Impact of the withdrawal of funds from the AFPs: economic challenges and opportunities

The disbursement of money from pension funds that would be made with the retirement law of up to four tax units (UIT) for AFP affiliates would reach S/28.500 billion, estimated the Superintendency of Banking, Insurance, and AFP (SBS), according to the deputy superintendent of Economic Studies of this entity, Manuel Luy. This amount represents a significant figure that could impact various financial and economic aspects of the country. According to the presented estimates, between S/6.000 billion to S/8.000 billion would be allocated to debt repayment or prepayment of financial products by affiliates who choose this withdrawal of up to 4 UIT. This decision could have a marginal impact on the default ratio, as it is expected that those who still have funds in their accounts are the ones with a better payment profile. The default rate on consumer loans, according to SBS data, was 9.4% for December 2023. In the microenterprise segment, this rate was 10.4%, and 10.1% for small businesses. These figures reflect the current debt situation in the country and the importance of managing financial resources properly. Renato Ravina, head of the Economic Research Department at SBS, noted that the default ratio has been increasing since mid-2022, mainly due to new loan placements and difficulties in fund recovery. However, it is expected that with the improvement of economic conditions in the second half of the year, this indicator may start to decline. In a context of possible improvements in the national economy, an increase in people's ability to pay is expected, which would result in a decrease in financial defaults. This would have a positive impact on the profitability and solvency of financial institutions, which could contribute to a more stable and favorable environment for the sector. Jorge Mogrovejo, deputy superintendent of Banking and Microfinance at SBS, emphasized the importance of addressing the needs of micro and small businesses (MSMEs) and microfinance institutions, which have been affected by various economic shocks in recent years. With a default ratio in the MSME credit portfolio of 8.9% and a credit growth rate of 4.1%, it is necessary to find new sources of financing and medium-term solutions. In summary, the financial landscape in the country is at a critical moment, where the withdrawal of funds from AFPs could represent a boost for the economy of many families, but also poses challenges in terms of debt and payment capacity. The stability and growth of the financial sector will largely depend on how these resources are managed and the needs of the different economic actors involved are addressed.