MICROCAPITAL.ORG STORY: International Finance Corporation (IFC) Invests $1.2m in Paraguay's Financiera El Comercio

In June 2008, the International Finance Corporation (IFC) announced a proposed investment in Financiera El Comercio, a Paraguayan microfinance institution (MFI) [1]. On August 12, 2009 the proposal was approved and the IFC declared an investment of USD 1.2 million in the MFI. The investment is part of the IFC’s plan to protect and support MFIs in the wake of the economic crisis [2]. Details about the approved investment have yet to be disclosed, however the proposed investment projected a 12% equity investment in Financiera El Comercio. According to the proposal, the purpose of the investment is to help ensure the MFI’s sustainability and to provide capital support for its future growth [1].

According to Enrique Cañas, IFC Country Manager of the Southern Cone (Argentina, Chile, Paraguay, and Uruguay) and Bolivia, this is the first transaction by the IFC in the Southern Cone. Cañas says this investment reflects the IFC’s commitment to Paraguay and its economic development [2]. In September 2008, Financiera El Comercio received a loan of USD 1 million from the Inter-American Investment Corporation for medium-term financing in the areas of permanent working capital, equipment purchases and the like. The Inter-American Investment Corporation is a financial institution established to “promote and support the development of the private sector and the capital markets in its Latin American and Caribbean member countries” [3].

In a case study presented at the International Conference for Best Practices, Carlos Heisecke Rivarola, staff member of Financiera El Comercio, says “the whole active portfolio of Financiera El Comercio is financed by seizure of deposits and credit lines with market interests that are directed to micro-businesses, i.e., BID funds, the Industrial Development Fund, and the Spanish Cooperation.” That is to say, according to Rivarola, the MFI does not finance its portfolio with donor credits [4].

Financiera El Comercio SAECA is an MFI based in Paraguay, providing financial services such as credits, loans and mortgages primarily for small-sized rural and agricultural businesses [1]. The MFI was founded on January 1, 1976 but it was only after its merger with EFISA Financiera in December 1999 that it began focusing its attention to rural microfinance [5]. The MFI has upwards of 73, 000 customers, operating through 46 branches, 36 of which are located in rural areas.

According to the MIX Market, the microfinance information clearinghouse, as of 2008 Financiera El Comercio had a gross loan portfolio of USD 55,375,772 and approximately 58, 323 active borrowers. The average loan per borrower is USD 949 and the number of outstanding loans is approximately 63, 995. The MFI has an ROA of 8.30%, an ROE of 51.56% and a debt to equity ratio of 5.49 [6]. As of December 31, 2008, the Company held interests in Bancard SA, Pronet SA and Sistemas y Gestiones SA [7]. For more information, please visit http://www.mixmarket.org/mfi/fielco, or the company’s website at http://www.elcomercio.com.py/memoria_2004.html.

The International Finance Corporation was established in 1956 and is currently a member of the World Bank Group. The company was established to “foster sustainable economic growth in developing countries.” As of 2008, it has a net worth of USD 18.3 billion [5]. For MicroCapital’s detailed coverage on the IFC, please visit https://www.microcapital.org/?s=IFC&x=0&y=0&PHPSESSID=157aa4774840d7cb61166adb93c1ebc5

By: Diya Chopra, Research Associate

Bibliography:

[1] International Finance Corporation

http://www.ifc.org/ifcext/spiwebsite1.nsf/1ca07340e47a35cd85256efb00700cee/F7559065C6625CD085257467005712FB

[2] Microfinance Focus

http://www.microfinancefocus.com/news/?p=816

[3] Inter-American Investment Corporation

http://www.iic.int/newsrelease/view.asp?id=604

[4] Paving the Way Forward for Rural Finance: An International Conference on Best Practices

http://www.basis.wisc.edu/live/rfc/cs_04c.pdf

[5] International Finance Corporation

http://www.ifc.org/ifcext/lac.nsf/Content/SelectedPR?OpenDocument&UNID=0B4CEC9673B7F03985257616005045BC