were made.

The program established by the National Guarantee Fund – FNG was called "United for Colombia" with a total value of guarantees for COP 25.5 billion12. This guarantee program aims to provide the necessary support so that MSMEs (natural and legal persons) can access the necessary financing to counteract the economic difficulties generated by the COVID-19 pandemic. This program is divided into six (6) warranty lines that were designed to support entrepreneurs affected by the COVID-19 pandemic as follows:

1. Working capital and investment line, aimed at serving micro, small and medium-sized enterprises, under the modalities of ordinary portfolio and factoring implemented through confirming.

2. Working capital line, aimed at meeting the financing needs for the payment of payrolls of employees of micro, small and medium-sized enterprises, through guaranteed products with coverage of 90%.

3. Support for sole proprietorships - independent companies that stopped receiving income because of the situation caused by COVID-19, with coverage at 80%. Additionally, it has a commission refund as an incentive to formalize the payment of social security.

4. Line for new loans granted by microfinance institutions, with 75% coverage for microentrepreneurs formalized by tax, with a commission subsidy of 100%, and another with 60% coverage for informal companies with a commission subsidy of 75%.

5. Credit Lline designed for the economic activities most affected by the high risk of contagion and that saw a decline in their income, for example: accommodation, entertainment, and restaurants, among others. 90% coverage, intended for MSMEs and large companies.

6. Guarantee line for restructuring of liabilities with coverage at 35% or 45% for microentrepreneurs formalized tax, with commission subsidy of 100%, and another with coverage at 30% or 40% for informal microentrepreneurs with commission subsidy of 75%.

Figure 9.1. Trends in SME and entrepreneurship finance in Colombia

Source: See Table 9.3. Charts A, B, C, D and E: Bank of the Republic of Colombia – Financial Superintendence of Colombia. Chart F: Superintendence of Societies. Insolvency database - December 2020. (Formalized companies).

Statlink

Table 9.5. Definitions and sources of indicators for Colombia’s scoreboard

Indicator	Definition	Source
Outstanding business loans, SMEs	OECD Guideline: Bank loans and financial institutions in favour of SMEs, outstanding balances (stocks) at the end of the period or new loans (flow); By size of company using the national definition of SMEs or, if necessary, loan amounts of less than 1 million euros. / Colombian measure: Total value of active lending operations between credit institutions and SMEs.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Outstanding business loans, total	OECD Guideline: corporate loans from banking and financial institutions to all non-financial corporations, outstanding amounts (shares) or new loans. / Colombian measure: commercial credits and microcredit (until December 2017). As of 2008, the financial lease is included (as of 2013 the commercial portfolio includes the lease of houses).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Share of SME outstanding loans	Proportion of loans to SMEs-percentage	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
New business lending, total	New commercial loans, Total (year 2017).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
New business lending, SMEs	New commercial loans, SMEs (year 2017).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Share of new SME lending	New proportion of loans-percentage	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Outstanding short-term loans, SMEs	OECD Guidance: Loans equal to or less than one year / Colombian measure: Commercial loans and microcredits used by SMEs, less than or equal to 1 year.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Outstanding long-term loans, SMEs	OECD Guidance: loans for more than one year / Colombian Measure: Commercial credits and microcredits used by SMEs, over 1 year.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Share of short-term SME lending	The proportion of short-term loans-percentage	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Government loan guarantees, SMEs	OECD Guidance: Guarantees available for banks and financial institutions, whether new or outstanding. / Colombian Measure: Value of SME loans with guarantees type 5 = Sovereign Guarantee of the Nation (Law 617 of 2000), 7 = Guarantees granted by the National Guarantee Fund SA and / or 10 = FAG (Agricultural Fund for Guarantees) SME loans. Based on technical criteria for the total guarantees reported under the parameters of Chapter II of External Circular 100 of 1995.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Government guaranteed loans, SMEs	OECD Guideline: Available guarantees for banks and financial institutions, whether new or outstanding. / Colombian Measure: Value of SME loans with type 5 guarantees = Sovereign Guarantee of the Nation (Law 617 of 2000), 7 = Guarantees granted by the National Guarantee Fund SA and / or 10 = FAG (Agricultural Fund for Guarantees) SME loans. Based on technical criteria for the total guarantees reported under the parameters of Chapter II of External Circular 100 of 1995	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Non-performing loans, total	OECD Guideline: Non-performing loans for total commercial loans. / Colombian Measure: Total capital value of current credit operations for which payment delays exceed 90 days.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Non-performing loans, SMEs	OECD Guidance: Non-performing loans from SMEs on total loans to SMEs. / Colombian Measure: Total capital value of current credit operations for which payment delays exceed 90 days.	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Interest rate, SMEs	OECD Guideline: Average annual rates of new loans, base rate plus risk premium; For maturity less than 1 year; And amounts less than 1 million euros. / Colombian Measure: Annual average interest rate for new loans (base rate + risk premium for maturity less than 1 year). The rate is presented in annual effective figures. When variable rates apply, reports must calculate the sum of the financial terms between the agreed rate and the variance. If a borrower has more than one credit to the reporting entity (and both credits are classified in the same category), the report takes the weighted average rate (excluding any credit with an interest rate of 0%).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Interest rate, large firms	OECD Guideline: Average annual rates of new loans, base rate plus risk premium; For maturity less than 1 year; And amounts less than 1 million euros. / Colombian Measure: Annual average interest rate for new loans (base rate + risk premium for maturity less than 1 year). The rate is presented in annual effective figures. When variable rates apply, reports must calculate the sum of the financial terms between the agreed rate and the variance. If a borrower has more than one credit to the reporting entity (and both credits are classified in the same category), the report takes the weighted average rate (excluding any credit with an interest rate of 0%).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Interest rate spread	Difference between the interest rate of SMEs and the rate applied to loans to large companies. (To disseminate observations that have a zero or zero are not included).	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Collateral, SMEs	OECD Guidance: Percentage of SMEs that were required to provide guarantees on the last bank loan. / Colombia Measure: Value of SMEs credits for which the declared guarantee is different from type 0 = No guarantee, and / or 1 = No value [1].	Bank of the Republic / Data of financial institutions / format 341 of the Financial Superintendence of Colombia
Percentage of SME loan applications	OECD Guidance: Percentage of loan applications to SMEs, this indicator is new from this report based on the formal sector of the country's economy. The% reported is a weighted average between the industry, trade and services sectors.	Great SME survey-Anif
Rejection rate	Colombian Measure: Demand Side survey: % authorized SMEs loans / SMEs loans requested. The% is a weighted average between the industry, trade and services sectors. The high figures could have two general explanations: the low number of SMEs applying for loans in the first place; And, the survey is only with the formal sector of the economy. The Colombian informal sector of SMEs can be huge.	Great SME survey-Anif
Utilisation rate	Colombian measure: According to demand survey: The % is a weighted average between the industry, trade and services sectors, these rates remain high in the three macrosectors and do not evidence significant changes with respect to their historical levels.	Great SME survey-Anif
Non-bank finance
Venture and growth capital	Seed, start-up, expansion and initial phase (excluding acquisitions, changes, substitutions). According to the Colcapital database as of December 2017. Adjustment of the information is made when consolidating 13 years (2005-2017). The data represents the investment in USD: 62 million Capital for entrepreneurship, for capital growth and acquisition (excludes purchases, restructurings, replacements) USD 1 687 million, converted to pesos at a rate of COP 2 420.38 average for the information consolidated in the last thirteen years [5]. It is important to mention that the amount invested can be much greater, since 11 investors relevant in size, did not report the amount of investment, and belong to large international funds that can not disclose the amount of your transactions.	VC association (supply side). / Data from Colcapital
Venture and growth capital (growth rate)	Venture and growth capital (growth rate)	VC association (supply side). / Data from Colcapital
Leasing and hire purchases	New leasing production, which covers leasing and operating leases of all types of assets (automotive, equipment and real estate) and also includes the rental of cars, vans and trucks. / Colombian measure: The data provided correspond to financial leasing. operations through all credit institutions	Bank of the Republic
Factoring and invoice discounting	Import factoring, import factoring and export invoice discount (international factoring) / Colombian measurement: data available for factoring (COP), growth in turnover In Euros 7 655 millones, convertidos a pesos a una tasa de COP 3 334.38 promedio para el año 2017.	Factors Chain International - FCI: Global network of leading factoring companies and banks (2017). Complete overview of statistics until 2017 - Data for Colombia.
Other indicators
Payment delays, B2B	OECD Guideline: Average days of delay beyond the contract period from Business to Business (B2B) and Customer Business (B2C). / Colombian Measure: Average days of delay: Days of delay after the date of payment. If a borrower has more than one credit with the reporting institutions (and both credits are classified in the same category), the report takes the highest delay. For non-delayed events, the report points to zero (0).	Demand side survey / Formato 341 of the Financial Superintendence of Colombia
Bankruptcies, SMEs	Number of companies admitted to liquidation processes admitted by the Superintendency of Companies, based on the requirements established in Law 1116 of 2006, Chapter VIII, articles 47 to 66.	Administrative data /Superintendence of Companies. Report: Insolvency Atlas - Insolvency in Colombia. December 2020 Available in: Presentación de PowerPoint (supersociedades.gov.co)
Bankruptcies, SMEs (growth rate)	Bankruptcy, SMEs (growth rate)	Administrative data /Superintendence of Companies

References

Anaya, H. O. (2006). Análisis Financiero Aplicado y Principios de Administración Financiera. Bogotá: Universidad Externado de Colombia.

Anif - Asociación Nacional de Instituciones Financieras. (2020). La Gran Encuesta Pyme, Lectura Nacional. Bogotá: Centro de Estudios Económicos Anif.

Anif Centro de Estudios Económicos. (diciembre de 2020). La Estrategia del FNG para la Reactivación del País. Coyuntura Pyme(66), 17-24. Acesso em 28 de mayo de 2021, disponível em https://www.anif.com.co/file-category/revista-coyuntura-pyme/

Asociación Nacional de Instituciones Financieras - Anif. (Mayo de 2019). La factura electrónica: Instrumento pro formalización y de impulso al mercado de capitales. Coyuntura pyme(64), 38-44.

Banca de las Oportunidades. (20 de Mayo de 2017). Banca de las Oportunidades. Acesso em 20 de Mayo de 2019, disponível em http://bancadelasoportunidades.gov.co/es/reportes/%2A

Bancóldex . (2018). Informe de la Junta Directiva y del Presidente a la Asamblea General de Accionistas. Bogotá.

Bancóldex. (2021). Informe de la Junta Directiva y del Presidente a la Asamblea General de Accionistas. Bogota. Acesso em mayo de 2021, disponível em https://www.bancoldex.com/sobre‑bancoldex/quienes‑somos/informacion‑de‑interes‑para‑accionistas-e-inversionistas/informes-anuales-792

Colombia Compra Eficiente. (23 de Diciembre de 2013). Manual para determinar y verificar los requisitos habilitantes en los Procesos de Contratación. Fonte: https://www.colombiacompra.gov.co/manuales-guias-y-pliegos-tipo/manuales-y-guias

Comisión Económica para América Latina y el Caribe - CEPAL. (13 de Mayo de 2018). La inclusión financiera para la inserción productiva y el papel de la banca de desarrollo. Acesso em 20 de Mayo de 2019, disponível em https://repositorio.cepal.org/bitstream/handle/11362/44213/1/S1800568_es.pdf

Confecámaras. (Diciembre de 2018). Nuevos hallazgos de la supervivencia y crecimiento de las empresas en Colombia. Fonte: http://www.confecamaras.org.co/phocadownload/2018/Cuadernos_An%C3%A1lisis_Econ%C3%B3mico/Cuaderno_demografia_empresarial/Cartilla17.pdf

Congreso de la República de Colombia. (31 de 12 de 2020). Ley 2069 de 31 de diciembre de 2020 "Por Medio de la Cual se impulsa el Emprendimiento en Colombia". Ley. Bogota.

