Cyrano Fund Manager (Cyrano or the Fund) is a specialized microfinance funds management firm based in Lima, Peru. In addition to GMF, Cyrano has developed and managed two specialized microfinance funds: the Latin American Challenge Investment fund (LA-CIF), and Solidus (a specialized Tier II capital investment vehicle). The Managing Director of Cyrano, Mr. Fernando Lucano, is an experienced investor in MFIs having worked in Africa, Eastern Europe, and Latin America. Cyrano will manage the vehicles and be responsible for all investment proposals. Cyrano has a qualified staff responsible for the following: - identifying potential investments; - negotiating and structuring investments; - monitoring the portfolio; - managing the flow of funds from the investments to investors and the Facility; and - anticipating growth trends and MFI needs.

The Fund will have a targeted asset base of $100 million in phase I with a target to reach $500 over the next few years. The funding structure will be composed of equity, mezzanine investments and senior debt. IFC’s investment consists of a direct investment in equity and a partial credit guarantee for multi-currency bond issue in PEN-Peruvian Soles and MXN-Mexican Pesos.

37.63 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	35.13
Loan
Equity	2.50

* These investment figures are indicative

Cyrano Fund Management operates out of Lima, Peru with additional office located in Paris, France. LA-CIF II has developed a portfolio pipeline for new and supplemental investments in 23-25 MFIs operating in Latin America. The portfolio will focus on the following markets: Peru, Mexico, El Salvador, and Chile.

- Significant Direct Contribution to Poverty Reduction: The project will extend finance through MFIs to previously underserved groups: micro and small businesses that lack adequate sources of funding. IFC’s new investment will increase the availability of financial services to this large underserved group. Supporting productive small businesses will in turn stimulate growth, employment generation and poverty reduction. - Scaling Up Microfinance: By supporting an institution sponsored by LA-CIF II, this project will help scale up 23-25 microfinance institutions operating in Latin America by providing them with commercial funding in order to expand operations. This model should attract other private and commercial investors to do the same, thereby promoting investments in the microfinance sector. The project will also help address the mismatch of assets and liabilities on the books of MFIs (foreign exchange risk). - Demonstration Effect: The integration of local private investors (private banks and pension funds) into microfinance will be one of the first of its kind. This will show the way for other sophisticated institutional investors to enter the sector and deepen local financial markets. In addition, the transaction is also expected to facilitate a flagship bond issue that will be offering a PEN bond instrument to local Mexican and Peruvian investors for the first time. This could lead to replication in other countries and regions. - Facilitate the Access of MFIs to Local Currency/Commercial Funding:  The current demand of credit by underserved micro enterprises in emerging markets far exceeds the funding provided by donors and commercial lenders.  In order to satisfy the demand and unleash the productive capacity of these micro enterprises, MFIs need to tap into commercial funding sources to support their expansion.  The Fund enables MFIs to access capital from financial markets in local currency, which strengthens their balance sheets. The demonstration effect and the experience to be gained by commercial and institutional investors in the MFI sector is expected to result in sustainable, commercial funding relationships.

As private investors increase their participation in microfinance, IFC has a key role to play in developing and structuring innovative solutions to better attract a consistent flow of private capital in microfinance. LA-CIF II fits perfectly with IFC’s microfinance strategy in that IFC’s involvement is through a collective investment vehicle that has the potential to provide financing for over 25 MFIs that might not otherwise receive financing from private investors. The fund will provide MFIs with an equivalent of $70 million in local currency through private capital under a total fund size of $100 million. IFC offers a cutting edge solution to providing local currency to numerous MFIs (through investment vehicles) by linking with its structured finance expertise and respective command of microfinance. In order to remain a market leader and respond to the increase in demand for commercial financing from Latin American MFIs, LA CIF II and its sponsor, Cyrano, must be able to provide sufficient local currency financing to a diverse group of MFIs across countries. In LA-CIF II, IFC has the ability to create catalytic cross-country structures in Latin America with commercial banks that provide financing in local currency to funds or directly to MFIs. IFC holds the unique opportunity to provide a partial credit guarantee for a first-time ever bond issue in both PEN and MXN simultaneously offered to private investors in Mexico and Peru. This pioneering transaction will lead to local currency financing for MFIs operating in Peru, Mexico, Chile and El Salvador. IFC’s role in the project has a demonstration effect that can be replicated in other countries and by other market players downstream. LA-CIF II’s success in the first phase has potential to leverage local currency financing by five-fold over the life of the project.

This project involves IFC support for the business of microfinance, and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. Considering the nature of activities supported, the project will be required to:

- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the IFC Microfinance Exclusion List;
- Commit to establish a similar screening process to avoid supporting activities on the IFC Microfinance Exclusion List in MFIs in which it will take a controlling stake;
- Demonstrate commitment and resources to implementing the procedure, and take action to remedy any gaps in implementation on an ongoing basis; and
- Submit a periodic report to IFC as per a format to be provided by IFC.