34799 - BanBif Subdebt

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Summary of Investment Information

Project Number

34799

Company Name

BANCO INTERAMERICANO DE FINANZAS SA

Date SPI Disclosed

Apr 15, 2014

Country

Peru

Region

Latin America and the Caribbean

Projected Board Date

May 19, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jan 30, 2025

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : May 16, 2014
Signed : Jun 27, 2014
Invested : Jul 14, 2014

Sector

Commercial Banking - SME Finance

Project Description

The proposed project consists of an up to US$25 million subordinated loan to Banco Interamericano de Finanzas (“BanBif” or the “Bank”) to be entirely funded by the IFC’s Capitalization Fund’s Subordinated Debt Fund (“Cap Fund”) through the AMC Management Company – “AMC”.

The Project is expected to support BanBif’s solvency base in light of the rapid growth achieved during the last years and which is likely to remain during the following years.

Sponsor / Cost / Location

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
Quasi-Equity	Loans to SME Borrowers

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

Development Impact

The development impact of the proposed transaction is expected to be high given that:
- It will support expand access to finance for SMEs in Peru as BanBif''s strategy contemplates an important focus on the SME segment.
- It will support SMEs and employment generation, thus, helping address the inequality that exists within the different segments of society.
- It will support the Company''s adaptation to the new capital requirements being implemented for Peru''s financial sector, thus, helping also to strengthen the soundness of Peru''s financial system.
- It would help to increase the financial choices for companies and individuals, by supporting a Tier II bank in a very concentrated banking sector, with the top 4 banks representing over 80% of the banking sector''s loan portfolio.

- IFC''s continued stamp of approval and IFC''s knowledge in best practices, would help BanBif keep improving the institution perception within the local and international markets, thus, supporting the Bank in reaching international capital markets.
-Mobilization of Funds: IFC will be mobilizing external investors through the IFC Capitalization Fund. IFC would support the mobilization of subordinated funding which in turn would allow BanBif to keep its growth path, while maintaining adequate leverage levels within the implementation framework of Basel III in Peru and consequently allow strengthening the soundness of Peru''s financial system.
- Funding diversification: The transaction will enable BanBif to diversify its funding sources as it will entail the incorporation of a new investor (the IFC Cap Fund). This in turn will help to keep mitigating concentration risk while enhancing the risk perception of the Bank.

Indicator	Metrics	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
Access to Financial Services: Branches, including Frontier or Rural Areas	Branches in Frontier or Rural Areas-#	Not Available	Not Available	Not Available
Access to Financial Services: Branches, including Frontier or Rural Areas	Branches-#	Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The proposed project consists of an up to US$ 25 million subordinated loan to BanBif to support the Bank''s subordinated debt requirements. The Bank’s portfolio entails the following breakdown by financing type: 46.8% Retail Banking/Consumer Loans (including mortgage); 26.4% Long-term SMEs; and 26.8% Long-term Project Finance and Corporate Finance. Given that the largest sectors of BanBif''s portfolio exposure (25% Wholesale and Retail Trade; 19.5% Utilities; 15.8% Construction and Real Estate; 8.5% Transport Service; and 5.5% to Financial Services) entail mainly medium/low environmental and social risks, the project has been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. The overall portfolio risk includes a limited number of business activities (Oil, Gas and Mining and Chemicals) that have potential limited adverse environmental and social risks or impacts that are few in number, generally site specific, largely reversible and readily addressed through mitigation measures. For this project and as an existing IFC client, BanBif will be required to ensure on-going screening of sub loans against the IFC FI Exclusion List (except for retail loans and mortgages), the national laws and regulations and the IFC Performance Standards.

The key E&S risks and impacts derive from BanBif’s capacity to identify and manage the potential environmental and social risks associated with its lending activities, particularly lending to corporate and large companies in the manufacturing sector. Additional environmental and social risks and impacts of the project derive from the capacity and systems in place to manage these risks, and the Bank’s practices with regards to labor and working conditions. BanBif has implemented a satisfactory environmental and social management system and has dedicated environmental and social staff in place. The Risk Department is in charge of conducting the initial environmental and social review including sub project categorization (high, medium, low risk) approach. The environmental due diligence includes screening against the Exclusion List, verification of compliance with national environmental and social requirements and the IFC Performance Standards. Key environmental staff has been trained in the management of the environmental and social aspects. In terms of labor and working conditions, the bank has been found to be in compliance with the requirements of PS2.

Contacts

For Inquiries About the Project, Contact

Mr. Javier Arroyo
Banco Interamericano de Finanzas
Av Rivera Navarrete 600, San Isidro
Lima, Peru
Telephone: (511) 6133000
mailto:jarroyo@banbif.com.pe

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Task Description	Anticipated Completion Date
Demonstrate compliance with Life and Fire Safety requirements	Condition of disbursement

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