The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement to provide approximately R115mn (US$50mn) in a seven-year financing to Brazil’s Banco BBM.

The transaction, which involves a subscription to a cross-border, real-linked bond, is IFC’s first major local currency investment project in Brazil.
Banco BBM will use funding proceeds from the transaction to expand its medium-tenor lending to mid-sized companies.

Saran Kebet-Koulibaly, associate director for Latin America and the Caribbean and head of Brazil operations, says, “In addition to being our first significant investment transaction effectively denominated in Brazilian reais, this will be the first of several IFC projects that aim to support the operations of medium-sized Brazilian banks – more often than not with local currency structures like this one.”

He adds: “We are very enthusiastic about this new type of business opportunity, since mid-size financial institutions play an important role in promoting competition and efficiency improvements in the country’s banking sector. Moreover, they often play a key role in making credit available to smaller and mid-size companies, firms that sometimes cannot obtain funding from larger banks or the capital markets.”

Banco BBM is Brazil’s oldest private sector bank and is regarded as one of the best-run financial entities in the country.

Pedro Mariani, president of Banco BBM, says, “As a result of this project and the profile of Banco BBM’s lending activities, IFC is playing a catalytic role in making additional and longer-tenor credit available to mid-size corporate borrowers, a client segment that we have targeted for further expansion.”