KBRA Releases Research – Mexico’s Payday Loan Distress Does Not Create Systemic Risks

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NEW YORK–(BUSINESS WIRE)–KBRA publishes research on recent episodes of non-bank financial institution (NBFI) payday lending difficulties in Mexico. In the opinion of the KBRA, these developments do not pose significantly increased systemic risks for the Mexican economy. However, they highlight shortcomings in the country’s economic performance due to COVID and the associated policy response.

Two salaried lenders, Alpha Holding and Crédito Real, fell into over-indebtedness in July 2021 and February 2022, respectively. Although this situation involved significant accounting issues, credit weaknesses in their targeted lending sector – employees of micro, small and medium enterprises (MSMEs) – were exacerbated by limited government support to the economy during the pandemic. Nonetheless, KBRA believes that the limited size and scope of payday lending in Mexico (KBRA sovereign rating of BBB/negative outlook) ultimately limits systemic risks.

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About KBRA

KBRA is a full-service credit rating agency registered in the US, EU and UK, and is appointed to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in several jurisdictions.

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