By Eliane Portillo

Domestic credit to Colombia's private sector and the nonfinancial public sector will likely approach 35% of GDP in 2011, up from 28% in 2006, but a lack of inclusion still persists in the financial system, S&P said in a report.

As a share of GDP, domestic lending in Colombia is now larger than in Mexico and Peru, but much of the population remains outside the formal banking sector, as less than 60% of Colombia's population has a savings account.  Continued growth in the financial sector should facilitate access to funding by the private sector, sustaining investment and GDP growth over the long term, the report reads.

But unexpected shocks in the global economy could lead to a sudden loss of external funding and would place pressure on local banks to restrict their own dollar lending, hurting the corporate sector, the report says.

Similarly, a sudden loss of external funding could lead the Colombian corporate sector to seek funding from domestic banks, raising the risk of falling liquidity, S&P said.