Banco Regional was established in 1991 by a group of Paraguayan entrepreneurs, with the purpose of promoting the development of the productive and industrial sectors in the department of Itapua. Soon after its constitution, the Bank expanded its activities to other locations in the department of Alto Parana and other productive regions near Asuncion. In January 2008, the Rabobank Group acquired a 40% stake in the Bank as part of the initiative of the Rabobank Development Program to support banks in developing countries through minority equity investments. In November 2009, Banco Regional completed the merger with the Paraguayan subsidiary of ABN AMRO Bank, becoming the largest player in the local financial system in terms of assets. The Bank has been an IFC client since June 2008, when it joined IFC’s Global Trade Finance Program.

The Project consists of a 5-year Guarani-denominated A-Loan for an equivalent of up to $15 million to Banco Regional. The Project will enhance access to finance for SMEs with a marked presence in the domestic market (a key driver of the economic activity in Paraguay), and will enable IFC to consolidate and foster its programmatic approach in the local financial sector initiated by the end of 2007, by reaching to relevant productive sectors which couldn’t be served due to the former structural barrier to lend in local currency. In addition, the Project will enable IFC to gradually enter into a relevant but yet unexplored segment such as the Paraguayan housing finance sector.

15.0 million (USD)

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

* These investment figures are indicative

Banco Regional´s headquarters are based in Encarnación, Paraguay. The Bank owns 39 branches located across the Paraguayan territory.

The Project is expected to have a high development impact as it will help an IFC client to bolster its financial services and products to Paraguayan companies and individuals, supporting economic activity and job creation in Paraguay. On an institutional level, by providing access to longer-term local currency financig, IFC will help Banco Regional to introduce new products in the financial system limiting foreign currency risk. On a sector level, the introduction of longer-term financing in the market will supply more options to SME's and individual borrowers, therefore generating a range of social and economic benefits which include promoting economic growth and raising productivity, as well as increasing banking penetration in rural areas. The anticipated development impacts of the Project are to: - Enhance access to finance for SMEs. The Project will allow the Bank to provide its clients access to funding in Guaranies with longer maturities, enabling them to undertake investment projects with more appropriate financing structures; - Generate a demonstration effect. The Project is expected to create a demonstration effect for other banks and further enhance IFC's developmental impact in Paraguay; and - Assist in the deepening of Paraguay's financial sector by increasing access to finance for low-income groups and other priority sectors such as affordable housing.

IFC's additionality would arise as a consequence of the following factors: - Provide long-term financing to assist a systemic and well managed locally-owned bank and strategic partner of IFC to achieve its growth objectives within the constraints of the global financial crisis, while concurrently improving the Bank's reach to underserved market segments such as SMEs and affordable housing; - IFC's investment in Banco Regional will play a significant role in supporting the Bank's expansion by enabling longer-term financing to foster portfolio growth, and fund longer tenor products such as mortgages. Specifically, IFC's additionality to the Project is delivered in the form of the ability to provide local currency financing through IFC's recent swap arrangement with the BCP. - IFC will continue to promote the development of Paraguay's financial sector in an innovative manner, by promoting local-currency lending and therefore maximizing the use of its limited resources. The Project will constitute IFC's first-ever debt investment in local currency done in Paraguay. This will consolidate the demonstration effect initiated with the prior long-term debt investments in U.S. dollars, sending a positive signal to the market regarding Paraguayan risk and thereby enhancing investor confidence in the Country.

This Project has been classified as Category FI according to IFC’s E&S review procedure. Under the existing project with Banco Regional - #29679, the Bank was required to upgrade its Environmental and Social Management System (ESMS) to ensure compliance of all applicable operations with the IFC Exclusion List, the Paraguayan E&S laws and regulations, and to develop specific criteria for the financing of agribusiness companies. In addition, the client agreed to implement a grievance policy and mechanism. The same requirements would apply to this new project and implementation of existing requirements will be a condition of commitment. The client will be required to: (i) finalize implementation of its ESMS and ensure its continuous operation; (ii) submit a periodic report to IFC; and (iii) implement the grievance mechanism and maintain compliance with the IFC Performance Standard 2: Labor and Working Conditions.