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To what extent has the banking sector been able to absorb the shocks and risks associated with Colombia’s economic slowdown? What threats is the sector currently facing?
JUAN CARLOS MORA: Colombia is still undergoing many macroeconomic adjustments this year compared to 2015. However, the biggest shock came with the fall in oil prices in 2014, so on a relative basis the Colombian economy has absorbed the effects of that shock very well.
Economic growth did slow down, as in many countries around the world, but from a macroeconomic point of view the country has managed it very well. Overall the first half of this year has been positive for the financial sector.
The banking sector has proven resilient to this volatility since the sector continues to see dynamic growth. Demand for credit has remained solid. The consumer loan portfolio has been affected the most. Demand is still growing but at a slower pace compared to 2015. Corporate credit remains steady, and we have seen a strong demand in mortgages even though this is expected to slowdown in the second half of 2016.
More importantly, the sector has not seen a significant rise in non-performing loans.
Looking ahead we see some macroeconomic challenges, which will have an impact on the sector. For example, high inflation has led the central bank to raise its interest rates up to 7.75%. This results in higher financial costs for consumers as well as for economic activity in the country. For that reason, it is likely that we will still see the impact of the central bank’s intervention, and once inflation starts to slow down it will have positive implications for the economy.
How will Colombia’s private banks shape the post-conflict era?
MORA: Colombia has been able to reach a final peace agreement, which is the culmination of a long peace process. However, this agreement is only the beginning. The government has created the necessary conditions, but now the private sector has an important role to play. There are many remote areas that have been abandoned by stakeholders and have not been part of the country’s economic growth and development.
There is a social responsibility that the country must fulfil. Private banks will be key in financing processes that boost production chains in these abandoned areas. Financial institutions have the capability to give loans and also bring together several players, ranging from those who can provide technical assistance to the buyers, through associations or cooperatives. This is where e-banking will be very important, as it will lower operational costs and bringing development opportunities to these areas.
What have been the biggest challenges with respect to financing the country’s infrastructure?
MORA: The country has made progress in creating key institutional conditions for financing infrastructure, especially through the fourth generation (4G) road concessions programme. These include confronting challenges to obtaining environmental licences and being more clear and efficient in the social realm in the communities where construction will take place.
Within this context, international banks play an important role in financing the country’s infrastructure plans. Foreign players also bring new visions to the table that can help consolidate contracts or establish new financing schemes that will then help advance the country’s infrastructure needs and further their construction and implementation.
How would you evaluate the utilisation of e-banking and other digital platforms in the banking sector?
MORA: The banking sector is clearly transforming and evolving into a much more technologically integrated sector. Today, you can have just a virtual bank account, which is a clear indicator of where we are headed since it gives the customer more facilities and adds efficiency to the sector. We are making progress, but the banks still need to invest more in e-banking, which will help people feel that their relationship with a bank is easy and transparent.