Specialized credit granting institutions
A SOFOM is a Multiple Purpose Financial Institution that may grant any type of credit to individuals, small and medium-sized companies, including leasing and financial factoring, as well as being a trustee in guarantee trusts, clarifying that they may not raise funds from the general public.
These non-bank financial intermediary institutions are supervised by CONDUSEF and CNBV for money laundering prevention. Among the types of loans they can offer are working capital loans, revolving loans, rural loans, payroll loans, student loans, mortgage loans, machinery acquisition loans, etc.
There are two types of SOFOMES:
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The SOFOMES ER (Regulated Entities); are companies whose equity is linked to a Bank and whose equity is linked to a Government Bank.
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SOFOMES ENR (Non-Regulated Entities) are companies that grant credit with their own capital and can access credit lines from the Government Banking System to increase the volume of credit for their clients.
How many are there and what is their role in Mexico?
At the end of 2020, CONDUSEF reports the existence of 1,750 SOFOMES. SOFOMES are the largest group of Financial Intermediaries in Latin America and their number is increasing due to the constant demand for credit in Mexico, which is difficult to access credit through traditional banks, which represents a preponderant factor in the financial inclusion of SMEs and individuals.
SOFOMES currently represent one of the most relevant sources of financing to the private sector, only behind banks as a whole. In fact, their delinquency rate (IMOR) at the end of 2020 was 6.79%, very similar to that of commercial banks for simple credit, according to official figures from CONDUSEF.
SOFOMES continues to contribute effectively to the rescue of industry in Mexico from the global recession caused by the coronavirus pandemic, and has been contributing with new plans and strategies to finance more and more productive projects to contribute to the recovery of the economy and job creation.
According to figures from Banco de México, currently 60% of companies in Mexico obtain their first line of credit from a SOFOM, which makes SOFOMES a key figure in the financing of SMEs in our country.
Benefits of having a SOFOM
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Acting as a "Financial Arm", allows to increase the profitability of the business group through the financing of its customers and suppliers.
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This model allows us to strengthen and develop the captive market through timely credit according to their needs.
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Under the figure of SAPI SOFOM, it is possible to ensure the injection of resources from external capital partners.
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Concentrate the liabilities of the companies and their clients in a financial company, thus reducing the operating burden and costs.
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A SOFOM has the Internal Control, Manuals, credit processes and Portfolio Management System, adequate for the operation and management of financing.
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Ability to obtain external funding lines with commercial and/or development banks to strengthen the business structure.
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It has fiscal and legal incentives to act as a financial intermediary.
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Tax and procedural planning advantages.
SOFOMES 4.0
Given the possibility of transferring financial processes to a technological scenario, more efficient, reliable and with the support of new platforms, SOFOMES are integrating automated processes with elements such as the fingerprint, geolocation and application programming interfaces, known as APIS that they decrease the margin of error and increase productivity.
These SOFOMES are currently using technology as their main tool to become Financial Technology Institutions (FINTECH).
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