The International Finance Corporation (IFC) is breaking new ground with a five-year Colombian peso loan of Ps20.7bn (US$9mn) to Fundacion WWB Colombia, one of Latin America’s leading microfinance institutions, serving more than 110,000 micro entrepreneurs.
The transaction is IFC’s first financing to a microfinance entity in Colombia. It consists of a local currency debt financing that will help Fundacion WWB Colombia provide an additional 25,000 loans to low-income clients during the next five years.
Jyrki Koskelo, IFC’s global financial markets director, says, “Fundacion WWB Colombia combines extraordinary outreach to poor micro entrepreneurs with exceptional financial results, making it an ideal candidate for IFC financing and long-term partnership.”
Clara de Akerman, founder and president of FWWB Colombia, underlines the importance of the transaction. “Our clients have revenues and expenses in Colombian pesos, and therefore need loans in the same currency,” de Akerman says. “IFC’s financing allows us to serve our clients, expand our portfolio and, by virtue of carrying a fixed interest rate, improve risk management.”
To provide the local currency financing, IFC – backed by its AAA rating – will enter into currency swap transactions with financial institutions present in the Colombian market.
After several years of strong growth, FWWB Colombia serves more than 120,000 micro entrepreneurs – many of whom live at or below the country’s poverty line – with working capital loans and other essential financial services.
Loans average Ps$1.77mn (US$779) and typically represent the client’s first relationship with a financial service provider. As of January 31, 2006, FWWB Colombia’s loan portfolio was Ps$233.1bn (US$103mn), with 131,827 loans outstanding. Two thirds of FWWB Colombia’s clients are women, an important factor underpinning the organisation’s success, as women tend to have better repayment records than men.
FWWB Colombia, based in Cali, is a non-profit foundation affiliated with the Women’s World Banking Network, a global group of 24 microfinance institutions in 19 countries.
IFC’s total portfolio in Colombia was US$280mn as of June 2005.Since Colombia joined IFC in 1956, the corporation has provided US$1.4bn, including syndications, for 58 companies.
The financial sector continues to be one of IFC’s priorities in Colombia, with special emphasis on housing finance and micro finance, as well as strengthening local capital markets and improving corporate governance. IFC’s strategy in the country also involves increasing support to strategic sectors for economic growth in the context of free trade agreements.
This strategy includes financing infrastructure projects such as port expansion, road and airport concessions, and support to companies in the logistic services sector. In addition, IFC seeks to finance oil and gas companies expanding in the region.