Washington, D.C, August 2, 2004.—
The International Finance Corporation, the private sector arm of the World Bank Group, provided a 34 percent partial credit guarantee to the bond issuance program of 500 million pesos (approximately$43.4 million) offered by Financiera Compartamos, a leading microfinance institution in Mexico. Compartamos has successfully issued the first tranche of 190 million pesos (about $16.5 million). With IFC’s credit enhancement of 64.6 million pesos, the five-year bonds have received an investment grade local rating of AA by Standard & Poor’s, and Fitch Ratings.
IFC’s partial credit guarantee enabled Compartamos to access long-term local currency financing from institutional investors, a deeper and more credit sensitive investor base than the private investors that have subscribed to Compartamos’s previous bond issues. The proceeds of the transaction will be used to fund the entrepreneurial efforts of thousands of Compartamos clients primarily in rural communities throughout Mexico. This is an important component of Compartamos’s growth plans, which include an expansion of its customer base to 1 million clients by 2008.
Compartamos is a financial institution that provides microloans with an average size of $300, and 94 percent of its clients are women. The company has a growing network of 94 branches in 22 states of Mexico and more than 250,000 borrowers. Loans provide working capital for Compartamos clients to build small businesses. In providing village banking loans to groups of 15 to 50 women, Compartamos has become a role model for strong financial performance and established a highly successful lending methodology in microfinance.
Lead managed by Citigroup/Banamex, the issue was structured to attract Mexican institutional investors including mutual funds, pension funds, and insurance companies. The placement of bonds for Compartamos was arranged by Acciones y Valores de Mexico (Accival), the brokerage arm of Banamex. The wide distribution of the securities, long tenor, and tight pricing relative to comparable benchmarks in the Mexican market, attested to the successful placement of the issue.
This is the second time IFC has supported this company. In 2001, IFC provided financing and equity to help Compartamos develop from a nongovernmental organization to a commercially viable entity, thus facilitating access to market-based funding and expanding services. As the largest international provider of funding for microfinance, IFC is deeply committed to assisting successful companies like Compartamos achieve their growth plans.
Nina Shapiro, IFC’s Treasurer and Vice President of Finance, said, “This instrument will provide an alternative for local institutional investors to diversify their holdings in terms of both asset class and underlying credit. IFC has been actively offering local currency partial credit guarantees in the region. This innovative product not only helps attract local financing, but also helps to develop domestic capital markets."
This is IFC’s second partial guarantee in Mexico. Last year IFC offered a peso-denominated partial credit guarantee of up to $3 million equivalent to finance a water conservation project in Tlalnepantla, Mexico. IFC offers partial credit guarantees for transactions globally in the emerging markets. This has proved to be an effective product for enabling new issuers to access the domestic capital market. Benefits for such issuers include a diversification of their existing investor base, as well as longer-term local currency financing that what is often available in the local bank market.
Carlos Danel, co-CEO of Compartamos noted, “ This is a milestone transaction for Compartamos, as it opens the way for a broader and deeper investor base for future growth of the company. We are excited that institutional investors in Mexico are willing to invest in microfinance and thereby continue to build a stronger and more inclusive financial sector in the country.” Carlos Labarthe, the company’s co-CEO added,“ We believe it’s also a milestone for the microfinance industry worldwide. Not only is investing in microfinance good business, but it’s also a way of creating enormous social wealth in our communities.”
Jyrki Koskelo, IFC’s director for Global Financial Markets, noted, “This is a landmark investment for IFC. We are committed to support the growth of microfinance institutions and develop innovative structures to enable local currency financing for our investee clients.”
Atul Mehta, IFC’s director for Latin America and Caribbean, said, “IFC has a long-term relationship with Compartamos, and this financing will enable the company to expand its microlending to new geographical areas and reach a broader client base currently not served by the commercial banks.”
About IFC
The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.8 billion for its own account and $6.6 billion held for participants in loan syndications.
