Financing SMEs and Entrepreneurs 2024

34. Peru

Key facts on SME financing

In 2022, Peru's economy grew by 2.7%, primarily driven by private consumption, leading to the expansion of the commerce and services sectors. However, the country faced challenges such as increased financing costs, inflation, and social unrest. Looking ahead to 2023, SMEs and entrepreneurs are projected to encounter similar challenges. The business environment could be further complicated by both social conflicts and climate-related issues.

SMEs play a major role in the Peruvian economy, contributing to over 30% of value added and approximately 7% to exports. They have a particularly strong presence in sectors such as commerce, services, and manufacturing. Regarding the business landscape, SMEs comprise 99.4% of all enterprises and contribute significantly to employment, accounting for 90.5% of private employment. This highlights the importance of supporting their growth as they are considered drivers for the development of the economy in Peru.

SMEs accounted for a significant share of all outstanding loans in 2022, reaching 30.9%, driven by an 8.9% increase in the number of formal enterprises accessing the formal financial system. Between 2010-2019, the share of all outstanding loans was around 25% on average, percentage that experiment a positive increasing of 7 pp. Thus, since 2020, the share on average was 32%. It should be noted that there was also observed growth in the number of SMEs, expanding at an average annual rate of 12.3%, going from 1,780 thousand companies in 2020 to 2,246 thousand companies in 2022.

While banks remained the primary lenders, alternative financing options such as factoring and invoice discounting gained some attention, although fluctuations have been observed in their usage in recent years. Moreover, over-indebtedness is a concern as the majority of SMEs rely on a single institution, and small business loans face higher interest rates, posing affordability challenges.

In 2022, the interest rate spread between large companies and SMEs in Peru was 19.9 percentage points. It is important to note that the interest rates for small business loans experienced an increase from 24.0% in December 2021 to 27.1% in December 2022. Therefore, this upward trend suggests that despite the narrowing spread, the cost of borrowing for these enterprises has increased.

The government of Peru has implemented several programmes to address financing constraints and support businesses during the COVID-19 pandemic. These programmes include Reactiva Perú, FAE-Mype, PAE-Mype, FAE-Agro, FAE-Turismo, Programa de Garantías COVID-19, and FAE-TEXCO. These initiatives aim to provide favourable financing conditions and ensure the continuity of resilient businesses across sectors.

Table 34.1. Scoreboard for Peru

Indicator	Unit	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Debt
Outstanding business loans, SMEs. As of June 30	PEN Billion	17.18	19.75	23.23	26.62	30.14	32.44	32.46	34.11	35.56	36.48	61.92	73.63	66.12
Outstanding business loans, total. As of June 30	PEN Billion	65.99	75.04	81.49	97.20	112.21	127.37	130.02	134.62	147.30	149.53	189.21	223.05	213.76
Share of SME outstanding loans	% of total outstanding business loans	26.04	26.31	28.50	27.39	26.86	25.47	24.97	25.34	24.14	24.39	32.73	33.01	30.93
New business lending, total	PEN Billion				264 129	244 850	249 880	226 035	219 435	244 928	241 292	281 590	273 983	327 359
New business lending, SMEs	PEN Billion				241 949	224 537	228 624	207 603	201 133	225 421	222 626	263 860	248 707	293 979
Share of new SME lending	% of total new lending				91.6	91.7	91.5	91.8	91.7	92.0	92.3	93.7	90.77	89.80
Government loan guarantees, SMEs	PEN Billion	..	..	..	..	..	..	400	..	..	..	..
Direct government loans, SMEs	PEN Billion	30.98	49.06	59.57	219.92	365.33	369.45	389.18	320.85	399.83	367.95	387.01	373.92	316.37
Non-performing loans, total	% of all business loans	2.20	1.78	1.65	1.96	2.14	2.37	2.46	3.33	3.40	3.15	2.93	3.48	5.00
Non-performing loans, SMEs	% of all SME loans	7.83	6.33	5.19	6.30	7.11	8.42	9.03	8.69	10.53	10.94	6.63	9.81	16.43
Interest rate, SMEs	%	27.63	27.09	25.96	24.66	23.41	25.59	26.37	26.57	26.31	25.28	20.23	24.03	27.05
Interest rate, large firms	%	4.98	6.03	6.60	6.49	6.37	6.29	6.86	6.75	6.00	5.93	4.39	3.80	7.20
Interest rate spread	% points	22.65	21.06	19.35	18.17	17.04	19.30	19.52	19.82	20.31	19.35	15.84	20.22	19.85
Percentage of SME loan applications	SME loan applications/ total number of SMEs	..	..	..	..	38.52	51.02	43.26	48.39		43.40
Rejection rate	1-(SME loans authorised/ requested)	..	..	..	..	5.06	5.77	4.63	5.93		4.00
Utilisation rate	SME loans used/ authorised	..	..	..	..	94.94	94.23	95.37	94.07		96.00
Non-bank finance
Leasing and hire purchases	PEN Billion	3 374	3 846	4 301	3 978	4 128	3 966	3 530	3 440	3 110	3 000	3 204	2 212	1 605
Factoring and invoice discounting	PEN Billion	768.98	754.27	719.99	779.45	809.13	819.41	835.50	833.89	1006.19	947.14	724.63	762.88	605.27
Other indicators
Bankruptcies, all businesses	Number	162 948	168 261	233 287	152 758	225 384	242 842	259 443	362 091	199 303	183 442	859 595	247 397	218 568

