32952 - ABC Capital SME

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Summary of Investment Information

Project Number

32952

Company Name

ABC Capital, S.A. Institucion de Banca Múltiple

Date SPI Disclosed

Apr 18, 2013

Country

Mexico

Region

Latin America and the Caribbean

Projected Board Date

May 20, 2013

Environmental Category

FI-2 - Limited

Status

Pending Signing

Last Updated Date

Nov 30, 2016

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Aug 5, 2013

Sector

Commercial Banking - General

Project Description

ABC Capital, S.A. I.B.M. (“ABC Capital” or the “Bank”) is a new financial entity resulting from various mergers and acquisitions, since it started operations in 2000 when it mainly targeted the construction industry sector. To further consolidate its growth strategy, in March 2011, ABC Capital started operating under the Mexican banking law with a clear strategy to tap into the Mexican SME segment, diversifying its loan portfolio while divesting from the construction and real estate industry. Today, ABC Capital’s strength and differentiating product strategy is based on their low risk, standardized products (“packaged products”). Standardization allows credits to be processed through an in-house credit scoring model providing consequent cost efficiencies, low risk, high volume and high margin products.

Now a strengthened financial institution with over 800 employees and presence in 22 states in the country, it’s willing to expand its product offering and target markets. As part of their expansion plans and in line with market needs, the Bank is further focusing on the SME segment, through their specifically targeted lending products, launched to the market in May 2012.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.63
Equity

Development Impact

Increased Reach/ Access to SME Finance: SME in Mexico is one of the main pillars of the economy but it continues to lacking competitiveness and development. Through the proposed investment, IFC would contribute to banking penetration and access to credit in the sector and improve production efficiency;
- Job Creation: The SME sector is a driver of employment in this economy. More funding availability would encourage businesses to produce in larger scales that would require the employment of more people; and
- Improvements in Environmental and Social Management: with IFC''s investment the Bank will need to establish a ESMS

-Long-term Funding to Support Scale-up of SME Lending: By providing long-term funding, IFC will strengthen ABC''s funding profile helping to meet its long-term strategic needs.
- Funding Diversification: IFC''s investment will help increase the Bank''s visibility with potential investors and strengthen its reputation in the local banking market; aiming funding diversification;
- Comfort to Prospective Investors/Lenders: ABC Capital''s management approached IFC in order to get IFC''s stamp of approval. IFC''s participation will positively influence the perception of other potential lenders and investors; and

E&S Category Rationale / Risks and Mitigation

This project has been categorized as an FI-2 in accordance with IFC''s Environmental and Social Review Procedure. The proposed investment consists of a USD 15.3 million loan for up to five years, intended to be used for lending to commercial small and medium enterprises (“SME’s”) in Mexico, which currently lack access to finance which impedes small scale businesses in improving their production efficiency. ABC capital portfolio is mostly composed of commercial (65%) and mortgage loans (32%). Commercial SME lending accounts for 6% of the total loan portfolio with an average loan size of USD 90,000. The overall portfolio risks includes a limited number of business activities that have potential limited adverse environmental or social risks or impacts that are few in number, generally site specific, largely reversible, and readily addressed through mitigation measures. For this project ABC Capital will be required to screen the sub- loans against the IFC Exclusion List and the Mexican environmental and social laws and regulations.

The key E&S risks and impacts derive from ABC Capital capacity to identify and manage the potential environmental and social risks associated with its lending activities particularly lending to commercial SME’s which typically have low environmental and social risks (e.g., working capital, office and house renovation, equipment acquisition, etc). Additional E&S risks and impacts of the Project derive from the capacity and systems that are in place to manage these risks, and the Bank’s practices with regards to labor and working conditions.

At present, ABC Capital does not have an Environmental and Social Management System (ESMS) outlining the procedures, responsibilities and tools for undertaking E&S risk management of its lending activities. As part of this investment, the bank will be required to implement an Environmental and Social Management System to ensure that all the sub loans in the commercial SME asset class are in compliance with the applicable environmental and social requirements and to continue its commitment to applying the labor standards

Task Description	Anticipated Completion Date
1. Nominate E&S Officers/Department	On or prior to Commitment
2. Establish an ESMS including guidelines for its implementation	On or prior to Commitment
3. Prepare Staff Training Plan	On or prior to Commitment
4. Enhance Human Resource Policy & Procedures in line with the requirements of IFC’s Performance Standard 2, Labor and Working Conditions.	Within 3 months of Disbursement

Contacts

For Inquiries About the Project, Contact

Jorge E. Gutierrez
e-mail : mailto:jegutierrez@abccapital.com.mx

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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