43051 - DCM FDC Gender

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Summary of Investment Information

Project Number

43051

Company Name

Federacion de Cajas de Credito y de Bancos de los Trabajadores SC de RL

Date SPI Disclosed

Sep 2, 2020

Country

El Salvador

Region

Latin America and the Caribbean

Projected Board Date

Oct 15, 2020

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG LAC

Industry

Financial Markets

Previous Events

Approved : Nov 30, 2020
Signed : Dec 10, 2020
Invested : Dec 16, 2020

Sector

Microfinance and Small Business - Non Commercial Banking

Additional Project Attributes

Blended Finance

Project Description

The project aims to provide long-term financing to Federación de Cajas de Crédito y de Bancos de los Trabajadores, S.C. de R.L. de C.V. (Fedecredito or FDC), an existing IFC client, for up to US$60 million in the form of a Diversified Payments Rights (DPR) notes issuance. The proceeds will be used to provide access to finance to micro, small, and medium size enterprises (MSMEs) and lower income individuals in El Salvador. At least 25% of the proceeds will be to fund women-owned or -led very small and small enterprises (WVSEs and WSEs, together WOE) through FDC’s Member Financial Institutions (MIs) (the Project).

Associated Advisory Engagement

IFC will implement an upfront training workshop with FDC and its MIs to improve their awareness about the importance of having a gender value proposition.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	60.0
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 MSME (mix of Micro and SME)

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

Development Impact

The most significant expected Project-level outcome is increased access to finance for MSMEs as well as increased access to finance for WOEs. Beyond the project level outcomes, IFC anticipates that the investment would promote greater inclusiveness via demonstration and replication channels to increase access to finance to women and rural areas of El Salvador. Through this Project, FDC hopes to further standardize its operations across the country, expand its footprint into underserved segments (rural, women), and establish the viability of lending to these segments with customized products and enhanced interoperability, which could spur the pace of financial inclusion in El Salvador for the rural poor and women enterprises, which currently face disproportionately more constraints.

Through the Project, IFC will provide financial additionality in the form of Financing Structure and non-financial additionality in the form of Knowledge, Innovation and Capacity Building to continue supporting FDC as it evolves its business model and sources of funding. In terms of financing structure, IFC is providing long-term financing, which is not readily available in the market and increasingly more relevant under the current market conditions. As for Knowledge, Innovation and Capacity Building, IFC will provide expertise in identifying the gender finance portfolio of MIs and help design and develop tailored strategies for growth of the WOE segment.

E&S Category Rationale / Risks and Mitigation

The Project involves a fourth transaction with Fedecredito, an existing IFC client in El Salvador, to support its portfolio of microfinance and SME loans through its Member Institutions (MIs), which have low to medium E&S risks, and as such has been classified as Category FI-2 according to IFC's IFC’s Sustainability Policy. FDC provides four core products to its members: MSME loans which are mostly used to support working capital to buy equipment, crédito popular which supports inventory finance for micro-vendors, housing loans mainly used for renovations, and consumer loans. Under projects #28635 and #33879, and #37719 FDC has developed an Environmental and Social Management System (ESMS) to assess sub-loan E&S risks against the IFC Exclusion List and the El Salvador’s E&S laws and regulations.

The key E&S impacts and risks derive from FDC and the MIs’ capacity to identify and manage the potential E&S risks associated with its lending activities to MSMEs, in particular within the agriculture and construction sectors. E&S risks for these types of projects typically include: labor and working conditions, occupational health and safety, pollution prevention, and waste and wastewater management. FDC has implemented a satisfactory environmental and social management system (ESMS) and has dedicated E&S staff in place to provide support to the MIs in the implementation of the E&S procedures. The credit officers at the MIs are responsible for the initial sub-loan screening against the IFC Exclusion List and verification of compliance with national E&S requirements (i.e., permits, licenses, etc.). Key officers at the MIs have been trained in E&S matters. As part of this Project, FDC will be required to: (i) maintain an ESMS; and (ii) submit a periodic E&S report to IFC.

Contacts

For Inquiries About the Project, Contact

FEDECRÉDITO
Ernesto Pacheco
Director of Finance and Operations
(503) 2209-9679
ernesto.pacheco@fedecredito.com.sv
25 Av. Norte y 23 Calle Poniente, Edificio Macario Armando Rosales Rosa, San Salvador
www.fedecrédito.com.sv

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