San Salvador, El Salvador, June 16,
2010—IFC, a member of the World Bank Group, will provide up to $30
million of debt financing to Fedecredito using an innovative funding approach
that leverages the significant remittances of El Salvadorans working abroad
to increase lending to microentrepreneurs and low-income people in the
This will be the first funding backed
by future remittance flows undertaken anywhere by a financial intermediary
focused on low-income clients. Fedecredito is a cooperative owned
by 55 El Salvadoran credit unions and workers banks that mobilize savings
deposits from 600,000 low-income member owners, who represent close to
one-quarter of El Salvador’s workforce. In addition to raising wholesale
funding for these credit unions and workers banks, Fedecredito also processes
remittances for them.
With IFC’s financing, Fedecredito will
grow its credit portfolio by up to 25 percent and expand its reach in areas
not served adequately by banks. It also will be able to use the transaction’s
funding platform backed by remittances it processes to obtain additional,
attractively priced, long-term, secured funding from other investors in
the future. This is expected to maximize the development impact of
the considerable remittance flows from abroad into El Salvador.
“With approximately 2.5 million Salvadorans
working in the United States, remittances make an important contribution
to El Salvador’s economy and can represent the basis for financial intermediaries
like Fedecredito to access favorably priced international finance,” said
Macario Armando Rosales, President of Fedecredito. “With IFC’s
support, we have established a platform to harness this resource, and expand
its lending capacity in El Salvador.”
“Our partnership with Fedecredito
represents the first financing arranged by IFC in Latin America for a financial
intermediary with cooperative ownership,” said Giri Jadeja, IFC
Senior Manager for Financial Markets in Latin America and the Caribbean.
“Fedecredito’s ability to sustainably mobilize funding will help
ensure credit access to otherwise underserved, low-income households and
microenterprises in El Salvador. Given its development impact, we hope
to replicate this transaction’s remittance-secured funding structure in
IFC’s strategy in El Salvador integrates
investment products and advisory services. It focuses on strengthening
access to finance for underserved populations, supporting local companies
with expansion plans, developing public-private partnerships in key infrastructure
projects, and promoting renewable energy development.
IFC, a member of the World Bank Group,
creates opportunity for people to escape poverty and improve their lives.
We foster sustainable economic growth in developing countries by supporting
private sector development, mobilizing capital for private enterprise,
and providing advisory and risk mitigation services to businesses and governments.
Our new investments totaled $14.5 billion in fiscal 2009, helping channel
capital into developing countries during the financial crisis. For more
information, visit www.ifc.org.
Established over 60 years ago, Fedecredito
is a cooperative owned by 55 El Salvadoran credit unions and workers banks
located throughout the country. These entities mobilize savings from 600,000
individual member-owners. In turn, they profitably provide credit
and other financial services/products to their individual member-owners
and microenterprises. One of Fedecredito’s main functions is to complement
deposit funding at these credit unions and workers banks to increase the
amount of financing made available to their individual member-owners and
microenterprises. For more information, visit: www.fedecredito.com.sv.