Cuban entrepreneurs now can get loans without collateral

Self-employed entrepreneurs can apply to the People’s Savings Bank of Cuba for loans of as much as 10,000 Cuban pesos (377 dollars at the current rate of exchange) without putting up a collateral, the AIN news agency reported on Wednesday.

The idea is “to encourage the use of foreign financing in the growing economic sector” and to “encourage a greater outreach to non-state enterprises,” the news item explained.

[For background on “non-state enterprises” in Progreso Weekly, click here and here.]

The People’s Savings Bank (BPA, for its Spanish acronym) operates throughout Cuba except in Havana. It has more than 400 branches, according to its website.

To enable a “cuentapropista” (as a self-employed worker is called in Cuba) to build up a financial base for future transactions, the bank will open a savings account in his or her name, said Greicher La Nuez, head of the BPA’s Business Branch.

For example, if the monthly repayment is 200 pesos, the bank will place 50 pesos into the savings account. That will create in the borrower “an awareness of savings,” La Nuez said, adding that, after the debt is paid, the money in the savings account will serve as a guarantee for future, larger loans.

The bank promises to rule on a loan application within three days, La Nuez said. Paperwork will be “less cumbersome,” said Maylin Ortega, another bank executive.

As additional enticements, grace periods will be expanded and repayment terms will be increased from five years to 10.

The 10,000-peso limitation is due to the fact that unsecured loans are “risky operations” for the bank, La Nuez said. Furthermore, the bank’s decision to grant the loan “will hinge on a rigorous analysis of the business’ feasibility, its chances of success and the borrower’s record with [other] financial institutions.”

According to AIN, as of late July, 2,482 “cuentapropistas” had applied to the BPA for loans to buy goods and supplies. The total number of self-employed entrepreneurs in Cuba is officially estimated at 504,613 and rising.

Because of that discrepancy, “the BPA deems it a priority to foster a financial culture through the creation of attractive products and services matching the needs of the growing economic sector,” the AIN report concludes.

[Photos from Cuban internet media.]