Financing SMEs and Entrepreneurs 2024

29. Mexico

Key facts on SME financing

In Mexico, approximately 29.6% of the micro, small and medium enterprises (MSMEs) had access to finance from any source between 2019 and 2021, according to the National Survey of Enterprise Financing (ENAFIN) 2021, conducted by the National Institute of Statistics and Geography (INEGI), which is representative of a sample framework of 266 270 MSMEs of 6 workers or more.

In 2022, the average interest rate for loans to MSMEs was 14.26%, which was 2.4 percentage points higher than the previous year, in line with the contractionary monetary policy stance of the Bank of Mexico, in the aftermath of its efforts to restrain inflationary pressures linked to the global macroeconomic conditions. Between the firms, the interest rate varied according to the amounts of the loans and the size of the borrowing company. For large companies, the average interest rate was approximately 10.68%, which means that the spread of the MSMEs’ loans is 3.58 percentage points (see Table 30.1).

The Mexican government has several funds that have been used to develop more specific programmes. For instance, amid the COVID-19 pandemic, the government implemented additional programmes to support SMEs in strategic sectors such as retail trade, manufacturing, lodging services, food and beverage preparation, restaurants, and the dough and tortilla industry, in order to contribute to economic reactivation.

Also, the institutional framework on the domestic financial market has allowed the entrance of several Fintech institutions1, not only as payment aggregators but as non-banking lenders. This phenomenon has contributed to increasing competition and generating a market environment that eases access to funding. However, there is still room for these entities to improve the credit conditions for MSMEs in particular in the offer of longer loan maturities and lower interest spreads.

Table 29.1. Scoreboard for Mexico

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Debt
Outstanding business loans, MSMEs	MXN billion	…	…	178.1	198.8	230.2	275.3	321.0	359.3	401.3	459.4	501.0	506.4	492.3	462.2	460.7	487.1
Outstanding business loans, total	MXN billion	…	…	890.7	968.4	1,135.2	1,219.4	1,336.7	1,445.3	1,681.5	2,386.8	2,835.7	3,106.0	3,157.4	3,112.9	3,179.0	3,540.5
Share of MSME outstanding loans	% of total outstanding business loans	…	…	20.0	20.5	20.3	22.6	24.0	24.9	23.9	19.2	17.7	16.3	15.6	14.8	14.5	13.8
New business lending, total	MXN billion	…	…	…	1,310.5	1,624.8	1,806.2	1,949.7	2,009.8	2,253.7	2,621.6	4,605.1	5,195.2	5,601.8	6,003.1	5,722.7	10,794.7
New business lending, MSMEs	MXN billion	…	…	…	250.4	304.5	367.8	426.3	468.0	517.3	544.2	911.0	825.6	795.8	658.4	740.0	1,070.2
Share of new MSME lending	% of total new lending	…	…	…	19.1	18.7	20.4	21.9	23.3	23.0	20.8	19.8	15.9	14.2	11.0	12.9	9.9
Outstanding short-term loans, MSMEs	MXN billion	11.1	41.3	39.1	30.8	30.0	36.9	34.3	12.5	17.7	21.7	32.1	23.8	…	…	…	…
Outstanding long-term loans, MSMEs	MXN billion	10.8	22.4	38.5	36.6	44.2	60.1	80.9	89.0	90.1	107.1	99.1	115.3	…	…	…	…
Share of short-term MSME lending	% of total MSME lending	50.6	64.8	50.4	45.7	40.4	38.0	29.8	12.3	16.4	16.8	24.5	17.1	…	…	…	…
Government loan guarantees, MSMEs	MXN billion	0.8	1.1	1.9	2.3	3.0	3.0	3.7	4.3	3.2	2.7	1.9	4.0	0.8	1.4	…	…
Government guaranteed loans, SMEs	MXN billion	21.9	63.8	77.7	67.4	74.3	96.9	115.1	101.6	107.8	128.8	131.2	139.1	34.0	39.7	…	…
Direct government loans, SMEs	MXN billion	…	…	29.5	30.8	53.3	63.0	88.1	135.4	183.8	6.5	6.5	6.8	5.7	5.3	4.3	1.2
Non-performing loans, total	% of all business loans	…	…	2.0	1.9	2.2	2.0	3.5	3.1	2.6	1.8	1.7	1.7	1.8	1.9	1.7	2.0
Non-performing loans, MSMEs	% of MSME loans	…	…	4.6	4.5	4.2	3.8	3.9	4.3	4.0	4.1	4.5	5.0	5.8	5.9	4.6	3.8
Interest rate, MSMEs	%	19.9	16.2	12.1	11.9	11.4	11.2	9.9	9.2	9.1	11.0	17.0	17.7	13.9	11.7
Interest rate, large firms	%	7.4	8.0	8.1	7.9	7.7	7.6	6.6	6.0	6.0	8.1	10.6	11.8	8.3	6.3
Interest rate spread	% points	12.4	8.3	3.9	4.0	3.8	3.6	3.4	3.2	3.1	2.9	6.4	5.9	5.5	5.5
Non-bank finance
Venture and growth capital	USD billion	4.1	2.1	…	…	2.1	4.7	2.1	7.2	13.2	5.2	4.6	3.6	0.7	1.3	0.3	…
Venture and growth capital (growth rate)	%, Year-on-year growth rate	…	-49.6	…	…	…	128.1	-54.5	238.4	83.2	-60.9	-11.6	-21.8	-80.6	94.3	…	…

