2024-09-16 07:58:28
Given the limited access to formal credit in banks and cooperatives, micro, small and medium-sized enterprises can think outside the box and rely on little-used financial instruments such as investment funds. Without financing, companies stagnate and even disappear.
At the national level, there are 906,523 Micro, small and medium-sized enterprises (MSMEs). These SMEs contribute with 60% of total employment and 25% of the GDP (Gross Domestic Product) of the Ecuador.
They are mostly focused on the trade, services and manufacturingDespite their relevance in the economic matrix, they still face financial challenges that threaten their sustainability over time.
One of the main economic challenges faced by SMEs is the limited access to bank loans.
In Ecuador, only 23% of these companies can access formal credit. This is due to the political system of interest rates which excludes the majority; the lack of payment guarantees, such as owning a physical property, a guarantor entity and the low formalization of businesses.
As LA HORA has already reported, in 14 of the 24 provinces of Ecuador less than 30% of the adult population has access to formal credit.
“A small percentage of people can access credit to increase their business or to buy durable goods such as houses or vehicles,” says a report prepared by the Network of Development Finance Institutions (RFD).
Thinking outside the box to find financing
There are other financial products, outside of traditional loans, that can allow a company to plan its expenses and surpluses to mitigate the lack of financing.
Non-traditional or little-explored financial mechanisms have emerged for SMEs. One of them is the investment funds.
This option offers planning over time where the business surpluses are used, no matter how small they are, and instead of being immobile, they work to produce returns, which generates a financial cushion to emergency situations or for the fulfillment of objectives.
Gonzalo Ruales, Treasury Manager at Fideval, explains the dynamics of investment funds and their relevant contribution to this economic sector:
“Investment funds are presented as an ideal tool, offering opportunities such as investment diversification, access to expert professionals in stock markets and attractive returns, all while mitigating weaknesses such as lack of investment experience and concentration risk.”
Taking advantage of these benefits can help SMEs improve their financial stability and boost their long-term growth.
Planned investment through investment funds offers companies the possibility of maintaining an emergency reserve that could be accessed in case of need, to finance expansion projects, Purchase of equipment or opening of new branches.
If the investment is made over the long term, it is even possible to ensure the stability and sustainable growth of the business thanks to daily performance and even offer plans through funds as part of retirement benefits to attract and retain talent.
Taking advantage of the benefits that investment funds offer to companies can make a difference, as it is an alternative through which the owners of SMEs control the financial management of their businesses. (JS)