47014 - WCS COVID Daycoval II

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Summary of Investment Information

Project Number

47014

Company Name

Banco Daycoval S/A.

Date SPI Disclosed

Jun 22, 2022

Country

Brazil

Region

Latin America and the Caribbean

Projected Board Date

Jun 21, 2022

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Dec 4, 2025

Department

Regional Industry - FIG LAC

Industry

Financial Markets

Previous Events

Approved : Jun 24, 2022
Signed : Jun 27, 2022
Invested : Jun 29, 2022

Sector

Commercial Banking - Trade and Supply Chain

Project Description

The proposed investment consists of a 1-year senior loan facility of up to US$100 million for Banco Daycoval S.A (Daycoval or the Bank) under the WCS Financial Institutions Response Envelope (FIGE). The facility will be renewable, at IFC's option, for two additional one-year periods (up to three years in total).

The proposed WCS investment in Daycoval is expected to leverage on the previous WCS Project with the Bank (Project #43220) and continue supporting the Bank's working capital needs and trade related financing to Brazilian enterprises, which in turn feed an ecosystem of small and medium enterprises (SMEs) distributors and suppliers (the Project). Similar to Project #43220 and in order to further promote gender finance, 20% of the Project's proceeds will be channeled to Women-Owned SMEs.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
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 Woman-Owned SMEs

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

Development Impact

Through the Project, IFC will support Daycoval to increase access to finance for SMEs and WSMEs in Brazil. It is expected that this in turn will preserve jobs and enterprise growth by supporting working capital needs and trade related financing for Brazilian SMEs with a focus on women owned SMEs. In Brazil, credit penetration has been one of the most important issues in financial sector development given the structural barriers and lack of incentives for banks to service these segments. The COVID crisis has exacerbated the challenge, further tightened credit lines and hindered the growth potential of the SMEs. Moreover, the Project will also help the financial sector increase its ability to continue to withstand shocks from the continuing devasting effects of the COVID-19 crisis and other macro vulnerabilities. Through this project, IFC is enabling Daycoval to support the working capital needs of SMEs during a time of crisis and contribute to the diversification of available financing in the market to include SMEs.

Through the project, IFC will provide Daycoval a one-year WCS facility renewable for up to 2 years, which enables the Bank to manage its trade finance business operation more efficiently on a portfolio basis. The revolving feature of the WCS will also provide Daycoval with more stable funding source, matching its current asset and liability management, which will strengthen its business expansion in trade finance portfolio.

E&S Category Rationale / Risks and Mitigation

The project consists of an up to US$100 million loan under IFC's COVID-19 Working Capital Solutions ('WCS') to Banco Daycoval to finance its SMEs portfolio. Portfolio risks primarily include exposures to low and medium E&S risk sectors, mostly composed of SMEs service providers and inputs suppliers for large industries, therefore this transaction was categorized as FI-2 according to IFC's Sustainability Framework. Applicable requirements for the project include IFC's Exclusion List and compliance with Brazilian E&S laws.

The key risks and impacts of the project derive from the Bank's capacity to maintain its management system to identify and manage the potential environmental and social risks associated with its sub-projects. Daycoval's SME portfolio risks are mostly associated with OHS and pollution prevention themes. Medium to high risk sectors such as agricultural activities and extractives represent a smaller portion of the portfolio. The Bank is an existing client and has implemented an ESMS with procedures to include IFC exclusion list screening, ESDD through a specific questionnaire, sub-clients host country laws assessment review, credit department analysis, environmental risks classification (low, medium or high), filing and monitoring. As part of the Project, the Bank will be required to: (i) maintain its ESMS procedures; (ii) remain committed to applying the labor standards established by the IFC Performance Standard; and (iii) submit a periodic report to IFC.

Contacts

For Inquiries About the Project, Contact

Banco Daycoval S.A
Ricardo Gelbaum
Inverstor Relations Director
+55 (11) 3138-1024
Ricardo.gelbaum@bancodaycoval.com.br
Avenida Paulista, 1793, 01311-200, São Paulo, Brazil
https://ri.daycoval.com.br/pt/servicos/fale-com-ri

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