David Vélez, the richest man in Colombia and co-founder of the largest digital bank in the world, Nubank, has put aside his role as a modest executive and has hit the headlines with one or two darts against the strict rules of the financial sector. He has done it from São Paulo, the great headquarters and place where the platform was created that today reaches a million users who landed, perhaps, in search of alternatives to traditional entities. He has also done so in a fragile and uncertain economic situation: “The regulation of the usury rate causes the greatest limitation in the market,” said the Paisa banker. 42 years old.
The figure, which establishes an official limit on bank loans as a mechanism to protect users, encourages, in their opinion, a black market such as the so-called drop by drop. For that, and other reasons, not all countries use it. In Colombia it has been at the epicenter of the debate due to the latest cuts carried out by the Financial Superintendency, which between April and May reduced it from 33.09% to 31.53% effective annually thanks to a change in the methodology to calculate it.
An operation with rescue overtones promoted by the Executive to revive consumption and credit requests that have become more expensive with the rise in interest rates. However, the economist and former dean of the University Jorge Tadeo Lozano Salomón Kalmonovitz believes that, on the contrary, it will be a counterproductive recipe: “The problem for banks is measuring the risk of default and that risk premium can be very high, something that Superintendent Ferrari has not bothered to investigate.”
In his opinion, banks will be forced to further restrict credit granting to clients they consider problematic. A scenario that would have an added impact on consumption and the financial portfolio, which already had a decline of 6.6% annually in 2023, according to Dane data. Investment specialist Sebastián Arango agrees and notes that the imperfections of any market deepen when the State exercises these types of controls: “In Colombia, the majority of people do not have good financial education and all this will probably lead to many “They seek access to third parties such as loan sharks or people on the streets who lend them under more expensive and dangerous conditions.”
It is a debate full of hypothetical scenarios that resurfaces from time to time. Already in 2008, a study by three economists from the Bank of the Republic, titled The effects of the usurious interest rate in Colombia, pointed out that it has a negative effect on “financial deepening”, that is, the possibility of more people accessing the financial system. Years later, in 2017, the then president of Banco Colpatria, Santiago Perdomo, proposed eliminating it. And there are many complaints from users in Colombia every time they realize the lack of alternatives to the amount of bank commissions that they are charged equally in all entities.
The professor and academic at the Javeriana University Andrés Giraldo refers to the days when Kalmonovitz himself directed the Bank of the Republic to unravel the historical roots of the usury rate issue: “He said that the concept itself was closely linked to the Colombian Catholic tradition, with a strong influence of the ideas of Saint Thomas Aquinas and his theory that a financial business was an immoral economic activity.”
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To the texts of Saint Thomas and a fintech like that of paisa David Vélez, centuries of religious, moral and economic theories separate them. However, a certain disenchantment persists in the 21st century when it comes to drawing the lines to define when abuse occurs and how to stop it. For this reason, Vélez has complained about a rate or intermediation margin that restricts the operation of entities in a digital universe with other logics and services: “It is a more complex ocean to navigate. But we are in good conversations with regulators in the country to see an agenda of regulatory changes that will facilitate and grow (…)”, he explained within the framework of the presentation of NU’s financial results for the first quarter of 2024.
For Andrés Giraldo, the core of the problem lies in the disadvantages that Colombian banks have when it comes to adjusting rates according to the profile and credit history of each client. A matter of information. “Banks around the world make profile assessments based on risk. They know how to identify which projects to participate in according to the degree of profitability and which debtors to offer what level of rates to encourage them to take out a loan.” It is a supremely limited field in Colombia. All banks adhere to the usury ceiling and the granting of credit is restricted to projects and people with the best financial profile.
“This rate regulation greatly limits the market, makes it very small and ends up creating many harmful effects for the population, precisely, who needs more access to the system.” Says a guy like Vélez, who at 42 years old has built a fortune of 11.5 billion dollars, according to the magazine Forbes. It is clear that the engineering of the Colombian financial system and its regulatory mechanisms adds advantages and complexities: “Entities have to be very careful who they lend to,” justifies financial analyst Andrés Moreno Jaramillo. “The risk factor is great because there is a lot of money that is lost in fraud and non-payment.”
Unforeseen events that are usually included within the financial margin to protect against risk. However, Moreno Jaramillo argues that with a relaxation of the rule, entities would probably grant loans more calmly. And digital entities like Nubank could open the credit tap “wherever and however and probably at higher rates.” They are the two points of an issue that has jumped into public discussion in parallel to a new parliamentary initiative in progress called the ‘Clean Slate 2.0’ law.
The project, promoted by a congressman from the leftist Historical Pact, seeks to extend the payment period for almost five million Colombians in default, in a second edition of a rule that was carried out in 2021 by the then conservative senator David Barguil, and that the Government endorsed. of Iván Duque’s right. A partial relief to clean up your debts and release the burden of being among those reported by Datacrédito, the largest credit risk center in the country. In the absence of approval, the matter raises more doubts than certainties for analyst Sebastián Arango: “The law, basically, would take away tools from banks to validate whether people can access credit.” An added argument, he concludes, for barriers to be raised and new digital channels to refrain from opening the range of supply in Colombia.
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