Departamento Administrativo Nacional de Estadística - DANE. (22 de Marzo de 2017). Encuesta de Microestablecimientos . Fonte: https://www.dane.gov.co/files/investigaciones/boletines/microestablec/Bol_micro_2016.pdf

Departamento Nacional de Planeación. (26 de Mayo de 2015). Decreto 1082. Bogotá, Colombia.

Departamento Nacional de Planeación. (2016). Política Nacional de Desarrollo Productivo. Bogotá. Acesso em 18 de julio de 2019

Departamento Nacional de Planeación. (2020). Política Nacional de Emprendimiento - Documento Conpes No. 4011. Bogotá.

Departamento Nacional de Planeación. (2020). Política Nacional de Inclusión y Educación Económica y Financiera - Documento Conpes No. 4005. Bogotá.

Fedesarrollo. (27 de mayo de 2021). Fedesarrollo Centro de Investigación Económica y Social. Fonte: https://www.repository.fedesarrollo.org.co/bitstream/handle/11445/3698/WP_2018_No_76.pdf?sequence=1&isAllowed=y#:~:text=Existen%20pocas%20fuentes%20para%20estimar,agregado%2C%20en%20las%20%C3%A1reas%20urbanas.

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Fondo Nacional de Garantías. (2020). Balance de Gestión 2020. Bogotá.

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Notes

← 1.  The Great Integrated Household Survey is a survey prepared by the National Department of Statistics of Colombia, which requests information on the conditions of employment of people (whether they work, what they work on, how much they earn, whether they have social security in health or whether they are looking for employment). In addition to the general characteristics of the population such as sex, age, marital status and educational level and it captures information about their sources of income.

← 2. The information presented in this section corresponds to the results of the Large SME Survey 2020-1. This survey was conducted with a sample of 1,957 formal enterprises in the industrial, commercial, and service sectors; located in 18 of the 32 departments of Colombia.

However, in Colombia there is a significant percentage of business informality, although there are few sources for its estimation it is possible from the Household Survey conducted by the Statistics Office of Colombia to state that informality constitutes about 60% of companies in Colombia.

← 3. Report on the Credit Situation in Colombia. Bank of the Republic of Colombia. June 2020.

← 4.  The DTF is a reference interest rate, this rate is the weighted average of the effective rates of collection of the 90-day Fixed Term Certificates of Deposit that the financial system recognizes to its clients and serves as a reference indicator related to the cost of money over time.

The average DTF in 2020 was 3.38%. (Banco de la República - Technical Management - information extracted from the data warehouse -Serankua- on 02/06/2021 19:59:43)

← 5. The additional points correspond to the bank spread which is the difference between the active interest rate and the passive interest rate that financial institutions apply.

← 6.  Format 088 - Weekly Report of Active and Passive Interest Rates. Financial Superintendence of Colombia, the regulatory body for financial and credit activity in Colombia.

← 7.  The report presented by the financial regulator in Colombia only details microcredit operations, for credit operations to small and medium-sized companies these are reported as ordinary credit, which also includes credit operations through credit cards and operations credit to natural persons.

← 8. Bancóldex: Development bank that promotes business growth and foreign trade in Colombia.

← 9.  The National Guarantee Fund - FNG is the entity through which the National Government seeks to facilitate access to credit for independent workers, micro, small, medium, large companies, and Colombian households, through the provision of guarantees.

← 10. Conpes: The National Council for Economic and Social Policy (CONPES) was created by Law 19 of 1958. This is the highest Colombian planning authority and serves as an advisory body to the Government in all aspects related to the economic and social development of the country. To achieve this, it coordinates and guides the agencies responsible for economic and social direction in the Government, through the study and approval of documents on the development of general policies that are presented in session. The National Planning Department serves as the Executive Secretariat of CONPES.

← 11.  The Medium-Term Expenditure Framework (MGMP) is the public financial programming instrument that allows the articulation of policy design, macroeconomic and fiscal planning in the medium term and annual budget programming.

← 12. Value in COP. 1 USD = 3.603,60 COP