Micro-enterprises: access to credit is not enough

A few weeks ago the government announced its recovery plan called “Chile Apoya”, which seeks to grant economic relief to people. One of the measures that stands out the most is the strengthening of access to credit for 100,000 unbanked MSMEs, which according to data from the Ministry of Economy was the sector hardest hit by the pandemic: they experienced the greatest drops in employment and remuneration levels and the number of microcredits and the amount of them contracted significantly.
Estimates indicate that in Chile there are more than two million microentrepreneurs, whose contribution to GDP reaches 17% and who generate more than one million jobs. Despite its relevance in the national economy, there is a key aspect that is constituted as an outstanding debt in which little progress has been made in recent years. It’s about financial inclusion. According to the latest financial education report of the UC Center for Public Policy, based on data from the Microentrepreneurship Survey (2019), access to and use of financial instruments by microentrepreneurs is very low: only 10% had access to some type of formal financing to start their business, 27% have requested credits and only 8% accept cards as means of payment. All this negatively conditions its sustainability and growth possibilities. To the low access to financing, a high aversion to credit and the financial system is added, which results in a sector where informality, low incomes and businesses predominate that are associated more with subsistence jobs than with the generation of value with a perspective of growth and sustainability in the medium term.
The measures announced by the government take steps in the right direction to advance the financial inclusion of this group. Now, it is important to consider that, according to figures from the same report of the CPP UC, half of microentrepreneurs do not keep any type of accounting of their businesses and almost a third cannot separate their personal expenses from those of their business. On the other hand, only 9.7% of the training they have received has been in accounting and finance. Given the lack of experience and technical knowledge, it is relevant to provide technical assistance and accompaniment aimed at increasing financial literacy and formalizing business.
In this scenario, access to finance alone is a totally insufficient measure. It is necessary that these credits are accompanied by financial education and monitoring instances that allow MSMEs to make proper use of money for the growth of their businesses, otherwise they will be lost public resources.

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Original source in Spanish

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