Note: *Preliminary data.

Source: See Table 36.4.

Macroeconomic and financing conditions

In 2022, economic activity in the country recorded a growth rate of 2.7% driven by the dynamism of private consumption, which was reflected in the expansion of the commerce and services sectors. However, the country also faced challenges such as increased financing costs, high inflation, and social unrest. These factors had a negative impact on enterprises across the board, with smaller businesses being particularly affected. In 2023, SMEs in Peru are facing similar challenges in the macroeconomic environment. The projected growth for the end of 2023 is 2.6% which relies heavily on private consumption as a driver of economic output. However, social conflicts in sectors like mining and tourism, as well as climate-related issues affecting agriculture and fisheries, can further complicate the business environment. Additionally, although inflation is expected to remain at around 3.0%, it will continue to impose cost pressures on businesses. The monetary policy rate is anticipated to remain at 7.75% in the near term, which could potentially lead to higher interest rates.

Against this backdrop, SMEs in Peru face significant challenges in accessing affordable financing, managing increased costs, and navigating volatile financial markets. Potential upward pressures on the exchange rate, capital outflows, and heightened political uncertainty could further add to the complexity of the SME operating environment.

SMEs in the national economy

SMEs play a crucial role in Peru's economy, both in terms of their sheer number and their contributions to various aspects of economic development. In 2022, SMEs accounted for 99.4% of all enterprises in the country. The total number of SMEs reached 2,245,795, with the majority being micro-firms (94.2%), followed by small firms (5.0%) and medium firms (0.2%). While the sector experienced a growth rate of 6.0% in 2022 compared to the previous year, it remained below pre-pandemic levels in 2019 (-5.5%).

Table 34.2. Distribution of firms in Peru (in thousands)

Enterprise Size*	2015	2016	2017	2018	2019	2020	2021	2022
Micro	1,607	1,652	1,837	2,130	2,292	1,704	2,035	2,128
Small	73	74	61	79	82	74	80	114
Medium	2.7	2.6	2.0	2.7	2.9	2.7	2.8	4.4
SME	1,683	1,729	1,900	2,212	2,377	1,780	2,118	2,246
SME var. % YoY	5.7%	2.7%	9.9%	16.5%	7.5%	-25.1%	19.0%	6.0%
Large	8.8	9.0	9.2	9.2	9.5	8.8	10.9	13.7
Total	1,691	1,738	1,909	2,221	2,387	1,789	2,129	2,260

Note: According to annual turnover. For 2018, the annual threshold are as follows. Micro-enterprise: up to PEN 622 thousand, Small enterprise: From PEN 622 thousand to PEN 7 million, Medium enterprise: From PEN 7 million to PEN 9.5 million.

Source: National Tax Administration Bureau.

In terms of employment, SMEs in Peru had a significant impact; they generated nearly 10.7 million jobs in 2022, which accounted for 90.5% of total private employment. This amount was 2.9% higher than the previous year and a substantial 6% more compared to 2019. Moreover, micro-firms had the highest share of employment (74.4%), followed by small firms (13.7%) and medium firms (2.4%).

