The State of Banking in Mexico. (Part 1)
As one of the largest economies in the world, one would think that banking in Mexico has contributed much to its growth. But the truth is that compared to Brazil or Chile, Mexico is lagging when comparing total loans as a percentage of GDP.
The famous «underbanked» population is being served by pawn shops, or even worse loan sharks to make ends meet. But with 30% of businesses being informal (meaning under the radar by the public registry for tax evasion) and a poor rule of law, banking in this environment is not an easy task.
Ad to the equation that 65% of Mexico’s banking assets have been managed by foreign banks subsidiaries and on top of that, regulators are implementing one of the harshest set of rules (Basel III «fully loaded» vs only Bassel II for the US). You get a limited product offering that does not allow a deeper market penetration.
That said, Mexico has always had great potential as a County and banking could be very profitable, if you manage to do it with global standards, focused business model and robust IT. But the main issue remains: understanding Mexican idiosyncrasy, values and ways. Trying to fit a one size fits all its not the way to go. Mexico is not equal to LATAM, more so North and South Mexico are quite different.
Banking in Mexico historically has been a challenge, but past five years performance gives you an idea of the things to come.