- access to credit bureau loan-level data – to analyze borrower characteristics and assess risk, particularly for consumer loans<sup>64</sup> .

- Longer-term measures would include:

- data collection on the financial condition of corporates and households (e.g. balance sheets, leverage ratios, income indicators etc.) – to better understand the connection between developments in the real sector and financing patterns (i.e. demand- versus supply-side factors)

- identification and analysis of alternative financing sources for companies and households outside the formal financial system – to quantify their importance and assess their impact on formal financing sources

- development of a more detailed chart of accounts on bank revenues by loan product (including both interest income and fees) – to assess bank performance when analyzing competition issues in different credit segments.

**Transparency and disclosure** : The development and public disclosure of standardized credit affordability indicators (i.e. interest rate time series by type of loan product and by provider) as well as of accessibility indicators (i.e. loan volumes by product, firm size, economic sector and state) would greatly contribute to a more transparent credit market. As has been the experience in other countries, publication of these indicators could provide a further impetus to competition across credit providers<sup>65</sup> and help borrowers become aware of credit pricing differences and hence more selective<sup>66</sup> ; these indicators could also allow the authorities to better track credit market developments and formulate policy in areas such as financial access and competition.

**Promotion of SME financing** : As mentioned previously, the prospects for SME financing growth are less positive relative to other market segments, at least in the short term. Given the importance of SMEs for Mexico’s economy, the authorities will need to continue to promote SME financing and strengthen the credit infrastructure for this market segment. In addition to the aforementioned recommendations, a short-term policy measure would be to promote greater information availability on SMEs – for example, by ensuring that the credit history of all SME loans is captured appropriately by the credit bureau<sup>67</sup> . In addition, the effectiveness of development banks’ support of SME finance should be evaluated and improved, including with respect to the design of well-targeted and appropriately priced guarantee programs. Longer-term policy recommendations would include further strengthening of public registries of commerce and property and the reduction in their user cost (e.g. notaries), stronger and more consistent enforcement of creditor rights across different state jurisdictions, and further simplification of the

> 64 This is important since Mexican banks have traditionally not targeted this market segment and relevant experience is relatively scarce (although not for the foreign owners of some banks); for example, even at the height of the credit boom prior to the 1994-95 crisis, consumer loans did not exceed 3 percent of GDP. 65 Publication of various credit accessibility indicators by state might also ‘sensitize’ states to the importance of the business environment and of enforcement of creditor rights on the amount of lending. 66 However, one issue that the paper does not address and that will need to be resolved is the institutional responsibility/mandate for the creation of such indicators.

> 67 For instance, loans to SMEs that involve invoice discounting are currently recorded by banks in the credit bureau as loans to large corporations (i.e. to those firms whom the SMEs act as suppliers).

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