38424 - Scotiabank Costa Rica SME and Housing Loan

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Summary of Investment Information

Project Number

38424

Company Name

SCOTIABANK DE COSTA RICA SA

Date SPI Disclosed

Sep 2, 2016

Country

Costa Rica

Region

Latin America and the Caribbean

Projected Board Date

Oct 4, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Oct 1, 2021

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Oct 26, 2016
Signed : Nov 18, 2016
Invested : Mar 30, 2017

Sector

Commercial Banking - General

Project Description

The project consists of a loan of up to US$75 million to Scotiabank de Costa Rica S.A. (the “Bank”) for on-lending to SMEs and low and middle income mortgages.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
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	Housing Finance
Straight Senior Loan	Loans to SME Borrowers
Straight Senior Loan	Housing Finance

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

Development Impact

Financial Inclusion: Costa Rica''s private sector credit to GDP ratio is below the regional average. Funding a leading private sector bank will support increased banking penetration and access to financial services for businesses and individuals in Costa Rica.

Employment Generation: Improving access to finance for SMEs that lack sufficient funding and thereby contributing to increased job creation in the country. Providing loans to new and underserved SME clients translates into larger production scales requiring additional workers, especially for the bottom 40 percent among the large pool of unskilled labor force.

Shared Prosperity: Access to housing finance for low and medium income individuals will help reduce high inequality in the country and improve shared prosperity. Like many other emerging markets, Costa Rica has an unmet demand for housing finance driven by growing incomes and rapid urbanization.

Long term partnership across the region: IFC has partnered with The Bank of Nova Scotia and its subsidiaries across Latin America and the Caribbean. Most recently IFC has provided digital financial services workshop to Scotiabank''s LAC operations, is engaged in a rural/agri microcredit advisory project with CreditScotia in Peru, is discussing a DARP program in the Caribbean as well as in Latin America and is investigating potential for investments in infrastructure in Latin America. The Bank of Nova Scotia is also a recurring top partner on trade, having confirmed more than US$1.8 billion, #4 in the GTFP league tables for volumes.

Financial Sector Consolidation: By supporting one of the strongest regional financial groups in Latin America, IFC will enable Scotiabank to play a critical role in the growth and consolidation of the banking sector in Costa Rica and enabling the private sector banks to better compete with the state-owned banks in Costa Rica.

Longer Tenor: The IFC Loan will enable Scotiabank CR to extend the tenor of their financing by providing longer term funding than normally available in the local market and become less dependent on the parent for long-term funding. By offering a loan with a tenor of five years to fund SME loans and mortgages, IFC will help the Bank reduce their asset-liability mismatch.

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 proposed investment consists of a credit line for up to $75 million, intended to be used for SME’s and housing. Scotiabank CR focus main focus of its operations are in the real estate and wholesale and retail segments, combined for approximately 40%. MSME lending under the asset class supported accounts for approximately 11% of the total portfolio. 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. The project has been categorized as FI-2 in accordance with IFC’s Sustainability Policy. For this project Scotiabank CR will be required to screen the loans against the IFC Exclusion List and the Costa Rican environmental and social laws and regulations.

The key E&S risks and impacts derive from Scotiabank CR''s capacity to identify and manage the potential environmental and social risks associated with its lending activities particularly lending to SME''s in the manufacturing and agribusiness sectors, which typically include: occupational health and safety, pollution prevention, waste and wastewater management, and labor and working conditions, among others. Moreover, E&S risks and impacts of the project may arise from the capacity and management systems in place to address these risks. Scotiabank CR has implemented a satisfactory environmental and social management system and has dedicated E&S staff in place. The bank will be required to continue implementing the environmental and social management system to ensure its investments are in compliance with the applicable environmental and social requirements and to continue its commitment to applying the labor standards under PS2 to its workforce.

Contacts

For Inquiries About the Project, Contact

Ignacio Vargas F.
Sr Manager – Liquidity & Funding
mailto:ignacio.vargas@scotiabank.com
Tel: (506) 2210 4131
Sabana Norte, Apdo 5395 - 100
San Jose, Costa Rica
Scotiabank de Costa Rica S.A.

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