Financing SMEs and Entrepreneurs 2024

9. Colombia

Key facts on SME financing

Access to finance is one of the main elements for strengthening and keeping entrepreneurships and micro, small and medium-sized enterprises (MSMEs) growing, allowing them to invest in order to increase their productivity, competitiveness and consolidation in the market. In times of economic distress, obstacles to access formal financing sources, significantly limit MSMEs’ ability to invest in upgrading their operations or in innovation, as they are required to have liquidity buffers to face economic uncertainty.

In 2022, for example, there were a range of factors that led to economic uncertainty becoming a global challenge for enterprises. The large-scale aggression of Russia against Ukraine, global inflation, major economic slowdowns, the lack of raw materials, an energy crisis, and a rise in interest rates have made the economic outlook tense. As a result of this, markets suffered high volatility.

In Colombia, uncertainty was felt in spite of relatively good internal economic performance compared to other countries in the region. On the one hand, the rise in interest rates and high inflation during the year has been a source of concern, and on the other hand, relative uncertainty could have emerged as a result of the change of government. Notwithstanding, GDP grew by 7.3% in 2022 and 310 000 new enterprises were established, which represents 1% more than in 2021. Of the newly established businesses, 62.5 % are enterprises led by women (Confecámaras, 2023[1]).

The results of the Entrepreneurial opinion survey, which was conducted by Fedesarrollo, demonstrated that trust by traders increased and reached 22.6% in December 2022 due to greater optimism about the current situation in comparison with 19.2% in November of the same year. However, it is important to note that this percentage is below the 41.3% recorded in the same period in 2021 (Fedesarrollo, 2022[2]).

The entrepreneurial opinion survey also provides information regarding the main sources of finance used by MSMEs. Findings show that 50.6% of micro-enterprises indicated their own resources as the most important source of finance, 39% mentioned profit reinvestment, and 23.9% chose traditional bank loans. Nevertheless, promoting financial inclusion and bridging the gap in access to finance as a mechanism to reduce business informality in Colombia continues to be an internal challenge.

In relation to the destination of credit resources, the majority of SMEs in the three main sectors (manufacturing, services, and trade) used credit resources to finance working capital. The second most frequent use of resources was the consolidation of liabilities, and the third use was the purchase or lease of machinery. Particularly, this last use was evident in companies in the industrial sector.

On the other hand, despite the lack of sources to accurately calculate business informality1, estimates show that the percentage of informal businesses in Colombia is high. According to data reported in the Household Survey, it is estimated that over 57.6% of businesses are informal, with the percentage even higher in rural regions at 84.7%, correlating with limited access to financing. In the country, only 15.8% of microenterprises have access to credit products, 63.6% for small enterprises, and 77% for medium-sized enterprises (Banca de Oportunidades, 2023[3]).

Table 9.1. Scoreboard for Colombia

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
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	77.6	83.01
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	294.8	345.04
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	26.3	24.1
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	138.7	146
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	29.4	39.07
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	21.2	26.8
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	13.28	16.2
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	64.3	66.7
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	17.1	19.6
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	18.1	17.2
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	27.1	26.9
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	2.4	1.6
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	3.3	2.6
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	12.4	21.8
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	5.2	13.9
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	7.1	7.9
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	93.3	91.7
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	27.7
Rejection rate	1-(SME loans authorised/ requested)	2	4	9	5	3	4	7	3	7.5	4	8	7	26	30	29.2
Utilisation rate	SME loans used/ authorised	98	96	91	95	97	96	93	97	92.5	96	92	93	88	70	N/A
Non-bank finance
Venture and growth capital	COP billion	..	..	..	..	..	..	..	..	1.83	2.91	4.23	5.61	5.70		N/A
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	..	..	..	..	..	..	..	..	59 .3	45 .5	32.69	1.57		N/A
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		23	28.8
Other indicators
Payment delays, B2B	Number of days	49	50	61	62	59	55	56	65	66	85	95	101	80.01		N/A
Bankruptcies, SMEs	Number		1	12	18	40	59	76	83	85	131	193	443	608	661	691
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	4.54

Source: See Table 9.3.

Macroeconomic and financing conditions

Despite a challenging scenario of hyperinflation, the GDP grew 7.3% in 2022 (compared to 3.8 % in Latin America). Inflation in 2022 stood at 13.1%, driven by several factors, including Colombian currency depreciation, indexation of income and high domestic demand.

