The Inter-American Development Bank (IDB) closed a $22 million syndicated loan with Banco Pichincha in Ecuador to help fund lending for housing and to support micro, small and medium enterprises (MSME’s).
Ecuador has been witnessing a significant increase in demand for finance in these sectors since 2008, after the IDB closed a six-year loan of $50 million (A Loan) from its own resources to support both housing and MSME’s. To cope with this market trend Banco Pichincha approached IDB in the fall of 2010 to add a syndicated loan (B Loan) involving private investors to the previous amount. In two months, the IDB raised $22 million for the loan, structured as a three-year bullet repayment, more than two times the original target of $10 million.
This deal is the first international syndication to an Ecuadorian financial institution in over a decade, and the largest international syndication with the longest tenor ever closed with a financial institution in Ecuador.
The operation is another example how the IDB is helping mobilize resources for non-traditional markets in the region. Earlier this month, the IDB closed Paraguay’s first ever internationally syndicated loan, by providing a $40 million B loan to Banco Continental to help fund lending to small and medium-sized business. In August, the IDB disbursed its first local currency syndicated B Loan in Peru.
“IDB has worked with almost 130 participants in our syndication program. We have been able to create a broad enough network to help our clients mobilize private sector capital for many types of deals in the region and in countries ranging from Ecuador and Paraguay to Brazil and Colombia,” said Jozef Henriquez, Chief of the Syndications Unit at the IDB. “While the international commercial markets alone may only focus on six or so countries in Latin America and the Caribbean, we see our role to help bring international capital to all of our 26 borrowing member countries.”
Micro enterprises in Ecuador are responsible for the income of more than one million Ecuadorians, or 25% of the country’s urban labor force. The ability to channel private sector proceeds to this area to help meet the customer’s demand and create positive impact in communities is a winning opportunity, according to Francisco Roig, Investment Officer at the IDB.
"This transaction will contribute to boost international confidence in the Ecuadorian financial system and its capacity to contribute to economic development", said Santiago Bayas, Banco Pichincha’s Vice President of Treasury.
The IDB acted as lead arranger in the Banco Pichincha’s syndication, which comprised of $10 million from Global Bank in Panama, $5 million from Dexia Micro-Credit Fund, managed by BlueOrchard, $5 million from Banco Aliado in Panama and $2 million from Panama’s Multibank.
“To reach the tenors and amounts Banco Pichincha was looking for, we knew we had to reach out to liquid institutions that know and understand the market in Ecuador,” said Syndication Officer Kristin Dacey. Targeting the right participants and Banco Pichincha being the largest bank in Ecuador with an AAA- local rating led to the oversubscription of the syndication, Dacey added.
The operation is aligned with the objectives the IDB beyondBanking program, which seeks to promote sustainable environmental, social and governance practices among financial intermediaries in the region, through financing, risk mitigation and knowledge sharing.
About Banco Pichincha
Founded in 1906, Banco Pichincha has established itself as the leading bank in Ecuador. BP is the largest bank in Ecuador with a market share in terms of assets as of December 31st, 2009 of 27.2%. Banco Pichincha has and continues to be a full-service bank that provides banking services to corporations, MSMEs, and the retail segment. The bank is keen on further diversifying its credit portfolio by providing housing financing to lower income clientele, a segment of the market that is currently underserved.
About IDB
The Inter-American Development Bank is the principal source of long-term financing for projects of economic development in Latin America and the Caribbean. Its Structured and Corporate Finance Department is responsible for projects without sovereign guaranties that include loans and partial credit guaranties for clients in both the private and public sectors.