Fonacot, a leading financial institution for workers in Mexico, is celebrating its 50th anniversary this year. During the celebration, Salvador Gazca Herrera, general commercial coordinator of Fonacot, highlighted the institute’s objectives and achievements.
Gazca Herrera noted that since the beginning of the current administration to date, Fonacot has decreased almost 20 percentage points in interest rates on payroll loans, leading to an increase in clients and amount of financing. This has allowed Fonacot to attract more clients and place a greater amount of financing, which has decreased the rate of the total annual cost of payroll financing for workers from a level of 40 percent to 25.5 percent today.
In an interview with me, Gazca Herrera pointed out that another objective of Fonacot is to remove the idea that it is just an institution for buying furniture. He noted that there has been a significant decrease in the total cost of credit by 18.2 percentage points even at a time when the economic cycle is marked by high reference rates maintained by the Bank of Mexico (BdeM). The growth of credit by Fonacot has been evenly spread throughout the country and is not limited to buying furniture. According to Gazca Herrera, 59 percent of the loans are granted to people whose income does not exceed two minimum wages.
Another objective announced by Gazca Herrera is to eliminate the notion that Fonacot is only an institution for buying furniture. To address this need, he announced that a new application with more features will be available within one month to provide better service to clients who already have a loan. Currently, 70 percent of clients already have a loan while 30 percent are new clients. An increase in technology investments has allowed each operator at Fonacot to increase their daily placement from 13 to 17 loans.
Overall, Fonacot’s achievements over its first half-century have been impressive and include increasing accessibility and affordability for workers looking for payroll loans while promoting financial inclusion throughout Mexico. As we celebrate its milestone birthday