In a move designed to spur the development of the banking sector in Guatemala, the International Finance Corporation (IFC) has signed an agreement to provide Banco Industrial, the country’s largest financial institution, with a US$30mn subordinated loan.

IFC’s financing will help support Banco Industrial’s plans to expand its financing of large firms, the growing export sector, and small and medium enterprises. It will also help deepen the bank’s successful programme for processing remittances from Guatemalans abroad. The loan will qualify as tier-II capital for regulatory purposes.

Jyrki Koskelo, IFC’s director for Global Financial Markets, says, “By strengthening the capital base of the leading bank in Guatemala, IFC will promote the consolidation of the country’s financial sector, which will further increase the stability of the banking system.”

IFC, the private sector arm of the World Bank Group, seeks to support Central American countries as they work to increase their competitiveness in the face of accelerating globalisation. IFC’s financing is particularly timely as the Central America Free Trade Agreement (Cafta) creates new opportunities and challenges for the private sector and the governments of the region.

In the financial sector, IFC has been providing leading banks in Central America with investments tailored to strengthen their capital bases so that they can take advantage of regional expansion opportunities.

Atul Mehta, IFC’s director for Latin America and the Caribbean, adds, “IFC’s investment will constitute a signal of approval in the international market and help put Banco Industrial on a very competitive footing as Cafta is implemented in the region.”