Grupo Mundial EQ II

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	27015
Company name	Grupo Mundial
Country	Panama
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Pending Approval

Date SPI disclosed	March 20, 2008
Projected board date	April 21, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Grupo Mundial Tenedora S.A. (Grupo Mundial or the Group) is a financial conglomerate with insurance and banking operations throughout Central America (including Panama, Guatemala, El Salvador, Nicaragua and Honduras) and Colombia. The Group’s main subsidiaries are Aseguradora Mundial S.A. (Aseguradora Mundial) and Banco Panameño de la Vivienda S.A. (Banvivienda).

The proposed project is a supplementary contribution to project number 26035 (approved by the Board on July 16, 2007 – IFCR/2007-0215) and consists of:

- a subscription of additional common shares of Grupo Mundial for up to $15 million equivalent; and
- a direct equity investment into the Group’s microfinance subsidiary, Microserfin, for up to $600,000 equivalent.

Anticipated development impact of the project

The current project is a natural next step of this long-term partnership between IFC and Grupo Mundial, as justified by the following factors:

- Strong Alignment with IFC’s Priority Sectors:

In addition to its original focus on insurance, the Group has proven its commitment to align with other IFC’s priority sectors, including:

- microfinance, through the recent purchase of Microserfin;
- microinsurance; and
- expansion into frontier countries, through the recent purchase of insurance companies in Nicaragua and Honduras.

In all these initiatives, the Group has sought IFC’s support and advice.

- Recent Changes in the Competitive Landscape:

As new banking conglomerates consolidate into the region, the business environment is gradually becoming more “efficient” and a clear definition of strategy, target markets and action plans are critical to increase the chances of success for a locally-owned entity like Grupo Mundial. Therefore, an increased IFC shareholding is decisive to leverage on previous experiences and exercise the necessary influence to support the Group’s continued growth.

IFC's expected development contribution

IFC’s additionality in this project is critical and represented by the following key features:

- Commitment to support Grupo Mundial’s strategy to downscale operations to serve the poorer and expand to frontier markets;
- Institutional building;
- Provision of long-term capital; and
- Regional knowledge and experience.

Environmental and social issues - Category FI

This project involves IFC support for the business of insurance and microfinance and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. For the microfinance operations, Grupo Mundial and/or Microserfin will be required to:

- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the Microfinance Exclusion List;
- Identify qualified persons to manage and implement the procedure;
- Commit to establish a similar screening process to avoid supporting activities on the IFC Microfinance Exclusion List in MFIs in which it will take a controlling stake;
- Demonstrate commitment and resources to implementing the procedure;
- Submit a periodic report to IFC as per a format to be provided by IFC.

The investment in the common shares of Grupo Mundial will not trigger the above requirements. However, Grupo Mundial is required to inform IFC in the event of any change in nature or scope of its present or contemplated business or operations.

IFC PROJECTS