Source: See Table 29.2.

Macroeconomic and financing conditions2

In 2022, economic activity in Mexico continued its recovery with an annual real GDP growth rate of 3.9%, after a bounce-back of 5.9% in 2021 and a fall of 8.7% in 2020 due to the COVID-19 pandemic. The private final consumption showed an annual growth rate of 6.2%, while the gross formation of fixed capital grew at an annual rate of 8.6%, boosted mainly by the manufacturing of machinery and equipment.

At the end of 2022, Mexico reached the lowest unemployment rate in the last 17 years, with an average rate of 2.8%, and 2.5% in the case of women, due to the creation of 2.4 million new job positions, most of them in the formal sector. Also, the public debt in 2022 was equivalent to 49.4% of the GDP, which was 1.4 percentage points lower than the previous year.

During 2022 disruptions in the global supply chains contributed to exacerbating inflationary pressures in the domestic economy, and only at the end of the year these pressures began to show some signs of mitigation. Within this context, the annual inflation rate in 2022 was 7.82%, which was over the Central Bank’s inflation target. This motivated its governing board to tighten its monetary policy stance, increasing the monetary policy rate by 500 basis points during the year, from a level of 5.50% to 10.50%.

SMEs in the national economy

MSMEs play a key role in ensuring inclusive economic development in Mexico since they provide 7 out of 10 job positions. Statistical information on SMEs is primarily generated by the National Institute of Statistics and Geography (INEGI), which conducts the Economic Census. According to the most recent update of the Census in 2019 (with figures for 2018), there are approximately 4.7 million MSMEs in Mexico, which account for 99.8% of all private enterprises. Approximately 95% of the total MSMEs were micro businesses. In demographic terms, there are 32 MSMEs per 1 000 inhabitants in Mexico.

Trade and services are the main economic activities of the Mexican MSMEs, since 9 out of 10 of these businesses belong to these economic sectors, while only one-tenth is in the manufacturing industry.

According to the National Survey of Productivity and Competitiveness for Micro, Small and Medium Enterprises (ENAPROCE), also conducted by the INEGI, less than 10% of SMEs export to the international market, and 80.5% of MSMEs exports’ value belongs to the manufacturing sectors, representing a 4.3% of the total value of manufacturing exports. Moreover, only 0.1% of MSMEs are direct suppliers for multinational foreign corporations. MSMEs’ participation in international trade has been limited by: 1) the lack of specialised and necessary knowledge and capabilities on entrepreneurship; 2) the lack of knowledge on international trade and markets; 3) non–tariff barriers, regulations and cross-border trade procedures; and 4) the limited access to finance, especially trade finance. The smaller the company is, the more difficult it is for them to participate in international trade. Finally, less than 2% of SMEs invest in innovation which leads to patent or brand registration.

