The Business Year

Jorge Avante Arcos

MEXICO - Finance

Jorge Avante Arcos

CEO, Association of Non-Banking Financial Intermediaries in Mexico (ASOFOM)

Bio

Jorge Avante Arcos has worked in the financial sector for more than 10 years as a consultant for non-banking financial intermediaries on corporate governance issues. He is currently the CEO of ASOFOM, the largest non-banking association in Mexico and Latin America in terms of the number of associates.

Given that SOFOMs have the ability to provide credit quickly and securely to SMEs, ASOFOM seeks to raise greater awareness of the opportunities available to small businesses.

What is your perception of the financial sector in Mexico and the mood of investors?

In the financial sector, despite the pandemic, we have tried to continue lending. Traditional banks are more risk adverse than we are, so they are not offering much credit right now. However, multiple purpose financial companies (SOFOMs) exist to provide credit quickly and securely, and our diversity of credit products (tailor made) has given us the opportunity to grow. We have experienced double-digit growth YoY, despite the fact we are a young financial sector in Mexico (15 years old). What differentiates us from other financial sectors is our personal approach to company owners and advise them on the right credit product for their needs. There are more impacted industries in Mexico such as construction, entertainment, or food service. However, SOFOMs continue to support the productive projects, that means, projects that have high possibilities to generate incomes to the company. We will invest in a project if it can generate income and ultimately allow them to repay us. We focus heavily on such projects, which has allowed us to continue to grow. There are also SOFOMs that are on standby currently. Many SMEs have closed, and those that are surviving no longer have savings, so we wanted to offer them a credit option to take advantage of business opportunities. In other words, if a company does not have a financial option yet, we recommend to approach a non-banking financial institution (such as a SOFOM, fintech, Sofipo, and others) to get a list of requirements.

Only 45% of Mexicans know what a SOFOM is. What are you doing to raise more awareness of SOFOMs and the opportunities you can offer them?

There are two types of SOFOMs: regulated and unregulated entities. The SOFOM name was born 15 years ago when there were no regulations whatsoever. Over the years, regulation has progressed. Today, we are as regulated like a bank in terms of prevention of money laundering and terrorist financing. For about two years now, we have been trying to remove this connotation of being an “unregulated entity,” which no longer corresponds to us.

Do you not accept members who are not regulated within ASOFOM?

The term SOFOM covers 1,863 unregulated and about 40 regulated entities. All regulated entities belong to a bank or those that emitted debt in the investors markets, though those without any links may be unregulated, then we only accept any kind of SOFOM that complies with all applicable regulations. For 15 years, we have been passing regulations. We like to describe ourselves as financial SMEs providing credit to other SMEs. The challenge is to attend credit users quickly, securely, and with the right product. We have registered more than 3,000 different credit products. There are financial product initiatives of all kinds that are tailored to a fact, an industry, or a region. By the end of 2020, we had MXN1 trillion linked to the sector’s total financial portfolio. Among our associates, there are 204 of us, and we have approximately MXN500 billion. We are already important in this bank-dominated market. Therefore, the cost of money is important, we constantly continue searching institutional funding.

What progress are you making as an association to help your members adapt to cybersecurity?

ASOFOM has 10 operating committees, and one of them is the technological innovation committee, in which technological SOFOMs, such as CapitalTech, Bien para Bien, Konfio, Credijusto, and more participate. There, we prioritize cybersecurity over digitalization . Through webinars and courses, we convey a culture of cybersecurity so that all our partners have a basic level of cybersecurity knowledge. We have external alliances with commercial partners where the objective is provide infrastructure diagnosis, stress tests, among others. Companies must incorporate technology simply to optimize processes, strengthen the security, and minimize resources.

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