MICROCAPITAL STORY: Venezuelan Government Bank BANDES To Open Branch in Angola

Jesus Alberto Garcia, Venezuelan ambassador to Angola, stated in an interview with Radio Nacional de Angola that Banco de Desarrollo Económico y Social de Venezuela (BANDES), the state development bank of Venezuela, will open a branch in Angola. He added, “This is one of the main things President Chavez wants to do with Africa.” Branches of BANDES outside of Latin America and the Caribbean include Syria and the Republic of Mali. Mr. Garcia expects that the Angola branch may be open by next year. In 2005, BANDES became an independently managed institution under the supervision of the government’s Ministry of the People’s Empowerment in Economics and Finance and is currently 75 percent government owned. BANDES provides microcredit and funds development projects in Venezuela as well as abroad.

The MIX, the internet microfinance database, lists two microfinance institutions (MFIs) in Angola, NovoBanco and KixiCredito, Angola’s first commercial microfinance organization. As of 2007, these MFIs cumulatively serve 11,056 borrowers and maintain a cumulative gross loan portfolio of USD 11.7 million. The CIA World Factbook reports Angola’s Gross Domestic Product (GDP) as USD 110.3 billion in 2008. The real GDP growth rate was 13.2 percent and the GDP per capita, about USD 8,800. The commercial bank prime lending rate was 17.7 percent at the end of 2007. Oil production accounts for 85 percent of Angola’s GDP. The Angolan government has used a USD 9 billion line of credit from China to build public infrastructure and has also been extended lines of credit from Brazil and the EU. Half of the country’s food is imported although 85 percent of the labor force works in agriculture. MicroCapital has reported on a USD 32 million allocation by the United Nations Development Fund (UNDF) to various Angolan economic development organizations in April 2008.

According to a balance sheet from November 2008, BANDES holds a gross loan portfolio of USD 1.13 billion. Total assets were listed as USD 8.5 billion and total liabilities as USD 4.15 billion. Between July and November 2008, BANDES reported a net income of USD 2.1 million. The decree that established BANDES lists several guidelines for financial practices regardless of the size and growth of the bank. Under these parameters, BANDES is not permitted to lend more than 10 percent of its assets to any individual borrower. BANDES is also not permitted to own any building for more than three years and must not hold a stake greater than 20 percent of its assets in any company or venture capital fund. BANDES does not report to the MIX.

Internationally, BANDES provides funding for social projects as well as consulting services, technical assistance, exports, and humanitarian aid. Descriptions for a few individual international projects are available on BANDES’ website. These include the conversion of a court house into a community center in Jamaica and the construction of a stadium in the Dominican Republic. In 2008, Venezuela Analysis reported that BANDES would provide USD 60 million in funding for existing projects in each Cuba and Uruguay. Existing projects in the Dominican Republic would receive USD 15.8 million while new projects in the country would receive USD 45.8 million. Investments in 2008 were projected to include USD 7.9 million in Jamaica and USD 13.9 million in Haiti. Loans were to include USD 5.5 million in Nicaragua, USD 2.9 million in El Salvador, USD 2.9 million in Antigua Island, and USD 2.2 million in Barbados. In March 2006, BANDES purchased COFAC, an Uruguayan credit cooperative, for USD 10 million and recapitalized it with an additional USD 10 million.In May 2008, BANDES acquired 94 percent of the Bolivian microfinance bank Prodem. In 2005, BANDES established an international cooperation fund (FACI) through which the bank could grant loans for up to 35 years to countries based on their Human Development Index. Through FACI, BANDES loaned USD 70 million to an electrification project in Havana, Cuba.

Domestically, BANDES charges an interest rate between 5 percent and 9 percent depending on whether the receiving party is a social entity, a partnership, or a private party. Private parties command the highest interest rate. Borrowers in the industrial sector and the service industry are granted loans up to USD 466,000. Borrowers from the tourism sector are granted loans up to USD 117,000 and from agriculture, up to USD 234,000. All loans are for a duration of 10 years and require a guarantee to loan ratio of 1.3:1. Personal input from the borrower ranges from 10 percent for social entities to 20 percent from private parties. BANDES requires that the loan be used for a social benefit, whether it be training programs for workers, environmental conservation, facilities for the elderly, or promotion of microenterprises. Local governments are also eligible to apply for loans.

Additional Resources:

“Venezuela Plans to Open Micro Bank in Angola”, Published by Reuters, May 2009
Banco de Desarrollo Economico y Social de Venezuela (BANDES) (in Spanish)
BANDES: International Finance (in Spanish)
BANDES: November 2008 Balance Sheet (in Spanish)
“Decreto Con Rango, Valor, y Fuerza de Ley del Banco de Desarrollo Economico y Social de Venezuela (BANDES)”, Published by Venezuelan government (in Spanish)
BANDES: National Finance (in Spanish)
“The Bandes de Venezuela Buys a Bank in Bolivia”, Published by Conapri.Org, May 2008
“BANDES Bank to Finance Havana Electricity System”, Published by Havana Journal, June 2005
“Venezuelan Social Development Bank to Increase Foreign Loans and Credits”, by James Suggett, Published by VenezuelaAnalysis.Com, March 2008
“Venezuela Bank “Bandes” to Expands in Latin America; Branch in Haiti”, Published by AP, September 2006
MIX Market: Angola
CIA World Factbook: Angola
“The United Nations Development Programme (UNDP) in Angola Allocates $32m for Economic Growth Programs Which will Include Microfinance Activities and Economic Training for the Youth to be Implemented in Partnership with Banco Nacional de Angola, Chevron Corporation, and Development Workshop Angola”, by Anthony Busch, Published by MicroCapital, April 2008