While the demand from small- and medium-sized enterprises (SMEs) for credit is increasing, companies are obtaining funds from the credit unions rather than from banks.
Credit unions are becoming the main source of finance for the SME sector due to their lower interest rates. The Mexican Council of Credit Unions, a partnership of the 34 prime companies in the sector, offers an interest rate for commercial credit of between 10% and 11%, while commercial banks quote 17% and development banks 12%.
The low interest rates charged by the credit unions are made possible because 86.77%, (4.63 billion pesos equivalent to US$443 million), of the total resources (5.43 billion pesos equivalent US$519 million) aimed at this activity between January and May 2003 were funded by the partners themselves.
