Banco BHD is the second largest private commercial bank in the Dominican Republic. The Bank is a subsidiary of Centro Financiero BHD, a diversified financial services company whose activities include commercial banking, consumer and micro finance, pension funds, insurance, remittances and private banking. Centro Financiero BHD is owned by four shareholders: Grupo BHD (51%), Popular International Bank Inc. (20%), Banco Sabadell of Spain (20%) and IFC (9%).

The proposed investment consists of a subordinated loan of up to $25 million and is expected to be made by the IFC Capitalization Fund, which is managed by IFC Asset Management Company, LLC, a wholly-owned subsidiary of IFC.

Banco BHD is headquartered in Santo Domingo and has 91 branches across the Dominican Republic.

Increase access to finance
The Project will enhance BHD''s capital structure maintaining its ability to continue growing and supporting the SME segment which will increase access to finance in a market with low banking penetration. Greater access to finance is expected to stimulate the growth of businesses and, in turn, employment generation.

Resource Mobilization
The capacity to mobilize other investors through the AMC to provide a significant amount of funding at a time of global instability.

The proposed financing will provide BHD long term funding to support the Bank to expand its lending operations and implement its nationwide expansion strategy, where there is strong demand for financial services from country''s corporate and SME sector. IFC''s engagement will also be important to strengthen its relations with BHD and continue to transfer and showcase international best practices, particularly in terms of corporate governance and risk management.

This project has been classified as a Category FI project according to IFC''s E&S review procedures. Under existing projects (#11147 and #26142), Banco BHD is required to assess its clients according to the IFC Exclusion List and the DR''s environmental and social laws and regulations. More recently, under the Energy Efficiency (“EE”) credit line (#30732), the Bank has agreed to apply the IFC''s Performance Standards to high-risk EE sub-projects, if any. BHD has satisfactorily implemented an Environmental and Social Management System (ESMS) and has trained E&S staff that conducts E&S assessments and frequently engages IFC to discuss the E&S issues.

During appraisal IFC confirmed implementation of the ESMS and the risks of the Bank''s portfolio, which can be considered moderate, although a few sub-projects that can be potentially high-risk. As part of this investment, the Bank will be required to roll out the application of the Performance Standards to its corporate and project finance portfolio in addition to select projects under the EE credit line. IFC also reviewed Banco BHD''s labor policies, finding that they are generally consistent with IFC''s Performance Standard 2: Labor and Working Conditions.
The client will be required to continue implement the ESMS to ensure that its investments are in compliance with the applicable E&S requirements, adjusting its procedures to expand the applicability of the Performance Standards; to continue its commitment to applying the labor standards established by the IFC Performance Standard 2; and submit a periodic report to IFC.