Dollar loans have recovered from the downward trend in 2010 to show positive growth rates since 2011, according to the Central Bank of Costa Rica.
In August 2010, a low of 15% was recorded, compared to 2009, but in September 2011, there was an increase of 20% compared to September 2010. In April, the annual growth rate was 15%, reported Nacion.com.
"The difference in interest rates in colones and dollars is encouraging demand for dollar credit, assuming a stable exchange rate," said Gerardo Corrales, president of the Costa Rican Banking Association.
More on this topic
The scare liquidity of colones explains the lower growth of loans in this currency, while credit growth in dollars continues to lose strength.
Added to the diminished liquidity in colones putting downward pressure on credit growth in that currency, is uncertainty at enterprise-level over recent changes in the exchange rate and lower credit demand for real estate projects, power generation and tourism, as explained by bankers to Nacion.com.
State banks are leading this growth, although private banks still retain 61% of the total loan portfolio in the U.S. currency.
An article in Nacion.com reports that "The growth in dollar loans from public banks is striking because it is a market that traditionally is dominated more by private financial institutions."
Arguing an attempt to control credit growth in dollars, the Central Bank will apply a reserve limit of 15% to banks that receive lines of foreign funding in that currency.
The banking sector has opposed the measure, asserting that it will result in an increase in the cost of credit in dollars, affecting the business sector, especially exporters and importers who normally resort to credit lines in dollars to finance their operations abroad.
The Sugef in Costa Rica has demanded tighter controls on banks when lending in dollars.
As part of the measures proposed by the Superintendent of Financial Institutions (Sugef), financial institutions must conduct a capacity analysis on the borrower, as well as requiring collateral and credit history, a test now only done when the loan is for more than $130,000.