Ministry of Economy and Finance backtracks on plan to capitalize municipal savings banks

The Ministry of Economy and Finance (MEF) had announced in February a capitalization plan to strengthen the equity of municipal savings banks, with the aim of contributing to local and national economic recovery. However, after a meeting with some mayors, it was decided to cancel this measure, generating uncertainty about the future of these financial institutions. Municipal officials expressed the need to maintain discretion in the distribution of the net profits of the savings banks, allocating funds for infrastructure projects instead of capitalizing 100% of the profits, as proposed by the MEF. Prior to this decision, the savings banks were required to capitalize 50% of their net profits, with the remaining amount able to strengthen their capital or be given to the municipalities. Experts like Juan José Marthans, former head of the SBS, support the idea of capitalizing profits to provide greater stability and credibility to municipal savings banks, especially in a challenging economic environment. However, they warn that this measure should be applied selectively, taking into account the financial situation of each institution. Jorge Delgado, president of the Association of Microfinance Institutions (ASOMIF), points out that capitalization is necessary due to the decrease in profits and the difficulty of maintaining a healthy loan portfolio. The lack of resources from municipalities to strengthen the savings banks has also been a determining factor in this discussion. The decision to backtrack on this measure has raised concerns among analysts, who argue that any action to strengthen municipal savings banks should be welcomed in a time of crisis for the microfinance system. The opinion of the SBS, as the regulatory body, could be crucial in this debate. Uncertainty about the future of municipal savings banks persists, as a balance is sought between strengthening their equity and ensuring their role in economic recovery. The financial stability of these institutions is essential to support micro and small businesses, as well as local entrepreneurs in a challenging economic environment.