26030 - Factorline EQ

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Summary of Proposed Investment

Project Number

26030

Company Name

Tanner Servicios Financieros S.A.

Date SPI Disclosed

Jun 11, 2007

Country

Chile

Industry

Financial Markets

Projected Board Date

Jul 15, 2007

Status

Completed

Sector

Commercial Banking - Microfinance and Small Business

Date Revised SPI Disclosed

Feb 14, 2008

Department

Global Industry, Financial Markets

Environmental Category

C - No Impact

Previous Events

Approved : Aug 15, 2007
Signed : Sep 12, 2007
Invested : Sep 26, 2007

Project Description

The proposed project consists of an equity investment of up to $15 million in Factorline S.A. (Factorline or the company). This project is aimed at both supporting the promotion of MSME lending in Chile with a particular focus on factoring and other financial products targeted at small and micro enterprises; as well as enhancing the liquidity and the scope of the private equity market in the country.

Factorline stands as the largest independent factoring company in Chile with a total portfolio of $183 million equivalent and about 2,500 clients as of December 31, 2006. The company is distinguished for targeting primarily small businesses that are currently underserved by the traditional banking sector, fostering the growth of domestic and international trade undertaken by MSMEs in the country.

Factoring plays a significant role in supporting the growth of MSMEs in Chile, providing an alternative to traditional bank financing and thus enabling MSMEs to finance their working capital, increase sales and expand their operations. Although the company’s growth in the last years has been solid with a portfolio increase as of year-end 2006 of nearly 60% versus 2004, a larger equity base would enable the company to further develop and expand its operations. Through this investment, IFC could play a significant role by supporting the growth of a financial intermediary serving niche MSME segments.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	15.0

Development Impact

The development impact of the project is expected to be high in terms of its support for productive small businesses and its stimulus for growth and employment generation. Niche players like Factorline fill an important role in the Chilean market. Thus, by having a stronger capital base, Factorline will be able to grow and diversify its asset base increasing the funding available to its target market, MSMEs. As a result, the project will:

- support the growth of productive or service small and micro businesses which increases their income and profitability as well as employment generation; and
- will expand the SME funding beyond simply factoring services by offering a wider range of financial products to SMEs such as auto loans and consumer loans.

Through this investment, IFC is expected to play the following key roles:

- As the only international shareholder, IFC will support Factorline by providing strategic advice leveraging on its international experience and relationships;
- As a AAA-rated institution, the presence of IFC as a shareholder will strengthen the risk profile of Factorline;
- Finally, the proposed capital increase, will strengthen the capital base, enable further growth by leveraging the balance sheet, as well as enhance the company’s corporate governance practices with a diversified shareholder structure and board

This project is engaged predominantly in the business of factoring and has been classified as a Category C project according to IFC’s Environmental and Social Review Procedure. However, considering that the project will expand into microfinance, the project will be required to develop a procedure, prior to starting any microfinance activities, 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. The project will then need to include information in their normal financial reporting to IFC on their implementation of the microfinance exclusion list when their microfinance activities commence, as per an agreed format. The project is required to inform IFC in the event of any change in nature or scope of its contemplated business or operations.

Contacts

For Inquiries About the Project, Contact

Sergio Contardo, General Manager
Factorline S.A.
Huerfanos 863, Santiago, Chile

Telephone: 562-674-7500
Fax: 562-664-8820

Website: www.factorline.cl

For Inquiries and Comments About IFC, Contact

General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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