48390 - Caja 18 Loan

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Summary of Investment Information

Project Number

48390

Company Name

CAJA DE COMPENSACION ASIGNACION FAMILIAR 18 DE SEPTIEMBRE

Date SPI Disclosed

May 21, 2024

Country

Chile

Region

Latin America and the Caribbean

Projected Board Date

Jun 30, 2024

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Dec 15, 2024

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Aug 8, 2024
Signed : Nov 8, 2024
Invested : Dec 13, 2024

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

The proposed investment (The Project) consists of a 4-year with a 2-year grace period senior loan of up to US$45 million to Caja de Compensación de Asignacion Familiar 18 De Septiembre (Caja 18 or the Company) to expand the Company’s social credit portfolio, including: (i) retirees; and (ii) women workers. The financial package includes an up to US$10 million A loan and an up to US$35 million mobilization, which includes US$30 million syndicated B-loan and US$5 million senior loan from IFC acting in its capacity as implementing entity for the Managed Co-Lending Portfolio Program (MCPP). The Project is in line with IFC’s strategic goal of ensuring financial and social inclusion, as well as with the WBG Gender Strategy of removing barriers to women’s ownership and control of assets.

Associated Advisory Engagement

The advisory project for Caja 18 is part of a comprehensive regional umbrella program that is focused on creating and developing a market for innovative financial products and services catering to the older people’s market segment (the silver economy, ages 50+) in Latin America and the Caribbean (LAC), with a particular focus on women. IFC will provide targeted advisory services to Caja 18 on adapting or formulating business models and value propositions specifically tailored to meet the needs of the older adults' segment, including women. Utilizing existing IFC’s delivery models of advisory services, IFC will assist Caja 18 in formulating silver economy segment-specific value propositions for innovative offerings of products and services, including digital options if viable (e.g., tele finance) and non-financial services (e.g., support networks, active aging programs, online resources, etc.) with a gender angle.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	10.0
Equity

Development Impact

Project Outcome -Stakeholder effects: Increased access to finance for women workers and retirees/seniors. IFC expects the project to improve access to finance for underserved women workers and retirees. Chile's elderly population and women have limited access to financial products and alternative sources of financing remain expensive: As of June 2023, only 23 percent of the banking system's commercial loans were dedicated to women. In addition, only 53 percent of the country's population over the age of 60 have used a financial service, while only 20.4 percent have access to non-bank credit cards and 10 percent have access to bank credit cards. Caja 18 has demonstrated its willingness to strengthen its strategy for women workers and retirees by increasing its portfolio for these two segments. Market Creation - Integration: One of the limitations for the sustainable expansion of the Cajas system is the limited access to funding sources as the Cajas are reliant on local banks for funding, which tend to be limited in amount and tenor. Moreover, the Cajas have been vulnerable to banks' risk-averse behavior originally triggered by the difficulties faced by some of these players in the past, which were later exacerbated by the occurrence of the COVID-19 pandemic. IFC anticipates that the Project will catalyze additional investors to the Cajas sector in Chile, by demonstrating the financial soundness and good governance of these institutions. The Project leverages both the regulatory change in 2018 allowing the multilateral investors to provide funding to Cajas, as well as IFC's ongoing project with Caja Los Heroes and aspires to promote the involvement of other international investors in the sector. By strengthening the resilience of the Cajas, IFC ultimately aims at improving access to finance for the underserved segments as these have a strong foothold and strategic reach.

The Project provides strong financial additionality through: • Financing Structure (long-term funding): The proposed 4-year up to US$10 million Senior Loan from IFC will allow Caja 18 to have access to longer-tenor funding from institutional investors, improving its repayment profile and helping diversify its liabilities structure from corporate bonds. • Resource Mobilization: IFC will play an active and direct role in mobilizing up to US$35 million from institutional investors. This mobilization will increase the financing amount of this Project to potentially US$45 million. The Project will help the company to diversify its funding sources and continue to grow its business sustainably. • Knowledge, innovation, and capacity building: IFC will support Caja 18 with advisory services aiming to improve its offerings for women and seniors. The Advisory Service encompass financial and non-financial products and the implementation of a differentiated commercial approach.

E&S Category Rationale / Risks and Mitigation

The Project consists of a loan of up to US$ 45 million to Caja 18 (“the Company”) to expand its credit portfolio targeting retirees and women workers in Chile and has been classified as category FI-3 according to the IFC Sustainability Framework. The E&S risks of the project are associated to those of the Company’s targeted portfolio which, due to the focus on individuals only, are considered to be low. As part of the Project, the Company will be required to enhance its labor standards in line with the IFC Performance Standard 2 and remain committed to apply them. Caja 18 will inform IFC in the case of any change in the nature of its operation that may affect E&S risks of the supported portfolio.

Contacts

For Inquiries About the Project, Contact

Caja 18 de Septiembre
Camilo Morales Riquelme
Chief Financial Officer
600 718 18 18
cmoralesr@caja18.cl
Nataniel Cox 125, Santiago
www.caja18.cl

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