28777 - Banco Continental SME Credit Line

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Summary of Investment Information

Project Number

28777

Company Name

BANCO CONTINENTAL S.A.E.C.A.

Date SPI Disclosed

Mar 13, 2015

Country

Paraguay

Region

Latin America and the Caribbean

Projected Board Date

Apr 15, 2015

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 3, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Apr 22, 2015
Signed : May 11, 2015
Invested : May 18, 2015

Sector

Commercial Banking - SME Finance

Project Description

The proposed project consists of a 5-year loan for US$50 million to be provided by IFC to Banco Continental S.A.E.C.A. (“Continental” or the “Bank") to support its lending activities to export-oriented small and medium enterprises (“SMEs”) in Paraguay, and an additional US$25 million loan under IFC’s Managed Co-Lending Portfolio Program (“MCPP”) under the same terms and conditions (the “Project”).
Continental is the largest bank in Paraguay in terms of loans. The Bank employs 1,266 staff and has 60 branches across the country. In addition, the Bank has a small subsidiary in the south of Brazil, Novo Banco Continental, which has 4 branches in that country.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

- The Project will enhance access to finance for SMEs as it will allow the Bank to provide its clients access to funding with longer maturities, enabling them to undertake investment projects with more appropriate financing structures.
- IFC''s continuous support to the Bank and to the financial sector of Paraguay coupled with mobilization through MCPP, are expected to generate a demonstration effect, signaling to other private investors the potential presented by the local financial system.
- Leveraging on the nationwide presence of the Bank, the Project will contribute to rural economic development and deepening banking penetration.

- IFC will mobilize US$25 million through MCPP to continue to promote the development of Paraguay''s financial sector and send a positive signal to the market regarding Paraguayan risk, thereby enhancing investor confidence in the country.
- Continental is an IFC client since 2008. As the largest bank in Paraguay with extended reach in SMEs, the Bank represents a strategic partner for IFC in the country.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The Project has been classified as Category FI-2 according to the IFC''s Sustainability Framework. The Bank’s operation has a significant concentration in SMEs loans, representing over 40.00% of its portfolio. Short term transactions account for 50.6%. SME portfolio is mostly composed of lower E&S risk transactions (commerce and services 46%). Industry clients are mainly small operations with low E&S risks and potential impacts related to labor health and safety or effluents disposal. As for Agribusiness clients (30.7%) the majority are small and medium producers dedicated to breeding livestock or agriculture; however, those could be considered as low to medium risk activities given the potential connection to large producers supply chains. Exposure to the life stock breeding in the Chaco region represents less than 4.00% of Banco Continental portfolio, limiting support to land use conversion in the sensitive biome. As an existing client, Banco Continental has developed an ESMS in line with requirements for the proposed project i.e. the Paraguayan Environmental and Social Laws and Regulations, the IFC Exclusion list and the Paraguayan Chaco controlling criteria for new land conversion. The Bank has currently a policy that includes applicable due diligence for the support of sub-projects in the region.

Contacts

For Inquiries About the Project, Contact

Banco Continental
Mr. Eduardo Cespedes Laguardia
Avda. Mariscal López Nº 3233 esquina Gral. Garay
+59521 627 4515
http://www.bancontinental.com.py

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N/A

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Task Title & Description	Anticipated Completion Date
Maintain ESMS procedures to screen export oriented SMEs in line with IFC requirements i.e. Paraguayan Environmental and Social Laws and Regulations, the IFC Exclusion list and the Paraguayan Chaco controlling criteria for new land conversion	05/15/2015

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