MICROCAPITAL STORY: International Finance Corporation (IFC) and Wachovia Capital Markets, LLC Co-Arrange USD 40 Million for Mibanco in First International Syndication in Latin American Microfinance

International Finance Corporation (IFC), a member of the World Bank Group, and Wachovia Capital Markets, LLC, a subsidiary of Wachovia Corporation, have co-arranged a USD 40 million syndicated financing agreement for Mibanco (Banco de la Microempresa S.A.), a leading private commercial microfinance bank in Peru. As the first international syndication for a microfinance institution in Latin America, this transaction will allow Mibanco to offer longer loan maturities to its clients, as well as reach more rural customers.

Originally structured as a USD 30 million loan, it attracted ten participant banks and was oversubscribed by USD 18 million. Lead share holders with USD 5 million include: Bancocolombia, HSBC, Natixis, Rabobank, State Bank of India and Wachovia Bank. Co-arrangers with USD 3 million shares include Israel Discount Bank, Republic Bank, and WGZ Bank. Minlam Asset Management, a microfinance fund also participated with USD 1.5 million.

Mibanco’s General Manager Rafael Llosa said that the financing will “allow [Mibanco] to continue diversifying our funding sources” and that it also “supports Mibanco’s strategy for expanding [its] microfinance portfolio”. Carlos Perez, Managing Director of the Americas for Wachovia’s Global Financial Institutions and Trade Division, and Ritva Laukkanen, IFC’s Director for Syndication and Resource Mobilization, both acknowledged that the transaction “represents a strong vote of confidence – in Mibanco and the region’s microfinance industry” and “reflects…the increasing interest in the international financial community to support microfinance”.

According to Microfinance Information eXchange (MIX), Mibanco was incorporated in Lima, Peru in 1998 by taking over the financial operations of the non-governmental organization Acción Comunitario del Perú (APC). Its funding partners include APC, ProFund International, Accion International, Banco de Crédito, Banco Wiese Sudameris, and the Andean Development Corporation. Operating out of twenty-five branches, Mibanco offers both savings and lending products. Its individual and solidarity group loans range in size from USD 100 to USD 100,000, with a term of three to six months and interest rates ranging from 25 to 50 percent.

Mibanco is Peru’s largest provider of microfinance loans by number of clients served (252,740 active and 1.9 million total as of June 2007) and second-largest in terms of loan volume (USD 382.7 million as of June 2007). As of September 30, 2007, it reported a 14.2 percent market share, total assets of over USD 512 million, and net worth of USD 59 million. Its main indicators reveal a debt-to-equity ratio of 643.4 percent, return on assets (ROA) of 4.1 percent, return on equity (ROE) of 35.2 percent, and portfolio at risk (PAR) of 2.52 percent. In June 2007, Mibanco received a rating of A by both Class and Asociados, S.A., a risk evaluator, and Pacific Credit Rating, a Latin American credit rating agency. Mibanco is currently led by Chairman Oscar Rivera Rivera.

IFC is a division of the World Bank Group that provides a variety of financial products and advisory services to businesses and governments, with the aim of promoting private sector development in developing countries. In 2007, IFC contributed USD 8.2 billion and mobilized an additional USD 3.9 billion for 299 investments in 69 developing countries. Its relationship with Mibanco began in 2001 with a five-year, USD 5 million loan that enabled the bank to expand outside the Lima area. In June 2006, IFC extended a second loan worth USD 29 million. A third round of financing was completed in April 2007 with a USD million subordinated loan. In June 2007, IFC became a shareholder of Mibanco with a 6.5 percent equity stake. IFC is led by CEO and Executive Vice President Lars Thunnel.

Wachovia Corporation was formed in 2001 with the merger of First Union Corporation and the former Wachovia Corporation. It is currently one of the largest diversified financial services companies in the United States with assets of USD 754.2 billion and stockholder’s equity of USD 70.2 billion. It has over 3,400 retail financial centers in 21 states and more than 40 international offices. Wachovia is currently led by President, Chairman, and CEO Ken Thompson.

By Mary Fu

Additional Resources:

WebWire: “IFC and Wachovia Co-Arrange Financing to Mibanco in Peru, Latin America’s First International Syndication for Microfinance”

Microfinance Information eXchange (MIX): Profile for Mibanco

Mibanco: Main Indicators

Mibanco: Board of Directors

International Finance Corporation (IFC): About

IFC: Executive Vice President

Wachovia Corporation: Company Facts

Wachovia Corporation: Company History

Wachovia: Officers and Directors