Regional Study Evidences Challenges of Costa Rican SMEs for Accessing Credits

Despite the fact that 6 out of 10 micro-sized, small-sized, and medium-sized enterprises (SMEs) in Costa Rica know about the existence of the Development Banking System (SBD), 33% out of them said that when requesting help their process was rejected. And of the group of companies that obtained funds from the SBD, only just 5% received partial approval.

This was revealed by a regional study conducted by the Latin American Center for Innovation and Entrepreneurship (Celiem). The report added that State banks are the most frequently mentioned in both approvals and denied applications. This lack of access to credit could be decisive in the survival of many enterprises. After a year of Pandemic, this has severely affected their operations and whose effects are still palpable.

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Access to credit

Celiem reported that -after a survey- it found that 87.6% of SMEs saw their activity drastically reduced or completely paralyzed, due to the health crisis caused by Covid-19 Pandemic: “This monitoring allows us to reaffirm the important task that we still have in terms of access to financing for SMEs. Despite the fact that several countries have been incorporating different financial products into their support instruments, the structural problems of financial regulation that facilitate the environment to provide the resources that MSMEs require to grow have not been resolved”, said the Executive Director of Celiem, Luis Álvarez.

This adds to a tangle of procedures that make it difficult for startups to survive in the current financial ecosystem, said the President of the National Chamber of SMEs, Carlos Peña, during an interview last month.

Additional complicated factors

In addition, other factors that complicate business management such as lack of information. For example, seed capital (46%), the guarantee and guarantee fund (29%), and risk capital (19%) are the main instruments that Costa Rican SMEs know, according to the regional study.

“The proposals by the Government must consider the establishment of credits for working capital under favorable conditions, the reduction in the payment of services, the generation of new financial instruments, and the establishment of better conditions. This occurs, to strengthen the linkage of companies in the value chains of public institutions, there by highlighting the need for greater access to the public procurement market”, said Celiem.

In the region, the situation is not very different at all, according to Celiem’s findings. At least, 75% of them use their own capital, often assuming personal debts for the operation of the venture. That situation, coupled with a loss of customers and profits in recent months, makes more than half of them foresee a negative outlook for the rest of the year.

On the other hand, the report found that, although it is true that there is a marked increase in the use of digital platforms, the overall situation is still far from obeying a generalized adoption and seems to be more circumstantial. 

        

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