37502 - Pichincha ECU II

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Summary of Investment Information

Project Number

37502

Company Name

Banco Pichincha CA

Date SPI Disclosed

Dec 11, 2015

Country

Ecuador

Region

Latin America and the Caribbean

Projected Board Date

Jan 29, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG LAC

Industry

Financial Markets

Previous Events

Approved : Feb 22, 2016
Signed : May 23, 2016
Invested : Jun 29, 2016

Sector

Commercial Banking - General

Project Description

As part of a joint Investment Services and Advisory Services strategy, the proposed IFC investment consists of a senior loan for Banco Pichincha (the “Bank”), in order to support the growth of climate smart projects and small and medium-sized enterprises (“SMEs”).

Associated Advisory Engagement

In parallel, the team will offer an advisory project consisting of a diagnostic and recommendations in order to potentiate the impact and growth of energy efficiency projects. This marks an innovative joint approach which ultimately aims to provide value-added solutions to Banco Pichincha.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
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
Straight Senior Loan	Loans to SME Borrowers

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

Development Impact

The development impact of the project is expected to be high, as it will enhance the Bank''s ability to support projects which ultimately have a direct impact on reducing greenhouse gas emissions, while stimulating growth, employment generation and poverty reduction.

IFC''s term loan will also enhance Banco Pichincha''s ability to support small and medium-sized enterprises which will in turn stimulate economic growth, while also increasing outreach and financial inclusion in Ecuador.

Banco Pichincha should be able to increase its sustainability by increasing its cross-selling potential and capturing new clients, ultimately increasing the Bank''s profitability.

IFC will continue to implement and enhance international best practices in environmental policies, strengthening the Bank''s environmental management system.

The proposed project is FIG''s first climate investment in the market, and will therefore further support the track record creation and demonstration of business case for climate smart and sustainability focused projects through banking institutions in Ecuador.

Through the proposed investment, IFC will support Banco Pichincha in strengthening its participation in climate smart projects, primarily for energy efficiency projects. These loans are aimed at the renovation or refurbishment of fixed assets designed to decrease energy consumption for every unit of service output.

IFC will provide online web IT infrastructure and training using its climate smart reporting tools, like the CAFI tool, which will allow Banco Pichincha to effectively measure and perform impact reporting of their climate portfolio.

By providing a term loan to Banco Pichincha, IFC would continue to solidify a long term relationship with the Bank, by supporting its growth in underserved segments with high growth potential. In parallel, IFC is offering the Bank with an advisory offering to better identify energy efficiency business needs.

IFC will continue to enforce international best practices in environmental policies, strengthening the Bank''s environmental management system.

E&S Category Rationale / Risks and Mitigation

The project involves IFC support to SMEs, including lending to energy/water efficiency and cleaner production. Banco Pichincha has a diversified SME portfolio, with emphasis on sectors such as commerce, transport, industry and construction. The portfolio supported through this project is expected to include 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. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. For this project, Banco Pichincha will be required to ensure that all loans in the asset classes supported comply with the IFC Exclusion List, and the E&S local laws.

The main potential E&S risks of the project are associated with the impacts of the SME activities financed in sectors such as, commerce, transport, manufacturing, construction and with the Bank’s capacity to undertake E&S risk management procedures. The risks in these sectors revolve around occupational health and safety, pollution prevention & mitigation, community health, safety and security, child labor and biodiversity impacts. To mitigate those risks, in the last two years Pichincha has made steady progress in developing and implementing an upper management-approved ESMS, in accordance with ISO 14001 including the creation of a grievance mechanism, project E&S categorization, procedures to carry out ESDDs and an independently audited sustainability reporting system. As a result, currently Pichincha have in place, procedures to identify, assess and manage the E&S risks related to its borrowers’ activities. Going forward, the Pichincha Bank will be required to report, annually the results of the use of its social and environmental framework to manage the E&S risks of its clients.

Key Mitigation Measures

Type of Action
Timeframe
Enhance labor practices for closer alignment with PS2: Labor and Working Conditions
Prior to disbursement

Contacts

For Inquiries About the Project, Contact

Mr. Santiago Bayas
Banco Pichincha
Av. Amazonas 4545 y Pereira
Edificio Centro Financiero oficina No. 507
Quito, Ecuador
Tel: +593-2 298 0980
Web: http://www.pichincha.com

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