It is important to emphasise that the fiscal deficit was estimated at 5.5% of GDP (compared to 7.1% registered in 2021). The decline is explained by a fiscal adjustment of 1.6 percentage points. This adjustment reflects the collective efforts of the Government to consolidate and improve public finances as a way to guarantee accountability in spending and financing of social programmes (Banco de la República, 2022).

The national unemployment rate stood at 10.3% in 2022, less than the figures registered in metropolitan regions, which reached 10.8%. Some regions show significantly high unemployment percentages despite the great efforts to reduce the informality rate. In Bogotá, unemployment reached 33.9% and in Medellín, 39.1%. This represents a challenge in improving the quality of employment in urban areas.

In the case of Bogotá, the local government has implemented programs aimed at boosting employment, such as the "Inclusive Employment" program. This program targets microenterprises and provides financial support to those hiring individuals from sectors with challenging employability, such as women, victims, people with disabilities, or individuals over 50 years old. This support is manifested through paying a portion of the salary for such hires, ensuring this economic backing for at least 6 months.

Regarding Medellin, the increase in the organisation of artistic, cultural, and entertainment events, coupled with the growth in tourism, has influenced the decrease in unemployment.

Regarding unemployment, Valledupar and Riohacha are the two most challenging regions, with unemployment estimated to be 69.6% and 68.1%, respectively. Measures to promote formal employment, and policies to stimulate and encourage economic development are crucial. Similarly, the promotion of financial inclusion is key, particularly in areas with high levels of informal labour.

In 2022, interest rates reached 12% due to a 100 basis points increase conducted by the Colombian Central Bank (Banco de la República). This figure has had a significant direct impact on customers as credit acquisition is more expensive and customers now must use a higher percentage of their income to pay debts, increasing the difficulty in obtaining a loan.

Foreign direct investment grew exponentially by 76% in 2022 (with USD 16.9 million registered in 2022 compared to 9.6 million registered in 2021) despite high inflation and an increase in the fiscal deficit in 2021. This is largely due to growth in sectors such as mining, oil, trade and tourism (Banco de la República, 2022[4]).

SMEs in the national economy

Micro, small, and medium-sized enterprises (MSMEs) play a crucial role as the main driving force for economic growth, transformation of the production capacity, employment, and income generation in Colombia. In fact, these enterprises represent 99% of all enterprises in Colombia and are responsible for generating 70% of employment and contributing 40% to the country’s GDP. Their contribution is vital to the overall economic development and prosperity of the nation.

According to the records of the Chambers of Commerce in 2022, Colombia’s formal business structure is composed of 95.4% microenterprises, 4.3% SMEs, and only 0.3% large enterprises. For the period between January and December 2022, 357,551 productive units were created, representing a 2% increase compared to the same period in 2021. These figures highlight the growing importance of entrepreneurship in the country (Ministry of Trade, Industry, and Tourism, 2022).

Table 9.2. Distribution of firms in Colombia by firm size, 2022

Enterprise size	(%)	Manufacturing Industry		Service Sector		Commerce Sector
Micro	95,4%	≤ 23.563		≤ 32.988		≤ 44.769
Small	3,5%	> 23.563	≤ 204.995	> 32.988	≤ 131.951	> 44.769	≤ 431.196
Medium	0.8%	> 204.995	≤ 1.736.565	> 131.951	≤ 483.034	> 431.196	≤ 2.160.692
Big	0,3%	> 1.736.565		> 483.034		> 2.160.692

Note 1: Starting from the issuance of Decree 957 of 2019, the classification of enterprise size is carried out based on the economic sector and the volume of sales measured in Tax Value Units - UVT. The value of the UVT is determined annually by the Colombian tax office - DIAN.

Nota 2: UVT 2022 = COP 38.004 COP

SME lending

The access of SMEs (Small and Medium Enterprises) to credit products offered by banks depends on various factors such as geographical location, the number of employees, and the company's installed capacity. By the year 2022, only 27.3% of companies had at least one credit product. Regarding approved applications, 89% of credit applications made by micro-entrepreneurs were approved.

According to the 2022 EMICROM survey conducted by DANE, the sources used for the creation or establishment of micro-enterprises were as follows: 60.2% used personal savings, 15.3% did not require financing, 11.1% sought loans from family members, 9.0% accessed bank loans, 2.9% turned to moneylenders, and 1.5% either used another source of financing.

Regarding microloans, the demand for new credit remained positive during the last four-month period of 2022, despite experiencing a decrease compared to the previous year. The increased demand for microloans is mainly attributed to higher economic growth, and improved information on the borrowers' repayment capacity (Banco de la República, 2022).

