CAO Audit of IFC Investments in Banco Financiera Comercial Hondureña S.A. (Ficohsa)

IFC FACT SHEET – August 11, 2014

 

En español

 

Why did IFC invest in Ficohsa?

 

  • Honduras is one of the world’s poorest countries. We invested in Ficohsa, a key financial institution, to expand access to finance for small and medium enterprises, promote job creation, and introduce environmental and social standards in private sector operations.
  • We have made several investments in the bank since 2008. The IFC Capitalization Fund made an equity investment in 2011 to build upon this vitally important development work.
  • As the CAO report notes, we did not pursue the 2011 equity investment to provide additional financing to Dinant.

 

What has IFC accomplished by investing in Ficohsa?

 

  • Small and medium enterprises account for nearly half of all jobs and economic output in Honduras. Yet nearly 58 percent of Honduran entrepreneurs say they’re unable to obtain the credit they need to grow. We are helping close that gap.
  • Since our initial investment in 2008, Ficohsa has disbursed more than US$360 million through 7,000 new loans to SMEs. We are committed to maintaining this important relationship.

 

 

What is IFC’s position on the CAO audit?

 

  • IFC Management has carefully reviewed the CAO’s compliance audit report regarding Ficohsa, and we take its findings very seriously.
  • We have drawn important lessons from the report and have already begun taking a number of steps to address these findings. We have provided a full management response.
  • We recognize that there was a failure of communication between members of our Ficohsa project team and others at IFC, which resulted in a lack of due consideration of the environmental and social risks in the bank’s portfolio.  We have since taken steps to address this.
  • IFC’s investments in Ficohsa between 2008 and 2011 adhered to our practices and procedures at that time. As the CAO report notes, IFC’s supervision of the Ficohsa investments has improved since 2012. Subsequently, IFC’s new Sustainability Framework took effect and our policies and practices have evolved.
  • Strong and effective accountability mechanisms have benefited IFC, our clients, affected stakeholders and the development community for over two decades. IFC’s Compliance Advisor Ombudsman (CAO) plays a critical role in ensuring accountability for development practitioners and for citizens.

 

 

Did the IFC investment in Ficohsa take into account the findings of the 2013 Audit on FIs?

 

  • The IFC Capitalization Fund's equity investment in Ficohsa in 2011 predates both the 2013 Audit and resulting Action Plan and the 2012 update to the IFC Sustainability Framework.
  • As the CAO report notes, IFC’s supervision of the Ficohsa investment has improved since 2012.

 


 

What actions has IFC taken so far?

 

  • We have already taken actions to address many of the report findings, including improvements in our approach to environmental and social management and flow of information.
  • We are on schedule with the implementation of an action plan to improve environmental and social (E&S) performance among clients that are financial institutions (FI), including boosting advisory services and engaging regularly with stakeholders.
  • We have increased our annual supervision requirements to cover more medium-risk clients, thereby providing a closer view of their E&S performance.  
  • Our supervision of FI clients that apply the Performance Standards now also includes a sample review of their sub-clients, to gain a better understanding of the implementation of E&S procedures.
  • IFC is also undergoing an internal reorganization that aims in large part to break down silos between units. Under this new structure, E&S risk will receive the same weight and attention as financial and credit risk.

 

 

What actions has Ficohsa taken?

 

  • We have made good progress in our work with Ficohsa to strengthen its E&S performance. For example:
    • Ficohsa’s Board of Directors approved an enhanced E&S risk-management policy in May 2014.
    • Ficohsa has expanded its dedicated E&S risk-management team, and its E&S procedures have been updated to incorporate the IFC Performance Standards.
    • By the end of this year, Ficohsa’s expanded E&S team will roll out training to the entire organization to ensure that the E&S risk-management system is integrated across its operations.
  • IFC is committed to working with Ficohsa to improve its E&S performance while expanding access to finance for Hondurans who need it most.