Table 34.3. Employment indicators for Peruvian SMEs

Enterprise size*				Private sector employment (Thousands of people)
	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Micro	7,666	7,596	7,593	7,610	7,698	7,803	7,875	7,989	8,165	6,617	8,716	8,811
Small	1,456	1,537	1,622	1,577	1,623	1,548	1,633	1,634	1,614	1,210	1,414	1,619
Medium	335	322	316	307	327	357	332	309	330	236	285	283
SME	9,457	9,454	9,531	9,494	9,647	9,708	9,841	9,932	10,109	8,063	10,415	10,714
Large	962	1,143	1,188	1,268	1,178	1,231	1,166	1,220	1,278	913	1,023	1,128
Total private employment	10,419	10,597	10,719	10,763	10,826	10,939	11,006	11,152	11,387	8,976	11,438	11,842
Employed EAP	15,307	15,541	15,684	15,797	15,919	16,197	16,511	16,776	17,133	14,902	17,120	17,756

Note: According to the number of employees. Micro: up to 10 workers. Small: between 11 and 100 workers. Medium: between 101 and 250 workers. Large: More than 250 workers.

Source: National Institute of Statistics.

The contribution of SMEs to the Peruvian economy is substantial, accounting for more than 30% of the added value. Out of the total number of companies, small firms have the largest share of added value(15%), followed by medium firms (10.7%) and micro firms (5.5%). In terms of exports, SMEs play a significant role, accounting for approximately 7.0% of the total value of Peruvian exports, particularly notable in sectors such as mining, agriculture, and textiles.

SME lending

According to the Finance and Banking Regulator Authority, SMEs accounted for a significant share of all outstanding loans in 2022, reaching 30.9%. During 2020, this percentage experimented a large increase that continued growing by 2021. Before COVID pandemic begins the higher share of SME outstanding loans was reported in 2012, when its share represented around 28%. This indicates the importance of SME lending in the overall credit market and highlights the role of SMEs in driving economic growth and development.

The increase in SMEs' share of outstanding loans is a positive sign, as it demonstrates better access to financing for them. Proactive initiatives aimed to support businesses have led to an increase in the number of formal enterprises accessing the formal financial system.

Figure 34.1. Share of SME outstanding loans to total business outstanding loans (%)

Note: Data for 2020 are preliminary.

Source: National Tax Administration Bureau and Finance and Banking Regulator Authority.

Statlink

Banks are the primary source of loans for companies, although micro-firms tend to rely less on them, as shown in Figure 35.3. Bank credits are primarily concentrated in Lima, the capital city, and other major cities across the country. In smaller cities and peripheral areas, urban credit unions are the predominant credit providers. While banks remain the main financing source for small, medium, and large firms, urban credit unions play a significant role for micro-firms, accounting for 40.7% of their financing. Credit unions and specialized institutions catering to SMEs often offer quicker loan processing and greater accessibility to individuals and entrepreneurs.

Figure 34.2. Distribution of financing sources used by enterprises, 2022 (%)

Source: National Tax Administration Bureau and Finance and Banking Regulator Authority.

Statlink

Credit conditions

SMEs are often considered riskier by the formal financial sector, primarily due to their lack of expertise and skills. Approximately 38.3% of SMEs have loans from a single financial institution, while 29.9% have loans from two lenders, which can include banks and other types of institutions. Only 5.2% of SMEs have loans from more than five financial institutions. This concentration of loans from a large number of institutions could indicate potential over-indebtedness in the SME sector. These firms may have borrowed more than their actual turnover, leading to challenges in repayment.

Figure 34.3. SMEs by number of lenders, 2022 (%)

Source: National Tax Administration Bureau and Finance and Banking Regulator Authority.

Statlink

In 2022, the interest rate spread between large companies and SMEs in Peru was 19.9 percentage points. This represented a decrease of 0.4 percentage points compared to the previous year, indicating a slight improvement in interest rate differentials. However, it is important to note that the interest rates for small business loans experienced an increase during the same period. Specifically, they increased from 24.0% in December 2021 to 27.1% in December 2022. Therefore, this upward trend suggests that despite the reduction of the spread, the cost of borrowing for these enterprises has increased.

Therefore, while the narrowing interest rate spread indicates some improvement in the accessibility of credit for SMEs compared to large companies, the increase in interest rates for small business loans highlights the challenges faced by SMEs in borrowing funds at affordable rates.

Figure 34.4. Interest rates by enterprise size (%)

Note: Observed rates at the end of each year.

Source: Central Reserve Bank of Peru.

Statlink

Alternative sources of SME financing

In recent years, there has been a rapid increase in the utilization of alternative financing sources for SMEs. One of these sources is factoring and invoice discounting activities, which have gained popularity. However, it is important to note that these financing alternatives can be volatile, as fluctuations have been observed in their usage each year. This volatility is influenced by factors both on the supply and demand side.

