How High is the Risk of Peruvian Saving and Credit Cooperatives?

Abstract

In 2019, a new regulation regarding, the supervision of all Peruvian Saving and Credit Cooperatives entered in force. Despite allowing a grace period to allow all such Cooperatives to comply with the new requirements, the Superintendency started to delist institutions on a monthly basis, halving the initial number in a few years. This process, which is still ongoing, has raised concerns throughout the country about the reliability of its microfinance system.

This study evaluates the bankruptcy probability of Peruvian Savings and Credit Cooperatives after the change in regulatory supervision It seeks to assess systemic vulnerabilities and propose improvements to supervisory mechanisms. The research applies internationally recognized models of financial distress prediction to a dataset of cooperatives categorized by total active. Results reveal that a significant portion of cooperatives show consistent financial distress signals across multiple models. The study identifies systemic inconsistencies in model outputs. The research underscores the need to reform supervision practice through predictive tools tailored to microfinance institutions.