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Banking Reform in Cuba

Banco Popular de Ahorro has implemented measures to improve services to small business owners.

Many of the banking reforms that have taken place within the banking system of Cuba have been the result of a partnership with the German Sparkassenstiftung für internationale Kooperation – the Savings Banks Foundation for International Cooperation (SBFIC).  Cuba’s Banco Popular de Ahorro (BPA) has worked in partnership with the development group to modernize its banking system.

The SBFIC has previously assisted in the restructuring and modernization of banking systems in other Latin American countries including Bolivia, Chile, Colombia, Ecuador, El Salvador, Honduras, Mexico, Panama and Peru.  The organization helps banks achieve sustainable economic and social development. The restructuring and modernization processes are in line with the Basle Capital Accords.  SBFIC and BPA worked together in a public private partnership in order to achieve the goal of modernization.

Funding for the banking project came from the German Federal Ministry for Economic Cooperation and Development (BMZ).  SBFIC provided assistance via consultation, the development of internal procedures, bank staff training and an information visit to the German Sparkassen bank.

How Successful was the Banking Partnership?

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Recently the Banco Popular de Ahorro in Trinidad tested the waters for the financing of small businesses and the results were very positive, according to José Couzo Villareal, president of the National Association of Economists Y Contadores of Cuba.  BPA was able to speed up the process of the granting of credit to small business owners.

A business unit was created to manage the analysis of credit worthiness of the entrepreneurs (TCP) applying for credit.  The unit was run by four bank managers with the task of accessing credit worthiness.  According to Couzo, the group offered a broader and more transparent source of information which allowed for greater depth in the evaluation of credit applications.

The BPA financial experiment was a success and resulted in a reduction of wait times for the granting of credit.  Wait times were reduced from 12 to 20 days to just four to five days.

Couzo said that providing credit to the TCP group is revolutionary and falls within the implementation of the new economic and social policy guidelines.  Up until December 2011, Cuba’s cuenta propistas did not have access to any sources of financing.  After the Decree 289, this became possible.

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Couzo added that in the first two years of the implementation of the new credit policy there was a low level of lending for various reasons.  The reasons for this include the lack of bank employee knowledge in the field of microcredit and the low level of population participation in a financial culture.

Since 2014, the Central Bank of Cuba and each one of the commercial banks has adopted measures of reorganization and restructuring in order to modernize the banking system in Cuba.  Another recent example of this was the Banco Metropolitano’s improvement of online banking services.

Trinidad was chosen as the ideal location to run the banking experiment for various reasons.  Its World Heritage site status with a high level of tourism and the large group of TCP members (small business entrepreneurs, or cuenta propistas) who own hostels, restaurants and cafes made it the perfect testing location.

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