IFC’s First Remittance-secured Financing Enables Credit for El Salvador’s Microe...

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Jun 2010
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 country.

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 other countries.”

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.

Source : IFC News
 

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