SME lending

In Mexico, the lending market for MSMEs is composed of loans that commercial banks, state-owned development banks and other non-bank financial institutions give to enterprises and physical persons with business and professional activities to allow them to fulfil their specific needs, e.g., day-to-day operations and machinery and equipment acquisition. The Ministry of Economy is in charge of defining the threshold a company should be in to be considered as an MSME. The main lending products for MSMEs in the Mexican market are direct loans and corporate credit cards.

At the end of 2022, the portfolio of bank loans to MSMEs reached an amount of MXN 487.1 billion, which is equivalent to 13.8% of the outstanding business loans (see Table 30.1). This portfolio increased MXN 26.4 billion between 2021 and 2022, however, the amount is still under its pre-pandemic level. On the demand side, 29.6% of the MSMEs had access to finance from 2019 to 2021. The perception that credit is costly is considered one of the main barriers to access to commercial bank loans, as reported by more than 20% of the MSMEs that did not get a loan, according to the Economic Census (2019).

In recent years, several programmes have been introduced by the government to broaden MSMEs’ access to finance. These initiatives were applied through direct credit programmes or guarantee schemes to financial institutions specialized to serve MSMEs’ demand for funding, targeting strategic sectors.

Credit conditions

During 2022, credit conditions deteriorated as a consequence of a restrictive policy stance aiming to contain inflationary pressures. Nevertheless, the credit portfolio of commercial and development banks was higher than the previous year (see Table 30.1), in the context of favourable conditions for domestic private consumption and fixed investment.

Average interest rates of firms’ loans in Mexico generally depend on the size of the borrowing company. For MSMEs, the average rate at the end of 2022 reached 14.3%, whereas for large companies it was 10.7%. Compared to 2021, these rates increased by 3.4 and 4 percentage points, respectively, in the aftermath of the contractionary stance of the monetary policy. However, the spread between them was the lowest since 2015, in a context where the MSMEs’ non-performing loans ratio was under 4%, a level that had not been seen since 2013.

Finally, the lending market for MSMEs in Mexico is still in expansion as new technological financial institutions have been joining in, thus improving competition and product diversification. Nonetheless, there is room for enhancements in the credit conditions these institutions offer to MSMEs in order to reduce their debt burden and broaden their access to finance.

Government policy response

The Ministry of Economy has several actions aimed at improving the situation of SMEs through two axes: a) access to financing under more favourable conditions than the market; and b) training and integrating actions on financial education and digital transformation.

One of the financing programmes was the Emerging Programme for Economic Reactivation, which was implemented between 2020 and 2022 by the Ministry of Economy, in partnership with the Fund of Investment and Capitalization for the Rural Sector (FOCIR, by its acronym in Spanish) and several local governments, with the aim of providing MSMEs affected by the pandemic with financial support to keep their activities. Through this programme, loans up to MXN 180 000 (around USD 1 000) were granted to MSMEs under interest rates of 10%, and a 3-year term including the option of a 3-month grace period. This programme prioritized the following activities: retail trade, manufacturing, lodging services, food and beverage preparation, restaurants, and the dough and tortilla industry. Up to the third quarter of 2022, 1 034 MSMEs were given loans under this programme.

On the other hand, the Ministry of Economy has MIPYMES MX the platform, which aims to provide micro, small and medium-sized companies with business tools and content on financial education, digital transformation and information on opportunities to linkages to global and regional value chains, in order to strengthen MSMEs’ economic activities and allow them to improve participation in their markets.

Programme to foster the venture capital industry

The Programme to foster the Venture Capital Industry aims to promote the creation and strengthen investment vehicles that pump equity funding to high-impact Mexican start-ups, through the Venture Capital Trust (Fideicomiso de Capital Emprendedor) of Nacional Financiera (NAFIN). As of the end of 2022, the programme promoted 36 investment funds via public or private investments. These funds supplied equity funding to 287 start-ups in more than 10 economic sectors.

This programme is currently reaching a point of consolidation that allows the creation of investment funds in the VC stage, co-investment of private entities and government, and development of companies with high growth. Due to the maturity that the older programmes have reached, the VC companies supported by these funds are achieving the expected results, beginning divestments with multiple interesting opportunities for the industry.

Figure 29.1. Trends in SME and entrepreneurship finance in Mexico

Source: See Table 29.2.

