IFC Works With Partner Banks To Reach More SMEs, Students
Washington, D.C., March 24, 2010— IFC is increasing access to local currency finance for small and medium enterprises (SMEs) in health and education and supporting student loan programs by expanding its ‘wholesaling’ or joint venture strategy with partner banks in developing countries.
As the largest multilateral investor in private health care and education in emerging markets, IFC aims to support the growth of both sectors in developing countries in a sustainable and socially responsible way that helps improve the lives of people, many of whom do not have access to basic health care or education services.
IFC’s ‘wholesaling’ strategy enables the Corporation to reach lower-income countries and frontier regions of middle-income countries, and increase access to finance for SME providers serving ‘Base of the Pyramid’ populations. IFC’s Health and Education and Global Financial Markets Departments work closely to develop ‘wholesaling’ products. By Financial Year 2013, such investments are expected to reach $420 million.
IFC also works with local banks to design attractive and affordable student loan products that are commercially viable and sustainable. The aim is to build capacity in local banks by introducing risk sharing instruments to increase the ability of students, including those from lower- and middle-income backgrounds who are unable to pay tuition fees, to receive long-term loans for higher education. Education providers who benefit from these programs can also reach a wider segment of the population.
“With the help of partner banks or financial intermediaries, IFC is expanding its reach to SMEs and students, thereby increasing access to services,” noted Guy Ellena, Director, Health and Education, IFC. “These transactions also complement IFC’s strategic relationships with the banks and give us the opportunity to design innovative products for our clients.”
Recent Examples of ‘Wholesaling’
Banca Transilvania, Romania
In October 2009, IFC committed a €50 million loan to Romania’s Banca Transilvania to expand financing for private health care providers in Romania, thereby helping increase access to quality medical care. Through this financing, IFC is helping Romanian health care entrepreneurs start, expand, or modernize their operations. Banca Transilvania is among the country’s top banks with majority Romanian capital and the first Romanian bank to be listed on the Bucharest Stock Exchange in 1997. Its four main business lines are retail, SMEs, corporate financing, and health care. For more information, visit www.bancatransilvania.ro.
Banco Industrial e Comercial S.A. (Bicbanco), Brazil
In November 2009, IFC signed a $25 million local currency financing agreement with Brazil’s Banco Industrial e Comercial S.A. to support its lending to SME providers of health and education services. Known as Bicbanco, the financial institution is among Brazil’s leading midsize banks with one of the country’s largest health and education loan portfolios. IFC’s financing helps Bicbanco reach a broader range of SMEs, including those located in remote areas of the country. One of Brazil’s oldest private banks, Bicbanco is a leading provider of SME funding in Brazil. Its main products are working capital, secured loans, trade finance, and public employee loans. For more information, visit www.bicbanco.com.br.
Earlier ‘Wholesaling’ Projects
Africa Schools Program (Ghana, Kenya, Rwanda):
In June 2005, IFC worked with Ghana’s The Trust Bank Limited (TTB) to set up a $2.1 million risk sharing facility disbursed in local currency to support lending to private schools to finance construction and purchase educational materials. IFC also provided advisory services to help TTB better process and monitor loans and for schools to strengthen their financial and managerial capacities. The demand resulted in a repeat investment in May 2007 which increased IFC’s risk participation to 47.5 percent of a total portfolio of 6.6 million in local currency terms, or $4.6 million currently. So far, TTB has disbursed the equivalent of $3.7 million to 25 schools with 53 additional schools participating in training programs; the schools have a combined enrollment of over 32,000 students.
In December 2006, IFC’s unique approach in Ghana was replicated in Kenya with Kenya’sK-Rep Bank. IFC provided K-Rep Bank with a risk sharing facility, leveraging up to 120 million Kenya shillings (about $1.7 million) on loans extended to eligible private schools, including low-income schools. So far, 23 schools have accessed more than $300,000 in loans; an additional 113 schools benefited from training programs; the Kenyan schools have a total enrollment of about 31,000.
In May 2008, the model was replicated in Rwanda. IFC partnered with Rwanda’s Banque Rwandaise de Développementto invest up to 2.6 billion Rwanda francs ($4.8 million) in a risk-sharing facility that leverages $12.3 million in local currency financing. Comprehensive advisory services were provided. So far, 31 schools have accessed $7.1 million in loans; 66 schools have benefited from advisory services; the schools have a total enrollment of 34,000.
Student Loans – DuocUC, Chile
In October 2007, IFC partnered with DuocUC, a higher education institution in Chile, and Banco de Crédito e Inversiones (BCI) to establish Chile’s first private financing program targeting low-income students with the aim of helping about 15,000 students finance their post-secondary education with long-term competitive loans. By focusing on students from underprivileged backgrounds, the program sought to address an important social need, while providing a means for higher education and better employment opportunities. Another objective was to boost the number of qualified professionals entering the labor market, a government priority. Students enrolled in the program are able to cover the full cost of tuition and are offered an attractive interest rate, with repayment terms of up to seven years after graduation. Risks are shared between DuocUC, BCI, and IFC. So far, loans have been extended to about 2,500 students.
Facts about IFC’s Activities in Health and Education
As of January 2010, IFC provided more than $1 billion in financing to 83 private health care projects in 33 developing countries. The projects had a total value of $3.5 billion. IFC has mobilized an additional $86 million from participant banks for its health investments. Twenty-two IFC health projects (27 percent) are in the world’s poorest countries.
IFC-supported health care facilities treat about 5.5 million patients annually.
IFC health projects employ about 36,000 people in emerging markets.
As of January 2010, IFC had committed $469 million in financing to 62 education projects in 30 countries at a total value of $1.54 billion. Twenty-one IFC education projects (35 percent) were in the world’s poorest countries.
IFC-supported projects educate about one million students annually.
IFC-supported education projects employ about 16,000 people in developing countries.
Senior Communications Officer
Health & Education Department, IFC