According to the Credit Situation Report in Colombia for December 2022, it was evident that large companies had favourable access to credit in banks, while their access was reduced in CFCs (Financial Cooperatives) and cooperatives2. For medium-sized companies, access to credit offered by banks and cooperatives was good, although there was a reduction in access from CFCs. On the other hand, micro and small-sized enterprises showed similar results to the previous three months, with satisfactory access in cooperatives but limited access to banks and CFCs.

Cooperatives commonly extend credits to their members, securing them with their contributions up to a multiple of the same. Unlike financial institutions, this condition is not necessarily required, as these entities derive their resources from various collection sources.

Access to credit is hindered by various factors, including high interest rates, which represent a significant barrier as they increase the total cost of the loan and can make repayment challenging. Additionally, another common issue is that the approved credit amount is often insufficient or lower than requested, limiting financing possibilities. Another aspect to consider is the high cost of loan commissions, which can further burden the applicant's financial situation. Finally, the conditions required for credit approval can be difficult to meet, leaving potential beneficiaries excluded. These combined factors create a challenging environment for those seeking financing and can negatively impact business and entrepreneurial expansion.

Given the aforementioned circumstances, it is vitally important to expand the range of financing instruments available for businesses, considering aspects such as enterprise size, level of innovation, and risk appetite. Diversifying financing options allows for the design of more practical financial solutions to meet the individual circumstances of each business, addressing their specific needs, challenges, and opportunities on their path to growth.

Credit conditions

The fixed-term deposit (DTF) performed an average behaviour of 13.42% effective annual rate (EA) by December 2022, an increase of 10.34 percentage points compared to the closing rate of 2020, which stood at 3.08% effective annual rate (EA).

Alternative sources of SME financing

During 2022, it was observed that SMEs that financed themselves through alternative means of funding utilised the following sources: 31% turned to their suppliers to obtain funding through credit agreements or deferred payment terms, securing necessary funds to operate or expand. On the other hand, 50% used their own resources or capitalisation, 13% used leasing, 12% resorted to factoring, and the remaining 6% sought credit from unregulated sources or the non-banking market.

In terms of public financing instruments and mechanisms, the Government offers subsidies, prizes, and seed capital funds from "Fondo Emprender" (Entrepreneurship Fund). The public offering of financing instruments includes resources from Bancóldex - Fondo de Capital (FoF), INNpulsa Aldea-Venture Capital, Fondo Mujer Emprende, and from the Fondo Emprender for companies in the growth stage. Additionally, Bancóldex provides lines of credit through rediscounting, and the National Guarantee Fund (FNG) offers credit guarantees to support companies at all stages of growth (Asobancaria, 2022).

Angel investors network:

Angel investors are all those individuals who invest their excess liquidity in early-stage companies with scalability potential, in exchange for equity participation and/or financial returns. These investments are made through vehicles such as convertible notes, equity, and SAFE agreements. Angel investors can group together and form what is known as an Angel Network with the objective of assisting in the relationship between the entrepreneur and the investor, providing support throughout the process, and making the investment in the best possible way.

Mexico and Colombia stand out as the main countries with angel investors in Latin America, representing 50% of the investors in the region jointly. It is important to emphasise Colombia leads Angel investment activity throughout Latin America, and the most attractive sectors for angel investment in the region are three in key areas: Fintech, E-commerce, and Proptech.

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

Government policy response

During 2022, the government implemented various policies aimed at mitigating the economic and social impacts in response to the global economic situation. These measures were designed to counteract the effects that could trigger a potential economic slowdown.

The accumulated exchange rate pressures on prices and indexing at high inflation rates led the Board of Directors of the Central Bank (Banco de la República) as a majority voting, to increase the interest rate by 100 basis points, setting it at 12%. This measure was adopted when the country was experiencing high inflation, keeping with the global situation, closing at 13.12% in 2022.

To address the rising inflation, the Central Bank increased the interest rate as a strategic response. This strategy aimed to discourage spending and consumption, which could reduce aggregate demand and, consequently, mitigate inflationary pressures.

Despite the challenging economic context, the government found opportunities to strengthen support policies for MSMEs, especially to foster new ventures. The following paragraphs will highlight the main economic and social support measures applied by the government to mitigate the adverse effects caused by economic circumstances. These measures aim not only to alleviate immediate difficulties but also align with long-term policies designed to provide financial backing to MSMEs.

