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| Banco Popular |
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| 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 | 25236 |
| Company name | Banco Popular Covelo |
| Country | Honduras |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
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| Date SPI disclosed | December 11, 2006 |
| Projected board date | February 28, 2007 |
| Previous Events | Invested: January 31, 2008
Signed: December 7, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The project consists of an equity investment of up to $1.5 million to Popular Asociación y Préstamo (Popular). Popular is a savings and loans association active in the Honduran microfinance sector. The purpose of the project is to provide funding in the form of equity in order to assist Popular in its transformation to a commercial bank as well as to expand its micro lending operations. The Team will explore the possibility of a partial credit guarantee (PCG), whereby Honduran commercial banks would provide up to $4 million equivalent in Lempiras with an IFC PCG at a currently unspecified percentage. The local currency funding in Lempiras would be used to partially match the currency of Popular’s funding with its lending activities. This, in turn, would allow Popular to expand and enhance its services to low-income population in Honduras. In addition, IFC will consider providing technical assistance (TA) in order to support the institution in its transformation to a regulated microfinance bank. |
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| Project sponsor and major shareholders of project company |
| Popular was created in late 2004 when Grupo Microfinanciero Covelo (Grupo Covelo) purchased the dormant savings and loans institution called Metropolitana S.A. from Banco Continental S.A. (transfer without any assets or liabilities). The project is being supported by Acción International, which is coordinating investor contacts and also assuming the role of technical partner. |
| Total project cost and amount and nature of IFC's investment |
| The project consists of an equity investment of up to $1.5 million, and may also include a PCG of a loan(s) of up to $4 million, Lempiras equivalent, from Honduran commercial banks and a TA package of up to $300,000. |
| Location of project and description of site |
| Popular is based in Tegucigalpa, the capital of Honduras, with six branch offices located in Tegucigalpa and San Pedro Sula. |
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| Anticipated development impact of the project |
- Expand access to financial services in Honduras;
- Institution-building by helping Popular transform from a non-bank financial institution into a commercial bank;
- Promote sustainability of a microfinance institution by maintain high quality of portfolio;
- Strengthen the institution by providing funding in the form of capital and debt. |
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| IFC's expected development contribution |
The developmental impact of IFC’s investment in Popular is expected to be very high in terms of its economic support for productive microenterprises, stimulus for employment generation and deepening of the financial sector. Popular’s capital increase and transformation to a bank is expected to boost Popular’s credit and other financial services support for productive micro, small and medium enterprises. It is expected that Popular will be able to reach 22,000 clients through 17 branches in the principal centers of Honduras in the next five years.
The project aims to track the following development indicators:
- ROIC - Return on Invested Capital,
- EROIC – Economic Return on Invested Capital,
- Portfolio Size (number of loans and amount outstanding),
- Portfolio quality,
- Establishment and operation of environmental management system. |
| Environmental and social issues - Category FI |
This project involves IFC support for the business of microfinance, and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. Considering the nature of activities supported, the project will be required to:
- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, that ensures that all its investments are screened and processed to avoid supporting activities on the IFC Microfinance exclusion list;
- Identify qualified persons to manage and implement the procedure;
- Demonstrate commitment and resources to implementing the procedure, and take action to remedy any gaps in implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
Mr. Manuel Torres, General Manager
Popular Asociación y Préstamo
Complejo IPM, 4th Floor Bulevard Centroamérica Tegucigalpa, Honduras
Fax: 504-239-0451 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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