Statlink

Table 29.2. Sources and definitions of the Mexico’s Scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	Bank and financial institution loans to SMEs, amount outstanding (stocks) at the end of period; The company size is obtained based on the number of employees and the amount of annual income of the borrower, according to what was published in the Official Gazette of the Federation on June 30, 2009.	CNBV (2023)
Outstanding business loans, total	Bank and financial institution business loans to all non-financial enterprises, amount outstanding (stocks)	CNBV (2023)
Government loan guarantees, SMEs	Fiscal resources to guarantee programs provided	National System of Guarantees (NGS) (2021) which was managed by the Ministry of Economy and the Development Banks. From 2021 onwards, information is not updated due to the bill that ordered to extinguish the public trust that executed the (NGS) loan guarantees, issued in November 06, 2020.
Government guaranteed loans, SMEs	Amount induced credit by the guarantee programs	National System of Guarantees (NGS) (2021) which was managed by the Ministry of Economy and the Development Banks. From 2021 onwards, information is not updated due to the bill that ordered to extinguish the public trust that executed the NGS loan guarantees, issued in November 06, 2020.
Non-performing loans, SMEs	SME non-performing loans out of total SME loans as a percentage	CNBV (2023)
Interest rate, SMEs	Average annual interest, including rate and fee.	CNBV (2023)
Collateral, SMEs	Percentage of SMEs that were not required to provide collateral on latest bank loan	CNBV (2023)
Non-bank finance
Venture and growth capital	This concept includes Venture capital and Funds of Funds and was gathered by the Association of PE & VC funds (AMEXCAP). Figures include Private Venture Capital Funds and Private Equity Industry Capital Commitments (the latter includes commitments with the Fund of Funds, which is an investment vehicle managed by state-owned development banks. Figure for 2021 is at the end of the first half of the year.	AMEXCAP (2021)

References

Bank of Mexico (2022), Report of basic indicators of credit to small and medium-size enterprises (SMEs). {D50011D6-98BB-1D8A-85C6-C635535A04DE}.pdf (banxico.org.mx).

Bank of Mexico (2023), Quarterly Report October - December 2022. https://www.banxico.org.mx/publications-and-press/quarterly-reports/%7B54AD2BD8-19C3-DEE1-1F4B-C7DCE7E1360E%7D.pdf.

Finnovista (2023) Fintech Radar Mexico 2023, https://www.finnovista.com/radar/fintech-radar-mexico-2023/.

Mexican Association of PE & VC Funds (AMEXCAP) (2021), Information based on AMEXCAP internal data. https://amexcap.com/.

Ministry of Economy (2022), Fourth Labor Report 2021-2022. https://www.economia.gob.mx/files/gobmx/uppe/1_cuarto_informe_de_labores_economia_2021_2022.pdf.

Ministry of Finance and Public Credit (2023). Press Release N° 9 Report on the Economic Situation, Public Finances and Public Debt. https://www.gob.mx/shcp/prensa/comunicado-no-9-informes-sobre-la-situacion-economica-las-finanzas-publicas-y-la-deuda-publica-al-cuarto-trimestre-de-2022.

National Banking and Securities Commission (CNBV) (2023), Based on data published in: http://portafolioinfo.cnbv.gob.mx/.

National Institute of Statistics and Geography, INEGI (2019) Economic Census. Censos Económicos 2019 (inegi.org.mx).

National Institute of Statistics and Geography, INEGI (2018) National Survey of Productivity and Competitiveness for Micro, Small and Medium Enterprises. https://www.inegi.org.mx/programas/enaproce/2018/.

National Institute of Statistics and Geography, INEGI (2021) National Survey of Enterprise Financing. https://www.inegi.org.mx/programas/enafin/2021/.

National Institute of Statistics and Geography, INEGI (2023) Quarterly Global Supply and Demand database. https://www.inegi.org.mx/temas/ofyd/#tabulados .

Notes

← 1.  According to Finnovista (2023), there were 650 Fintech operating in the Mexican ecosystem at the end of 2022, 65% more than the number in 2019 (394 institutions). Also, 145 of these institutions in 2022 were in the lending segment, which represents an increase of 40.7% when compared to 2021 (103 institutions).

← 2.  The content of this section is based on the following sources: Bank of Mexico (2023), Ministry of Finance and Public Credit (2023), and National Institute of Statistics and Geography, INEGI (2023).