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| Continental EQ |
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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 | 27828 |
| Company name | Banco Continental S.A.E.C.A. |
| Country | Paraguay |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
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| Date SPI disclosed | January 7, 2009 |
| Projected board date | February 20, 2009 |
| Previous Events | Approved: March 23, 2009 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The proposed project will consist of an IFC investment of up to $20 million in ordinary common shares, another convertible instrument or a combination thereof.
The primary objective of the project is to develop a long-term partnership with a fully locally-owned existing client, while providing support to a key local player to further expand the access to financial services to those segments that remain highly underserved by other financial institutions, such as SMEs. In addition, in the presence of the existing market dynamics, IFC’s investment constitutes one of the very limited viable alternatives to strengthen the capital base of the largest locally-owned bank of Paraguay, which will contribute to improve the risk profile of the Bank, eventually deriving in a better risk rating and overall lower funding cost. |
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| Project sponsor and major shareholders of project company |
Banco Continental is a bank currently focused on offering (i) commercial lending products and services to SMEs and corporates, and (ii) consumer finance. The Bank leverages its customers and its extensive network of branches to position itself as a leading institution in the Paraguayan financial system. To this end, the Bank targets all the main productive sectors that contribute to the GDP growth of Paraguay, focusing in all segments.
The Bank achieved a significant increase in both its loan portfolio and its deposits over the past years, outperforming the average growth of the whole Paraguayan banking system. As of September 2008, Banco Continental’s total assets, liabilities, and shareholders’ equity amounted to $822.1 million, $731.1 million, and $91.0 million respectively. |
| Total project cost and amount and nature of IFC's investment |
| The proposed project will be an investment of up to $20 million in ordinary common shares, another convertible instrument, or a combination thereof. |
| Location of project and description of site |
| Headquartered in Asunción, capital city of Paraguay, Banco Continental currently operates an extended network of 28 branches across the country. |
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| Anticipated development impact of the project |
- Support the development of the banking market.
IFC’s support to Banco Continental will contribute to foster its engagement with the Paraguayan financial system, at a time when local banks are facing increasing concerns on the verge of the global financial crisis.
- Enhance access to finance for unattended and priority sectors.
The Project will allow Banco Continental to provide its SME client base access to funding with longer maturities both in local currency and US$ enabling these to undertake capital investments at longer tenors and attractive costs. By partnering with Banco Continental IFC can leverage on national coverage to efficiently reach those segments of the population with limited access to financial services, therefore improving the living standards of these sectors.
- Support the growth of Banco Continental.
IFC will be supporting the growth of a well run local bank, which would like to play an increasingly active role in providing longer-term funding to those productive sectors of Paraguay which constitute a key driver of the economic growth of the country. |
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| IFC's expected development contribution |
In a very important counter-cyclical role, through this project IFC will be able to fill a funding void due to the tightening of capital markets in emerging countries, including Paraguay. Unavailability of long-term and diversified sources of funding has traditionally been one of the critical issues in the Paraguayan financial system, and has been recently magnified by the current financial turmoil, therefore limiting access to finance to several underserved segments.
Through its Board member, IFC will be able to directly support and advise Banco Continental in the definition and implementation of the strategic plan of the Bank to serve highly priority segments for IFC such as SMEs. IFC can assist the Bank with implementing best practices, including such areas as risk management and benchmarking. In addition, a significant IFC stake in the Bank would both convey a positive message to the markets and allow IFC to exercise its influence in promoting international standards in corporate governance and best practices. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
During appraisal, IFC analyzed the FI portfolio for types of transactions, size, tenor and industry sectors and determined the Applicable Performance Requirements based on an analysis of the potential Social and Environmental risks associated with the FI portfolio. The Applicable Performance Requirements are:
- The IFC FI and/or Microfinance Exclusion Lists and/or
- The applicable National Social and Environmental Laws and regulations and/or
- The IFC Performance Standards
IFC also appraised the FI’s labor practices and reviewed the FI’s existing Social & Environmental Management System (SEMS), and FI capacity to implement the same. It was found that the FI does not have an SEMS and has limited capacity to implement the same. This will be included as a Supplemental Action.
The FI has satisfactorily informed the IFC regarding its labor and working conditions.
Based on the Applicable Performance Requirements and FI SEMS and capacity review, the project will be required to:
- Develop a Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC
- Identify responsible, qualified persons to manage and implement the SEMS
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements
- 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. Oscar Diesel, Director
Banco Continental
Estrella 621 c/ 15 de Agosto
Asunción, Paraguay
Tel: (59 521) 442-352 |
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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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