Team size: 14
Major legal advisers: White & Case

Could you share an example of a time when you came up with an innovation that improved how your legal team works and did not come at a large expense?

During the initial stages of the COVID-19 pandemic, my team and I played a crucial role in innovating to ensure our company’s success. Like other businesses, we faced the challenge of adapting swiftly to maintain our operations and retain clients. This required a shift from our traditional approach of in-person loan processing at physical branches.

We confronted three main challenges. Firstly, adapting loan processing: The pandemic prevented clients from visiting our branches for Know Your Customer (KYC) interviews, loan document signings, and cash disbursements. We needed to devise new methods to continue granting loans seamlessly.

Secondly, managing loan collections, with clients and employees unable to access offices, collecting loan payments became complex. We had to find ways to facilitate payments while complying with regulations and restrictions.

Third, navigating COVID-19 regulations, striking a balance between regulatory compliance and the safety of employees and clients was essential.

Our main asset was our legal department’s deep understanding of technology regulations, despite the challenges of balancing regulatory requirements and technology implementation, when combined with our IT department we were able to begin an ambitious transformation from traditional to digital loan processes.

We digitalised the entire onboarding process, encompassing KYC interviews, document execution, and cash disbursement. In a matter of weeks, we established a 100% digital loan granting process while ensuring compliance with FINDEP’s regulations. Second, the legal and IT team collaborated closely to design an entirely new process. This internal effort proved cost-effective as we utilised our in-house expertise without resorting to external consultants.

Third, to replace in-person collections, we introduced various payment methods accessible through different channels. Our call centre played a pivotal role, with supervision from the legal department to ensure adherence to financial regulations.

At the time we were operating across 350 branches in Mexico, each subject to federal, local, and municipal COVID-19 regulations, which was a challenge to handle. We managed to keep our branches operational by implementing a hybrid approach that integrated traditional and digital processes.

What are some of the main trends impacting the industry sector you work in in Mexico?

Over the past three years, Non-Bank Financial Institutions (NBFI) in Mexico, particularly in the micro-loan sector, have faced considerable challenges. The troubles of three major NBFI players in Mexico have resulted in financial and reputational issues, negatively impacting the entire sector, including our company.

This situation has led to reputational risk and implications. For the first time in my tenure at FINDEP, we are experiencing reputational risks affecting the NBFI sector due to the issues faced by those three companies. The sector has been affected, with investors and rating agencies penalising NBFI in Mexico due to faults from these companies. Many NBFI in Mexico, including us, rely on resources from banks and debt issuance for operations. The financial and payment uncertainties generated by the troubled companies have led to challenges such as rating downgrades, higher financing costs, and decreased funding availability. Since 2021, the trend in the sector has been cautious and meticulous financial management. Banks, investors, and rating agencies have become wary of the sector, avoiding risk exposure.

To distinguish ourselves from the troubled companies, we took several measures. Recognising the importance of accurate financial reporting, we opted to change our external auditor. This decision was driven by the realisation that the previous auditor had also been involved with the three troubled companies, whose financial statements were found to have substantial errors. This change marked our commitment to transparency and accurate financial reporting.

Despite being a publicly traded company with transparent financial information, accessing new lines of credit required us to offer more collateral and complex structures. Trust guarantees have emerged as a trend, allowing us to secure funding despite the changing market dynamics.

In 2022, we executed a debt exchange offer, while uncertainties remain, these strategies have helped us maintain our funding, ensuring that we can continue our operations.