MK4: Retail Financiero proposes creating a microcredit segment with a differentiated maximum rate, and deputies open up to analyzing the idea

As part of the processing of the capital markets reform — also known as MK4 — the executive president of the Retail Financiero Association, Claudio Ortiz, appeared this Wednesday before the Finance Committee of the Chamber of Deputies. The guild leader valued the government's bill, but said that "there is a great absentee" in the initiative, namely that "a financial inclusion plan is missing." On this, Ortiz commented that "financial inclusion reduces the field of action of informal credit. When formal credit disappears, the need for financing does not disappear with it, but rather migrates to other markets." In that sense, he argued that according to figures from a study conducted by the guild, "there are 600,000 people, according to our estimates, who are exposed to informal credit. We believe US$4 billion a year is the informal credit market in our country, and around US$100 million is the tax revenue not collected year after year." Under this scenario, he made six proposals. First, the creation of a criminal offense of extortionate usury. Second, empowering Sernac to create a system of complaints and data intelligence, so that it acts as a gateway for detecting illegal commerce and credit. Third, empowering the Financial Market Commission (CMF) to block websites with illegal credit offers. Fourth, generating a national financial education campaign. But it was on the fifth and sixth points that Ortiz went into depth. And it was also the topic that concentrated some of the subsequent comments from lawmakers: the idea of creating a new category for microcredits under $1 million, with a differentiated Maximum Conventional Rate (TMC). And in the same vein, empowering the CMF to issue the regulations so that credit providers participate in this differentiated segment. Ortiz argued that this would allow "opening an entry door to the formal system for more than 600,000 people who are currently excluded." He stated that "this is something limited and focused, aimed at segments that are very excluded from formal credit." He even said that "we imagine this segment as temporary. This is like the entry ticket to formal credit, and those people who show good behavior during the year, in the following 12 months the current regime that exists, the TMC, is applied to them. And those who during that year do not have good behavior will, unfortunately, return to informal credit, will leave formal credit, but the relevant part of our proposal is to give them the opportunity." In that sense, he commented that "with this proposal, we give guarantees that this proposal will not mean raising the price, raising the interest rate, on the current stock, on the people currently in the formal credit market." Lawmakers open up to analyzing the idea The lawmakers opened up to analyzing this idea proposed by the guild. "I find these microcredits very interesting," commented Deputy Pier Karlezi (National Libertarian Party). For his part, Deputy Juan Marcelo Valenzuela (PDG) said that "it is an interesting alternative solution given that people today do not have access and are practically risking being kidnapped when they face informal credit (...) What worries me is, what will the containment be so that this does not end up transforming into what is already a problem (...) that this tool does not end up being predatory of people's incomes and end up being unpayable." For her part, Deputy Irací Hassler (PC) commented: "We have a bill precisely regarding extortionate usury. It is led by Senator Daniel Núñez, it is currently in the Senate, so I ask that you can review it and consider it in light of the presentation that was made, and such an important topic. And I would also like to value in particular how we are going to be taking space away from these informal credits, from the 'gota a gota' [drop-by-drop lending], which has generated so many problems. And therefore, the proposal regarding the new microcredit of up to $1 million seems to me that it can be very positive." Hassler added: "If you could specify more elements of how this would be introduced from your perspective, I think it would be very good because we can also take it up for future legislative initiatives." The president of the Finance Committee, Deputy Agustín Romero, asked the capital markets coordinator of the Finance Ministry, Eugenio Symon, what the Executive thought of this proposal. "Indeed, from the Ministry there is great concern about the issue of banking this large number of people who are today exposed to an informal market, with signs of criminality," said Symon. He added: "We did not include in the bill this indication of a change in the TMC, and I can only say that we will study and review the proposal that Retail Financiero is making and other institutions that have presented indications and proposals regarding this topic. But I can tell you in advance that it is a very important concern in the Ministry." Deputy Romero then commented: "Hopefully in the instance where they can be constituted, after the general vote, we will have some moment in which we can transversally discuss this, to see if we effectively have some political floor, which in this we must be very clear about, to address this situation. Because indeed today the 'gota a gota' credit is something that is suffocating many people." On this idea, Deputy Jaime Coloma believes that "it is a very interesting proposal, because it can become a true entry door to formal credit for thousands of people who today, being excluded from the financial system, end up resorting to the 'gota a gota' and to informal lenders, many of whom are linked to organized crime and to crimes as serious as extortion." In any case, he states that "since we are talking about credits aimed at people in situations of greater vulnerability, it is indispensable that all the necessary safeguards be adopted. For this reason, as a committee we must study this proposal in depth, learn what the rates that are proposed will be, who will be behind the oversight, and what mechanisms will be established to prevent possible abuses or situations of over-indebtedness."