In order to promote the use of factoring, since 2020 the government has encouraged private firms to accept invoices for factoring. Now, sellers have the option to use their invoices as collateral for factoring with financial institutions. In previous years, this practice was not common, as large buyer firms often declined to accept invoices for factoring, citing high operating expenses associated with the process.

Despite the government's promotion of factoring and invoice discounting activities, the volumes of leasing and hire purchases continue to surpass them. As of December 2022, factoring and invoice discounting for SMEs reached PEN 605 million, which is approximately PEN 158 million less than in 2021. In contrast, leasing and hire purchases amounted to PEN 1,604 million during the same period, a decrease of approximately PEN 608 million compared to 2021.

Figure 34.5. Alternative funding options for SMEs

Year on year growth, as a percentage

Source: National Tax Administration Bureau and Finance and Banking Regulator Authority.

Statlink

Other indicators

Non-performing loans tend to be common in the SME sector due to the great relative uncertainty they face in their activities. Considering that SMEs are less resilient than larger companies, it is more likely that during any period of slow economic growth, they will suffer from lower sales and lower demand, which in turn directly affect their capacity for loan repayment. Larger firms, on the contrary, are more exposed to global demand and commodity prices, therefore, they are less vulnerable to internal market shocks.

Figure 34.6. Non-performing loans by firm size (%)

Non-performing loans (more than 90 days of delay) over total outstanding loans

Source: National Tax Administration Bureau and Finance and Banking Regulator Authority.

Statlink

Government policy response

As part of the economic recovery process and in response to the negative effects of the COVID-19 pandemic, the government has implemented various programmes to provide favourable financing conditions for companies across all sectors, ensuring resilient businesses in the economy. The programmes include:

• REACTIVA PERÚ: This programme aims to support the payment of workers and suppliers by providing state-guaranteed loans to companies, ensuring the continuity of the payment chain and addressing the economic impact of COVID-19.

• FAE-MYPE: is a state fund that promotes working capital financing for micro and small enterprises across all sectors of the economy.

• PAE-MYPE: The Business Support Programme for micro and small enterprises aims to provide financing for working capital and fixed assets to the most affected MSMEs by COVID-19.

• FAE-AGRO: This programme supports small producers in the agricultural sector, specifically the Family Agriculture1, by providing financing to ensure the success of national agricultural campaigns.

• FAE-TURISMO: A fund created to provide short-term financing to micro, small, and medium enterprises in the tourism sector, helping them to cope with the economic effects of COVID-19.

• Programa de Garantías COVID-19: This programme aimed to guarantee reprogrammed loans for consumer, personal, housing mortgage, vehicle, and MSMEs loans for individuals whose repayment capacity has been affected by the pandemic.

• FAE-TEXCO: A programme created by the Ministry of Production to stimulate the economic recovery of micro and small enterprises in the textile and clothing sector.

These programmes have played a crucial role in providing financial support and assisting businesses in overcoming the challenges presented by the pandemic. The government's initiatives aimed at addressing financing constraints have been instrumental in sustaining the economy and promoting recovery.

There is evidence that MSMEs that accessed to financing programmes increased their survival probability, number of formal employees and sells comparing to those that didn´t access. MSMEs with financing increased their survival probability in 5.2 pp and their annual sales in 12.5 UIT2 (around USD$13,000).

Table 34.4. Summary of the main financial measures in favour of SMEs in the face of the COVID-19 pandemic.

Programs	Number of Beneficiary SMEs	Amount Awarded (in millions)
Reactiva Perú	1 493 635	S/ 26 874
FAE-MYPE1/	1 303 000	S/ 2 890
PAE-MYPE2/	8 493	S/ 249
FAE – TEXCO3/	263	S/ 8
Total Beneficiary SMEs4/	4 805 391	S/ 30 021

W1/ Information as of the closing of the placement process.

2/ As of December 31, 2021.

3/ As of December 31, 2022.

4/ Does not include the Impulso MYPERU Program (up to S/2,000 million) which is still in the auction stage.

Source: Ministry of Economy and Finance (MEF) - https://www.gob.pe/institucion/mef/campa%C3%B1as/8464-programas-de-reactivacion-economica

Preparation: PRODUCE - OGEIEE - Office of Economic Studies

Figure 34.7. Trends in SME and entrepreneurship finance in Peru

Source: See Table 34.2.

