Colombian Payroll-Deductible Loans as an Asset Class

Attached is a white paper on Colombian payroll-deductible consumer loans (known locally as Créditos de Libranza or “Libranzas”) as an investable asset class. It is meant to provide insight into the investment characteristics of Libranza-linked transactions for non-Colombian companies and investors with an interest in consumer lending.

About Libranzas:

§ Libranzas are the primary unsecured consumer credit product in Colombia. They are part of a social impact program created in the mid-1990s to facilitate financial inclusion. As of July 2016, the total amount of outstanding Libranza loans is approximately USD$11.5bn

§ The average amount of a Libranza loan is approximately USD$3,000 (in COP). Payments are made directly to the lender via an automatic deduction from the borrower’s paycheck. Loans are offered with terms of up to 7 years. Interest rates that vary from ~15% to ~30% (the legal maximum) based on borrower characteristics

§ The Libranza industry is highly regulated and Colombia has been rated investment-grade since 2011. Small loan portfolios frequently trade locally. Larger portfolio securitizations have been offered on occasion by large international financial institutions

Please feel free to contact me if you are interested in learning more about the sector.