The project sponsor is Grupo Financiero Ficohsa, which is composed of four entities: Banco Ficohsa which is the third largest bank in Honduras, Interamericana which is the largest insurance company in Honduras, Dicorp (currency exchange) and Probursa (broker). As of June 2007, the Group had combined assets of $945 million, equity of $70 million and net income of $15 million. Grupo Financiero Ficohsa is owned by several privately-held groups. The controlling group has a 51% ownership. The remainder is divided among 9 individuals and 4 investment companies, none of which own more than 11% of Grupo Financiero Ficohsa. Grupo Financiero Ficohsa owns 99.99% of Banco Ficohsa.

The proposed project cost would be $15 million A loan, of which $10 million would be used to finance the Bank’s middle and low-income mortgage portfolio and $5 million would be used to finance their SME portfolio.

20.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
Equity

* These investment figures are indicative

The Bank is headquartered in Tegucigalpa and has a 50-branch network across the country. IFC’s investment can be used to fund loan activities through any of the branches.

The project serves two purposes: - the debt will support Ficohsa’s expansion in housing and SME finance sectors; and - potential Advisory Services contribution will strengthen the Bank’s internal capacity to efficiently and effectively penetrate the SME and middle to low-income housing sectors. The project (funding and advisory services) will foster growth in the SME and middle to low-income housing sectors, which are still largely underdeveloped in Honduras.

- Strengthening a Locally-Owned Bank: The entry of international deep-pocket players and increasing regulatory demands will likely lead to further consolidation in the financial sector. IFC’s financing will support Ficohsa’s efforts to better face its new competitive pressures by further penetrating the housing and SME sectors, strengthening its balance sheet by matching their tenors for their long-term financing and diversifying its funding base. - Long-Term Funding: Providing access to long-term finance to low to middle income segments, who have limited or no access to mortgage financing. - Access to Finance: Honduras has a large SME sector, which is credited with contributing 25% of their GDP. However, commercial banks devote a combined 1% of their total loan portfolio to this sector. IFC’s funding will help one of the largest banks in the country to focus on this 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 portfolio and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, if any, that would include a combination of:

- The IFC FI Exclusion Lists;
- The applicable National Social and Environmental Laws and regulations; and/or
- The IFC Performance Standards.

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 Bank will be required to:

- Develop an, or upgrade, if necessary, any existing Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements;
- Submit a periodic report to IFC as per a format to be provided by IFC.