Law 2254 of 2022. Ley Escalera de la formalidad (Congress of the Republic of Colombia, 2022).

This law creates a programme that lays down a gradual path to formalising MSMEs in Colombia. This programme offers benefits to both formalised companies and those that aim to become formal.

The programme is composed of several steps with well-defined requirements and demands depending on company size as well as a maximum period of stay.

The law establishes that the programme consists of several steps, each of which is defined by requirements that must be met, such as being registered in the Registry of Productive Units in Formalization in the Chambers of Commerce and, upon promotion, registration in the Mercantile Registry through the Single Business Window.

The objective is not only to formalise businesses but also to provide entities and the government with information about existing businesses to generate statistics and inform policy design to strengthen and develop companies and economic sectors.

Law 2234 of 2022, Social Entrepreneurship Law (Congress of the Republic of Colombia, 2022).

This law intends to develop and maintain the public policy of social entrepreneurship in order to build up solutions to social, cultural, and environmental problems, serving as a driving force for transformation and innovation at the national and regional levels.

This law recognises social entrepreneurship as a business model, providing a regulatory framework. In this respect, it facilitates formalisation processes, access to financial leverage tools, and allocation of public resources for its promotion and advancement.

The main aspects included in the Law are:

• Recognize the business model of social entrepreneurship.

• Establish the design of programmes and projects for promoting and supporting social entrepreneurship.

• Establish strategic alliances among investors, social entrepreneurs, and public sector institutions.

• Strengthen employment formalisation and improve respect and compliance with labour and social security regulations for workers.

• Create new formal employment opportunities in the territories through service to society.

• Promote national and transnational cooperation to foster knowledge transfers, helping achieve the Sustainable Development Goals (SDGs).

• Design, implement, and strengthen existing platforms that make social entrepreneurship more visible within the national territory.

• Allocate funding sources and financing channels to promote and support social entrepreneurship.

CONPES 4080 of 2022 Public Policy for Gender Equality for Women.

On April 18, 2022, Document CONPES No. 4080 was approved, which establishes the Public Policy for Gender Equality for Women: The objective of the policy is to increase opportunities for economic autonomy and eliminate barriers for women as part of Sustainable Development of the Country. It aims to advance towards gender parity in women's participation in public positions, improve the mental and physical health of women, prevent and address violence against women, strengthen the role of women in peacebuilding processes, and ensure a gender perspective is integrated across strategic matters of the State.

The Main strategies outlined in the document are aimed at:

• Increase women's access to opportunities for income generation and sustainable economic autonomy with high potential and under conditions of equality.

• Strengthen women's involvement in the exercise of public authority, high-level positions within the State, and community organizations.

• Promote women’s health and welfare.

• Strengthen policies that include prevention and integrated support services to combat violence against women.

• Strengthen women's leadership in peacebuilding and security.

• Institutional strengthening and cultural transformation.

Under this policy, a new programme was created funded by Bancoldex, the Women Entrepreneurs line, structured in partnership with the Women Empower Fund (FME), whose disbursements by the end of 2022 amounted to COP 87.835 million, aimed at addressing working capital and modernization needs of 2,968 businesswomen located in 30 departments (Bancoldex, 2022).

The fund is a comprehensive solution for the country's entrepreneurial and businesswomen, providing access to financial resources through co-financing and debt, along with specialized technical support, information, and analysis on the female entrepreneurship ecosystem in Colombia.

The Fund provides its services through various financial instruments, such as subsidies for access to credit products, asset delivery in co-financing, financial education, and the expansion of financial offerings for women, with the necessary support for the implementation and assessment of the results of applying the incentives.

The selection of business initiatives to receive financing is carried out through nationwide calls, recognizing existing differences and diversities. The program aims to support the creation and strengthening of more inclusive businesses. In this regard, the goal is to diversify the beneficiaries, including conflict victims, women from ethnic communities, Afro-descendants, rural women, among others.

Issuance of Green Bonds (IRC Investor Relations Colombia, 2021)

In line with the policy set by the National Government regarding financial inclusion with an environmental and sustainable focus, and the goal to reduce greenhouse gas emissions by 51% by 2030, national and territorial strategies have been developed to make productive sectors more sustainable, competitive, and innovative in order to reduce environmental impacts in their production processes.

Implementation of a roadmap was considered as a mission process to develop the Green Bonds market as a public financing tool aimed at promoting the country's environmental, sustainable, and climate goals within the MHCP4 (Ministry of Finance and Public Credit).

