Davivienda, a longstanding IFC client, is the fourth largest financial institution in Colombia with $3.4 billion equivalent or 6.9% of the financial system's assets, $536 million equivalent or 18.64% of the system’s mortgage loans outstanding, and equity of $337 million equivalent as of June 30, 2006. Davivienda has a long-term credit rating of AAA (national scale) by Fitch ratings. Davivienda is controlled by Grupo Bolivar. Founded in 1938, Grupo Bolívar is the fifth largest economic conglomerate in Colombia and focuses on the financial sector. Grupo Bolívar’s companies include strong players such as Davivienda, Seguros Bolívar, Leasing Bolívar and Constructora Bolívar. Grupo Bolívar is controlled by a group of families, the dominant of which is the Cortés Family. However, the management of the group relies on a professional management team with strong reputation in Colombia

IFC proposes to provide a $200 million financing package, comprised of $75 million of direct equity investment into Davivienda and $125 million ($65 million expected for IFC’s own account) of subordinated debt.

140.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	65.0
Equity	75.0

* These investment figures are indicative

Headquartered in Bogota, Davivienda provides a wide coverage of products and it operates the fifth largest branch network in Colombia, with 283 offices in 52 cities. It also has the fourth largest ATM network with 783 machines in operation. Granbanco will provide Davivienda with 256 additional branches and 403 ATMs, increasing the Bank’s coverage from 52 to 132 cities.

The proposed project is expected to have a strong development impact, as it will: - support Davivienda, a key player in the banking sector, in its diversification and expansion strategy and its consolidation in the Colombian financial sector; - improve the financial fundamentals of the Bank by diversifying its funding sources and reducing its maturity mismatches; - mobilize syndicated funding from international banks on terms otherwise not available; and - continue contributing to the transformation of the Colombian mortgage sector, as the former savings and loans institutions shift their focus from financing mortgages to origination and securitization; at the same time further escalating their universal bank model.

IFC will play a key role in the project, as it aims to: - support the long time client Davivienda’s growth strategy by providing equity; - improve the financial fundamentals of the Bank by diversifying funding sources, reducing liquidity risks and supporting more stringent CAR levels than required by local regulators; and - mobilize long-term funding from international banks via its syndication efforts. In addition, IFC’s support for this project complements IFC’s multi-faceted strategy to strengthen the Colombian financial sector.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. During appraisal, IFC will analyze the FI''s corporate lending portfolio, for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements, if any, that would include a combination of the IFC FI Exclusion List(s) and/or the applicable National Environmental and Social Laws and regulations.

IFC will also review, if required, the capacity of the FI to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS. Based on the review, the project will be required to:

- develop an SEMS, or upgrade an existing SEMS, prior to disbursement to the satisfaction of IFC, and agree to a time bound action plan to address gaps if any;
- identify responsible, qualified persons to manage and implement the SEMS;
- commit to implement the SEMS, to ensure that their corporate lending activities investments/activities are in compliance with the Applicable Requirements;
- commit to take action to remedy any gaps in SEMS implementation on an ongoing basis; and
- submit a periodic report to IFC as per a format to be provided by IFC.