Bancamía: Financing for Rural Producers and Microentrepreneurs in Colombia
The Project consists of a senior unsecured IIC-led A/B loan of up to US$56.6 million or its equivalent in Colombian Pesos (“COP”) to Bancamía S.A. (“Bancamía). The A loan will be for up to US$20 million equivalent in COP with an expected tenor of up to five years. The B Loan will be raised on a best efforts basis for up to US$35 million equivalent in COP and a tenor of up five years, depending on the market appetite and tenor preferences of the B lenders. The Project will also include a parallel financing of up to US$1.6 million from the Climate Smart Agriculture Fund (“CSAF”) and non reimbursable technical assistance funds of up to US$100,000.
The Project’s objective is to finance the expansion of Bancamía’s portfolio to provide greater access to financing for small-scale farmers and microentrepreneurs in Colombia. The proceeds from the A/B loan will provide financing to rural small-scale farmers for working capital and productive investment needs; as well as to finance the working capital needs of microentrepreneurs. The CSAF tranche will be used to fund a new financial product intended to support small-scale farmers in adopting ecosystem-based measures to adapt to climate change, which enhance their productivity. With the non-reimbursable funds, the IIC will offer technical assistance for designing the new financial product dedicated to the small farmer investment portfolio and for establishing the differentiated tenors of the CSAF tranche.
As a result of the IIC financing, Bancamía is expected to provide loans to approximately 35,000 rural microentrepreneurs and smallholder farmers for commercial and agricultural activities respectively, with a large majority (>70%) of the clients expected to be considered from the “vulnerable” population segment. This would be Bancamía’s first syndicated A/B Loan in COP, and the IDB Group’s first loan operation with Bancamía S.A.
Bancamía S.A. is the second largest microfinance banking entity in Colombia. It is regulated by the Finance Superintendence (Superintendencia Financiera, “SFC”), Bancamía is the result of the integration of Fundación Microfinanzas BBVA, the Corporación Mundial de la Mujer Colombia (“CMMC”), and the Corporación Mundial de la Mujer-Medellín (“CMMM”). Bancamía currently serves 810,000 clients, 57% of which are women, and employs 3,583 people.
Bancamía has a presence in 29 of Colombia’s 32 departments, serving more than 856 municipalities, 90% of them categorized as rural. It has 200 branches, 75% located in rural municipalities. In addition to productive microloans, Bancamía offers savings accounts, debit cards, and micro life, funeral, liability, and debt insurance.
1. Project Description: The objective of the IIC Loan is to finance the expansion of the Bancamia portfolio to provide increased access to finance for small producers and microentrepreneurs in Colombia. With this loan, Bancamia will be able to provide loans including for investments that require longer tenors, such as loans to rural producers to facilitate investment in new machinery, improve agricultural production techniques, and/or invest in ecosystem based climate adaptation measures.
2. Environmental and Social Categorization and Rationale: This is a category FI-3 Project according to the IIC’s Environmental and Social Sustainability Policy because of the low risk of the subprojects in the financial intermediary’s current or future portfolio and the subprojects’ amount (average US$1,200).
3. Environmental and Social Risks and Impacts: The portfolio risk to be financed includes financial exposure to microfinance activities, which predominantly have low environmental and social impacts including, but not limited to: (i) environmental: water, soil and air pollution, waste management, and agrochemicals; (ii) OHS (occupational health and safety) risks such as: gas releases, chemical hazards and fire; and (iii) community issues such as health, safety and stakeholder engagement.
4. Mitigation Measures/E&S Action Plan: Bancamía currently implements a Sustainability Manual, which is committed with national law, ISO 2600/2010, Pacto Global, UNEP-FI, Protocolo Verde, Global Reporting Initiative, Mix Market, and Smart Campaign. It also includes an environmental, social and economic policy and a List of Excluded Activities. Bancamía will be required to ensure that activities financed with IIC funds are not found on the IIC’s list of excluded activities and that they comply with domestic environmental and occupational safety standards. In addition, Bancamía will be required to submit annual environmental reports to the IIC indicating the progress made and problems encountered in the implementation of its ESMS. To enable the borrower to better understand the IIC’s requirements, Bancamía will be required to attend the IIC’s environmental training workshop for financial intermediaries or another similar course approved by the IIC.