Statlink

Table 34.5. Sources and definitions of Peru’s Scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	Amounts allocated to the SME sectors at the end of the year. All possible types of credits are considered. The SME sector is identified according to its annual sales. Preliminary data for 2020.	SBS - Financial regulator from Peru and Tax administration.
Outstanding business loans, total	Amounts allocated to all firm sizes at the end of the year. All possible types of credits are considered. The firm size is identified according to its annual sales.	SBS - Financial regulator from Peru and Tax administration.
Share of SME outstanding loans	Preliminary data for 2020.	SBS - Financial regulator from Peru and Tax administration.
New business lending, total	There is no formal definition for this, we consider any loan as new if it has not appeared in the financial system two years before.	SBS - Financial regulator from Peru and Tax administration.
New business lending, SMEs	There is no formal definition for this, we consider any loan as new if it has not appeared in the financial system two years before.	SBS - Financial regulator from Peru and Tax administration.
Share of new SME lending	There is no formal definition for this, we consider any loan as new if it has not appeared in the financial system two years before.	SBS - Financial regulator from Peru and Tax administration.
Outstanding short-term loans, SMEs	We are unable to produce this data since the terms are stated by private financial institutions and they do not report this. Maybe we could consider the amounts allocated, and consider a certain threshold, which can be arbitrary.
Outstanding long-term loans, SMEs	We are unable to produce this data since the terms are stated by private financial institutions and they do not report this. Maybe we could consider the amounts allocated, and consider a certain threshold, which can be arbitrary.
Share of short-term SME lending	We are unable to produce this data since the terms are stated by private financial institutions and they do not report this. Maybe we could consider the amounts allocated, and consider a certain threshold, which can be arbitrary.
Government loan guarantees, SMEs	There are certain programs for these loans, and data are collected by the Ministry of the economy. But the last numbers are for recent funds raised especially for these types of financial services.	Ministry of the economy
Government guaranteed loans, SMEs	We are unable to produce this data since a second-floor bank delivers the funds to private banks for the guarantees, and we do not have access to that information.
Direct government loans, SMEs	We consider all loans given by the two public banks directly for the SME segments.	SBS - Financial regulator from Peru and Tax administration.
Non-performing loans, total	We consider as non-performing loans those with more than 90 days of maturity.	SBS - Financial regulator from Peru and Tax administration.
Non-performing loans, SMEs	We consider as non-performing loans those with more than 90 days of maturity.	SBS - Financial regulator from Peru and Tax administration.
Interest rate, SMEs	This information is provided by the Central bank mainly from the banking industry. Many other types of financial institutions are excluded, but they account for less of 10% of the market, so it is a proper proxy.	BCRP - Central bank of Peru
Interest rate, large firms	This information is provided by the Central bank mainly for the banking industry. Many other types of financial institutions are excluded, but they account for less of 10% of the market, so it is a proper proxy.	BCRP - Central bank of Peru
Interest rate spread	This information is provided by the Central bank mainly for the banking industry. Many other types of financial institutions are excluded, but they account for less of 10% of the market, so it is a proper proxy.	BCRP - Central bank of Peru
Collateral, SMEs	We are unable to provide this. We have no data at all.
Percentage of SME loan applications	We use an annual survey where SMEs are asked whether they applied for a loan. So we measure the percentage from the total of SME surveyed.	Ministry of Production
Rejection rate	We use an annual survey where SMEs are asked whether they did not receive the loan after applying for it. So, we measure the percentage from the total of SME surveyed.	Ministry of Production
Utilization rate	We use an annual survey where SME are asked whether they indeed received the loan after applying for it. So, we measure the percentage from the total of SME surveyed.	Ministry of Production
Non-bank finance
Leasing and hire purchases	This is calculated using the financial regulator information for SME segments, given that this kind of service can be identified.	SBS - Financial regulator from Peru and Tax administration.
Factoring and invoice discounting	This is calculated using the financial regulator information for SME segments, given that this kind of service can be identified.	SBS - Financial regulator from Peru and Tax administration.
Other indicators
Leasing and hire purchases	We use the Tax administration data to measure how many SME quits each year.	Tax administration

References

Central Reserve Bank of Peru (2023). INFLATION REPORT. March 2023.

Ministry of Production (2022). Las MIPYME en cifras 2021. Obtenido de: http://ogeiee.produce.gob.pe/index.php/shortcode/oee-documentos-publicaciones/publicaciones-anuales

Notes

SME and entrepreneurs: Consider micro-enterprises as an indicator of entrepreneurship. From now on, the term SMEs is used to refer to both micro, small, and medium-sized enterprises.

Notes

← 1.  Family Agriculture is an organizational model where family labour predominates.

← 2.  UIT: Unidad Impositiva Tributaria (Tax Unit)