Within this context, the national government has made progress in issuing green bonds as a public policy that enables the channelling of resources towards green initiatives for sustainable economic growth. These bonds are primarily allocated to finance clean and sustainable transportation, unconventional sources of energy, sustainable management and utilization of water resources, waste management, and circular economy initiatives.

According to the report by Bancoldex, financing amounting to COP 584.6 million has been leveraged since the issuance of the first green bonds to date. This amount benefited 482 projects and 333 companies nationwide, of which 81% are SMEs. Among the funded projects, 54% were allocated to energy efficiency, 29% to pollution control and resource efficiency, 12% to renewable energies, 3% to sustainable transportation, and 2% to sustainable construction (Bancoldex, 2022).

Bancóldex Fund of Funds:

The Bancóldex Capital - Fund of Funds, with its "Entrepreneurial Capital" compartmentIt , aims to invest in Colombian and regional venture capital funds that, in turn, invest in high-impact, scalable, and cross-cutting entrepreneurial ventures in trade, industry, tourism, services, and creative industries.

The Fund of Funds allows the investor to choose between two investment theses according to their strategic interests:

• Private Equity Funds: Investing in established companies in the market that require resources or financing for the consolidation and expansion of their operation. Venture Capital Funds: Investing in early-stage companies that have funded their initial operational phases and have an approved product.

The structure of the Fund of Funds allows the investor, regardless of the size of their commitment, to have a diversified portfolio of underlying funds that enhances the invested value. Thus, through Bancóldex Capital Fund of Funds, the investor can access various strategies, industries, geographies, investment cycles, professional managers, and underlying funds (Bancóldex).

Despite adverse economic conditions worldwide, Bancóldex achieved disbursements of COP 6.9 trillion in 2022, benefiting over 138,000 companies, of which 93% are microenterprises, across all 32 departments of the country. Out of the total disbursements, COP 667 billion were allocated to directly support SMEs through direct credit, leasing, and factoring products, benefiting more than 500 companies (Bancóldex, 2022).

Granting of guarantees:

Through the National Guarantee Fund – FNG, guarantees were provided to support regular portfolio activities (working capital, fixed investment, and business capitalisation) aimed at small and medium-sized enterprises. Among the traditional products, there are also other usage or destination modalities, such as global revolving credit lines, financial leasing, and guarantees for business microloans, designed with special characteristics for this segment. The National Guarantee Fund (FNG) reported that during 2022, COP 15.6 billion were mobilized, a decline of 21.96% compared to 2021. As of November 2022, 30 606 entrepreneurs had been benefited. Furthermore, COP 4 trillion was allocated to credit for micro-entrepreneurs, so that 284 761 of them in total successfully benefited.

Crowdfunding A2censo:

A2censo is a collaborative financing platform, a "crowdfunding" platform, where SMEs and investors come together. With this alternative financing method based on financial crowdfunding through debt, a space has been created where multiple investors make small contributions to finance these companies. This investment platform is managed by the Colombian Stock Exchange - BVC.

Angel Investors

In Colombia, the promotion of angel investors is primarily driven by the private sector, with active participation from entities such as the Bolívar-Davivienda Foundation and Entorno Comercio, among others. Additionally, local Chambers of Commerce have played a significant role in establishing networks that connect entrepreneurs with angel investors.

In this context, institutions like the Chamber of Commerce of Bucaramanga and Antioquia have stood out for leading initiatives that go beyond mere connection, offering training and support. These programs not only facilitate the connection between entrepreneurs and angel investors but also provide guidance before and during negotiations, thereby contributing to the effective formalization of investments.

Figure 9.1. Trends in SMEs and entrepreneurship finance in Colombia

Source: See Table 10.3. 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 9.4. Sources and definitions of 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 credit 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 microcredit 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 credit and microcredit 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 credit 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 credit 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 credit 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 million, converted into Colombian pesos at an average exchange rate of COP 3,334.38 for the year 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 credit 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

[7] ACOPI (2022), Encuesta de Desempeño Empresarial, https://www.acopi.org.co/wp-content/uploads/2023/03/ENCUESTA-DE-DESEMPENO-EMPRESARIAL-2022-4.pdf.

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

[11] Asobancaria (2022), Ensayos Sobre Inclusión Financiera en Colombia.

[3] Banca de Oportunidades (2023), Reporte de Inclusión Financiera, https://www.bancadelasoportunidades.gov.co/sites/default/files/2023-07/RIF2022%2018072023.pdf.

