MICROCAPITAL STORY: The International Finance Corporation (IFC) to Acquire Equity Stake in Chilean Factoring and Lending Company, Factorline

The International Finance Corporation (IFC), a member of the World Bank Group, has announced its intentions to acquire an equity stake in Factorline, the largest non-bank controlled factoring and lending firm in Chile. The IFC plans to invest up to USD 15 million to obtain an 18 percent stake in the Chilean company. This investment, along with a 2.2 billion peso (USD 4.28 million) increase in capital resulting from current shareholder activity, is expected to raise Factorline’s capital base to approximately USD 46 million by the end of September.

The Santiago-based company was founded in 1993. As of 2005, Factorline was the fifth largest factoring company in Chile by overall volume of factoring operations and the largest factoring company in Chile by volume of international factoring. It has a 3,000-customer base, total assets of USD 200 million, and an average ROE of over 30 percent for three years running. The company is also a member of Factors Chain International, the largest chain of banking and factoring companies in the world, with more than 160 members in 64 countries.

According to Factorline chairman Jorge Sabag, the company anticipates 18 percent loan growth to USD 1 billion in 2007. The company mainly targets small and medium enterprises (SMEs), businesses which are typically overlooked by traditional financial institutions. Sabag estimates that there are 90,000 potential SME customers in Chile, and, thus, “[T]here is a lot of room to grow,” he says. Besides expanding the number of SME customers and the scope of financial services offered to this clientele, Factorline will also be looking to increase its consumer and car loan businesses and to enter the microloan sector in the upcoming year.

The IFC’s initial investment in Factorline was a USD 5 million senior loan in 2005. Over the last five years, IFC has committed a total of USD 410 million in Chile, primarily in infrastructure and education projects. The IFC, established in 1956, is a financially independent member of the World Bank Group which seeks to promote sustainable private sector development in developing countries. In 2006, Moody’s Investor Services, a private company that performs financial research on commercial and government institutions, evaluated the IFC and gave it a rating of Aaa, which suggests the highest quality investment grade, with minimal credit risk. That year, the IFC’s assets totaled USD 28.49 billion, its return on assets (ROA) was 4.33 percent, and its return on equity (ROE) was 11.23 percent.

By Elizabeth Nelson, Research Assistant

Additional Resources:

International Finance Corporation (IFC) Press Release: “IFC Investment in Factorline Helps Expand Lending to Chile’s Underserved Small and Medium Enterprises”

TMC.net: “Factorline expects 18% loan growth this year”

International Finance Corporation (IFC)

International Finance Corporation (IFC): Summary of Project Information

World Bank Group

Factorline

Factors Chain International

MicroCapital.org article, September 17, 2007: “International Finance Corporation (IFC) and Blue Financial Services Group to Integrate HIV/AIDS Prevention with Microfinance”

Moody’s Investor Services

Moody’s Investor Services: Credit Opinion: International Finance Corporation

Similar Posts: