Colombian Consumer Lending Market
If there’s one thing you can safely say about Colombia, it’s that the financial sector is thriving. There was once a huge problem in the country where most financial transactions used to go undocumented and ever since 2010, they’ve made great headway in terms of formalizing the banking system. According to reports, the share of Colombian bank assets relative to the GDP was at 53.16% back in 2016 and was expected to get higher over time.
This rising share of bank assets effectively tell us that there’s a huge demand for financing options in Colombia. The rising need for finance tells us that the investments scenario is well and thriving—something we should seriously consider when devising our retirement plans. Whether as part of your SDIRA or your existing portfolios, Columbia represents a brilliant investment opportunity in the consumer lending market.
This article will discuss the existing state of financial markets in Colombia, the investment opportunities and I’ll also speak of some associates involved in lending ventures.
Investment Environment In Colombia
If financial data is any indicator, FDI inflows into Colombia have reached an all time high. In 2018, nearly $11.53 billion dollars were sourced from foreign investors looking to make it in the Colombian economy. The country has a fairly high ease of doing business ranking, standing in the top 30% of the highest ranking countries across the world. Additionally, it has the 3rd highest FDI inflow throughout Latin America.
This is mainly attributed to the economic restructuring and the introduction of new migrant-care policies implemented by the state earlier this year. Every day, more migrants are flying into the country looking to invest in real estate and other business ventures to make a living in the Central American country. The country’s macroeconomic indicators have been respectable over the past couple of years, with GDP growth sustained at 3% since 2017. If trends continue, the World Bank indicates that growth might reach 3.6%.
With the improving economic conditions in Colombia, spurred on by greater investment, we can safely conclude that consumer expenditure patterns might also change. As native Colombians make more money and more foreigners bring business into the market the financial market might experience another boom in the next few years. With rising prices and a greater range of goods and services, the financial sector will have to offer a greater range of investment options if these trends are to continue. It is this dynamic that the people over at the Gutierrez Group are capitalizing on, trying to get ahead of the financing game before major banks crowd out the market—if at all. They have honed in on two market gaps in the finance market and consumer lending which can be filled by private lenders—the taxi-cab market and real estate.
Why The Taxi Cab Market?
While this may sound a little dramatic, Colombia is right now the battleground for plenty of ride-hailing startups. A market that was once dominated by world-renowned corporations like Uber suddenly finds itself short of supply as the state declares these companies illegal. The Colombian government ordered Uber to halt their work on December 20th, 2019 and declared another local ride-hailing service as illegal. Everyone’s scrambling to get a piece of that market as another Chinese ride-hailing service called DiDi moved in to fill in this vacuum as both Uber and the local ride-hailing services gear up for a legal battle against the injunctions.
As of January 31, 2020 Uber will no longer be available in Colombia, and having 88,000 drivers in the country, they will all likely be scrambling for new companies or to join the world of the local taxi companies.
Colombia, Bogota in particular, is probably the first place where I’ve heard of public transport strikes bringing entire cities to their knees. This has been a recurrent problem in Bogota where even now cab owners are out on the streets protesting against the practices of these ride hailing apps—particularly Uber. These dynamics only tell us this—Bogota needs a lot of taxis. This is the dynamic that the Gutierrez Group is working in.
As more people look to buy cabs in an effort to replace the monopoly created by ride-hailing apps and service providers, they need an increasing amount of financing. Private lending merchants are having a hay-day making huge returns on these loans. The scheme suggested by the Gutierrez Group is as follows:
Sutax, a leading taxi brokerage and financing entity in Medellin and its metropolitan area is partially owned by Gutierrez Group . Sutax provides loans to people looking to buy taxis. You basically invest to assist with the financing schemes and get returns when the loans and interest are paid off. The returns are projected as follows:
- Interest rate paid for a minimum $40,000 is 10% per annum.
- Interest paid for investments from $150,000–$300,000 at 11%.
- Interest payments received for minimum investments of over $300,000 at 12% per annum.
Mortgage Financing Services
The state controlled Colombian financial system doesn’t lend people money if they don’t have a credit history within Colombia for at least two years. This effectively excludes foreigners from getting funding for their investments in Colombia—4.4 million people cut off from Colombian financial resources. The rise of tourism and entrepreneurship in Colombia has attracted a record number of foreigners to the country who’re looking to buy houses in the country but don’t have the money to do so.
The Gutierrez Group also offers you the opportunity to contribute to a source of private mortgage loan fund. Foreigners who can’t get loans from state-owned sources turn to private lenders who run funds like the one that the Gutierrez Group runs. This fund, in particular, offers amortization within 5 years and offers great collateral terms for anyone who wishes to invest in it. According to the projections, you can expect annual returns of 8%–11%. This is another great way to take advantage of the Colombian Consumer Lending Market.
Say what you want, but countries like Colombia are relatively insulated by global economic currents and today is the day to take advantage of the Colombian consumer lending market. Considering how actively the country has thrived despite global economic instability, these trends will continue. With the growth of public transport sectors, real estate and the expected GDP growth you can stand to make a fair bit of money for yourself.
I hope you enjoyed: How To Take Advantage Of The Colombian Consumer Lending Market
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About The Author
Mikkel Thorup is the host of The Expat Money Show podcast and Director of Content at Escape Artist. He is also the author of #1 Best-Selling book Expat Secrets on Amazon. He has spent nearly 20 years in continual travel around the world, visiting more than 100 countries including Colombia, North Korea, Zimbabwe, and Iran. His goal is to help people just like you to generate additional streams of income, eliminate your tax bill, and take advantage of offshore structures so you can travel the world freely and never have to worry about money again. For more information on his legal (but creative) tax strategies for Expats watch this free video.
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