The International Finance Corporation (IFC), a member of the World Bank Group, will provide USD 30 million of debt financing to Fedecredito, a Salvadoran financial cooperative owned by 55 financial institutions, which will be guaranteed by future cash flows of remittances sent by Salvadorans working abroad to family and friends at home. The precise nature of the guarantee arrangement is not specified.
“Our partnership with Fedecredito represents the first financing arranged by IFC in Latin America for a financial intermediary with cooperative ownership,” said Giri Jadeja, IFC Senior Manager for Financial Markets in Latin America and the Caribbean. “Fedecredito’s ability to sustainably mobilize funding will help ensure credit access to otherwise underserved, low-income households and microenterprises in El Salvador. Given its development impact, we hope to replicate this transaction’s remittance-secured funding structure in other countries.” [1]
With this financing, Fedecredito expects to increase its credit portfolio by up to 25 percent. As of December 31, 2008, Fedecredito’s gross loan portfolio was USD 564.9 million and total deposits were USD 250.7 million.
By Jennifer Shevock, Research Associate
About International Finance Corporation:
A member of the World Bank Group, the International Finance Corporation (IFC) uses loan and debt securities, equity investments and guarantees with the intent of alleviating poverty. It invests in financial institutions and other companies in emerging markets as well as providing technical assistance. The IFC has 182 member countries that collectively determine its policies and approve investments. In fiscal year 2009, its new investments totaled USD 14.5 billion.
About Fedecredito:
Fedecredito is a cooperative owned by 55 Salvadoran credit unions and workers’ banks. It provides credit and other financial services to its individual member-owners and microenterprises by leveraging deposits at these credit unions and workers’ banks to increase the amount of financing made available to its members. As of December 31, 2008, its gross loan portfolio was USD 564.9 million and total deposits were USD 250.7 million.
Sources and Additional Resources:
[1] IFC Press Release: “IFC’s First Remittance-secured Financing Enables Credit for El Salvador’s Microenterprises, Lower-income People” June 16, 2010. http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=7703082F1497FBD385257744005CA5F8
“Remittances in Development” December 2009. http://www.imf.org/external/pubs/ft/fandd/2009/12/ratha.htm
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