[13] Banca de Oportunidades (2022), Reporte de Inclusión Financiera, https://www.bancadelasoportunidades.gov.co/sites/default/files/2023-07/RIF2022%2018072023.pdf.

[10] Banco de la Republica (2022), Reporte de la Situación del Microcrédito en Colombia, https://repositorio.banrep.gov.co/bitstream/handle/20.500.12134/10594/RSMC_Dic_2022.pdf.

[4] Banco de la República (2022), Inversion extranjera directa en Colombia - Total y por actividad económica¹², https://totoro.banrep.gov.co/analytics/saw.dll?Go&Path=%2Fshared%2FSeries%20Estad%C3%ADsticas_T%2F1.%20Inversi%C3%B3n%20directa%2F1.1%20Historico%2F1.1.3%20Inversion%20extranjera%20directa%20en%20Colombia%20-%20Actividad%20economica_Anual&lang=es&Options=.

[18] Banco de la República (2022), Los resultados fiscales de 2022 y el Plan Financiero de 202, https://www.minhacienda.gov.co/webcenter/portal/SaladePrensa/pages_DetalleNoticia?documentId=WCC_CLUSTER-209171.

[14] Bancoldex (2022), 5to Reporte de Bonos Verdes, https://www.bancoldex.com/sites/default/files/5to_reporte_bonos_verdes_-_f1.pdf.

[17] Bancoldex (2022), Reporte Anual 2022, https://www.bancoldex.com/sites/default/files/bancoldex_reporte_anual_2022.pdf.

[12] Bancóldex (2022), Reporte Anual 2022, https://www.bancoldex.com/sites/default/files/bancoldex_reporte_anual_2022.pdf.

[1] Confecámaras (2023), Más de 310 mil en empresas se crearon en Colombia en 2022, https://confecamaras.org.co/noticias/865-mas-de-310-mil-en-empresas-se-crearon-en-colombia-en-2022.

[16] Congreso de la República de Colombia (2022), Ley 2234 de 20222, “POR MEDIO DE LA CUAL SE CREA LA ESCALERA DE LA FORMALIDAD, SE REACTIVA EL SECTOR EMPRESARIAL EN COLOMBIA Y SE DICTAN OTRAS DISPOSICIONES”.

[15] Congreso de la Républica de Colombia (2022), LEY 2254 DE 2022, “POR MEDIO DE LA CUAL SE CREA LA ESCALERA DE LA FORMALIDAD, SE REACTIVA EL SECTOR EMPRESARIAL EN COLOMBIA Y SE DICTAN OTRAS DISPOSICIONES”.

[9] DANE (2022), , https://www.dane.gov.co/files/investigaciones/boletines/ech/micro/bol-micronegocios-2022.pdf.

[2] Fedesarrollo (2022), Encuesta de Opinión Empresarial, https://www.repository.fedesarrollo.org.co/bitstream/handle/11445/4372/BEOE_Diciembre_2022.pdf?sequence=5&isAllowed=y.

[8] Fedesarrollo (2022), Encuesta de Opinión Empresarial, https://www.repository.fedesarrollo.org.co/bitstream/handle/11445/4372/BEOE_Diciembre_2022.pdf?sequence=5&isAllowed=y.

[19] IRC Investor Relations Colombia (2021), Marco de Referencia de Bonos Verdes Soberanos de Colombia, https://www.irc.gov.co/webcenter/ShowProperty?nodeId=%2FConexionContent%2FWCC_CLUSTER-169891.

[6] Ministerio de Comercio, Industria y Turismo (2022), Informe de tejido empresarial, https://www.mincit.gov.co/getattachment/estudios-economicos/estadisticas-e-informes/informes-de-tejido-empresarial/2022/diciembre/oee-dv-informe-de-tejido-empresarial-diciembre-2022.pdf.aspx.

Notes

← 1.  Formalization is a mean for companies to be economically, environmentally and socially included in the markets, increase productivity rates, access the financial system, and become sustainable. Although a percentage of companies in Colombia are not completely formal, there are several in the transition to formality.

← 2.  Savings and credit cooperatives are specialised cooperative organisations whose main function is to carry out financial activity exclusively with their members. Financial cooperatives are specialised cooperative organisations whose main function is to carry out financial activity. https://www.supersolidaria.gov.co/es/content/3-que-cooperativas-Vamos-exercer-activity-financiera