Non-bank financial institutions: what you need to know!

Non-bank financial institutions help businesses and individuals with financial services grow in a different way than traditional banking.

The financial system in Mexico is made up of a large number of institutions that are beyond banks. As its name indicates, a non-banking financial institution (NBFI) or non-bank financial company (NBFC) is one that provides financial services or products, but does not belong formally or informally to a bank. And then, what can they offer you?

The financial system

A financial institution is an entity that carries out financial intermediation operations, that is, that captures money from its clients to carry out its monetary operations and provides different types of products or services such as credits, loans, capital investment, insurance, fund administration, asset management, among others.

The sum of the entities that carry out these activities make up the financial system, divided between banking and non-banking, while the former are made up of Banco de México, commercial banking and savings, the latter are integrated mainly by SOFOMES, SOFIPOS, SOCAPS, Credit Unions, Collective Funding Associations, among others.

Non-bank financial institutions (IFNB)

Institutions that are not dependent on the banking system have different objectives and depending on these, is how they are classified. One of the main advantages they offer is that they take their financing activities to the population that cannot easily access bank credit and to companies that do not have a credit history of yesteryear, which gives entrepreneurs and SMEs the opportunity to access to financing and can be consulted in the bureau of financial entities.

Despite the fact that NBFIs are the largest number of participants in the financial sector and have grown a lot in recent years, it is considered that only 4 banks concentrate 70% of assets in Mexico, this is because the vast majority of users do not know what these types of entities are and how they work, which are definitely of great help so that companies can capitalize at any time during their development because they offer faster credit approval, the creation of a credit history or as a complement with some financial products that banks do not cover.

5 examples of non-bank financial institutions

SOFOM: Multiple Purpose Financial Companies are entities that grant credits or financing in a simpler and more direct way compared to a banking entity. There are regulated and unregulated ones.

SOFIPO: Popular Financial Societies are microfinance entities that operate through the authorization of the CNBV, provide financial services focused on the client or partners.

Credit unions: They provide financial services exclusively to their members, who are affiliated with a series of requirements dictated by each organization and their participation in shares.

Crowdfunding platforms: They are digital platforms where projects are presented and the support of investors, funders and donors is obtained.

SOCAPS: Cooperative savings and loan societies are a form of social organization made up of people who have common interests and seek to satisfy their financial needs.

Validate the identity of your clients

Of course, many of these companies seek to validate the identity of their clients before they can establish a financial relationship with them. If you are one of them and you are looking for how to do it, do not hesitate to contact us and book a demo!

We are creating a new identity ecosystem in Mexico! We love to share our experience, the technology we develop and provide the security that our clients need in their companies.

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