NEW YORK--(BUSINESS WIRE)--#KBRA--KBRA releases research on the recent episodes of nonbank financial institution (NBFI) payroll lending distress in Mexico. In KBRA’s view, these developments do not pose meaningfully heightened systemic risks to Mexico’s economy. However, they do highlight shortfalls in the country’s economic performance due to COVID and its associated policy response.

Two payroll lenders, Alpha Holding and Crédito Real, fell into debt distress in July 2021 and February 2022, respectively. While this situation involved sizable accounting issues, credit weaknesses in their targeted lending sector—employees in micro, small, and medium enterprises (MSME)—were exacerbated by the limited government support to the economy during the pandemic. Still, KBRA believes the limited size and scope of payroll lending in Mexico (KBRA sovereign rating of BBB/Negative Outlook) ultimately limits systemic risks.

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