Finance Entrepreneurs in Venezuela

Investment Funds Becoming Microbanks to Finance Entrepreneurs in Venezuela

The Caracas Stock Exchange is presented as an option for financing entrepreneurial businesses in Venezuela since 2019. Several investment funds approached this market to serve specific sectors such as small and medium-sized enterprises, agribusiness and entrepreneurs.

Investment Funds Becoming Microbanks to Finance Entrepreneurs in Venezuela: A New Opportunity for Investment

In 2023, the number of products to be offered in the Venezuelan capital market will also be expanded for other investors, such as stock certificates and factoring, the latter of which is back after many years.

Venezuelan capital markets support the growth of entrepreneurs by serving as an intermediary in the search for financing. Since 2019, the Caracas Stock Exchange (BVC) is presented as an alternative for those natural or legal persons, large or small, who have no possibility of accessing a bank loan due to the limitations of this sector.

Factors That Have Contributed to Increased Dynamism in Venezuela’s Central Bank

Several factors have caused a greater dynamism in the BVC, among them, the changes in the consumption habits of Venezuelans due to the upheavals caused by the hyperinflationary process in the country that lasted three years and the de facto disorderly dollarization. Also, the growth of the capital market has been dominated by the easing of regulations by the authorities.

That is to say, its growth is not so much linked to an effective economic reactivation, but at the expense of the impossibility of the banks to deliver more loans, affected by the monetary policy of the Central Bank of Venezuela with the legal reserve.

In this scenario, several investment funds approached the capital market to obtain resources that would allow them to financially support sectors such as small and medium enterprises, agribusiness and entrepreneurs. Among them are AlAlza Inversiones, Fivenca, Impulsa Agronegocios and Montesco Fondo Agroindustrial.

These investment promotion companies have allied with an institutional entity such as the Caracas Stock Exchange to reach SMEs and small entrepreneurs.

“We have gone towards financing through private bonds (fixed income operations) and we see that this market has grown significantly. We have several funds that came to capture resources within the Stock Exchange for other specific projects, that had not been seen before, we are talking about microbanks”, highlighted Gustavo Pulido, president of the BVC.

He pointed out that there is now a new market segment and it is expected that by 2023 new products such as stock certificates and factoring will be launched.

Using Commercial Papers to Access Various Financial Instruments

Already in the Stock Exchange, it is possible to have access to various instruments such as commercial papers, unsecured obligations, securitizations, the stock exchange promissory note that was authorized by the National Securities Superintendence (Sunaval) in October 2018 and the issuance of shares in bolivars and dollars (variable income).

For the development of the entrepreneurial ecosystem that is being generated in the country, investment funds seek not only to accompany them from the financial point of view but also in the operational and marketing aspects of products and services.

Rafael Álvarez Loscher, the managing partner of the Corporate Legal Consulting Firm, maintains that the entrepreneur as such cannot directly access the capital market, but he can do so through these investment funds.

He pointed out that the stock market offers a set of opportunities that have begun to be decanted as investment mechanisms. This makes it attractive for companies to issue debt to raise capital for a specific plan. In the case of entrepreneurs, since there is a legal configuration with the Code of Commerce, which requires several procedures to incorporate a company, there is no other way but to look for a mechanism to start the formalization process and in Venezuela, this process is also costly…