Colombia – Financial Sector Assessment : The Role of the State in the Provision of Financial Services
The State plays an important role in the provision of financial services in Colombia through state-owned financial institutions (SOFIs), interest rate controls, mandatory investment requirements and credit subsidies. State-owned financial instituti...
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| Format: | Working Paper |
| Language: | English |
| Published: |
Washington, DC: World Bank
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099835104192245861/P173142025ffb601f0be8e057c1cb8735fc http://hdl.handle.net/10986/37425 |
| Summary: | The State plays an important role in
the provision of financial services in Colombia through
state-owned financial institutions (SOFIs), interest rate
controls, mandatory investment requirements and credit
subsidies. State-owned financial institutions (SOFIs) hold
about 12 percent of banking sector assets and about 8
percent of insurance sector assets. SOFIs are key actors in
microcredit, agricultural and small business loans markets.
The recently created Grupo Bicentenario (GB), a financial
holding for SOFIs reporting to the Ministry of Finance
(Ministerio de Hacienda y Credito Publico, MHCP), aspires to
become the third largest financial group in Colombia. There
are also fourteen small subnational development financial
institutions (Institutos Financieros de Fomento y Desarrollo
Territorial, INFIs), albeit the size of the sector is
unknown as most INFIs do not disclose financials. All credit
in Colombia is subject to interest rate controls, either
ceilings under usury caps set relative to industry rates or
regulated rates in socially sensitive sectors. Mandatory
investments remunerated at below market rates are used to
provide subsidized credit to the agricultural sector. The
State also provides interest rate subsidies to private
intermediaries lending to certain sectors and subsides
agricultural insurance premiums. In the past, agricultural
producers have received debt relief, undermining credit
culture. Monitoring and evaluation (M and E) and disclosure
of public credit support policies and programs and their
costs should be substantially strengthened to assess value
for money. Information on credit support programs and their
subsidies should be systemically compiled, aggregated, and
reported. Profitability of SOFIs excluding subsidies should
be calculated and disclosed. A strategy for systematic and
rigorous impact evaluation of public credit programs and
policies should be designed and implemented. The GB should
also formulate a strategy for the M and E function at the
group level following international best practices that
would facilitate aggregate monitoring and disclosing of SOFI activities. |
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