DPR Fedecredito

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IIC’s Communications Group
E-mail: divulgacionpublica@iadb.org

For project inquiries, including environmental and social questions related to an IDB Invest investment, please contact the client or IDB Invest using the contact information provided above. As a last resort, affected communities have access to the IDB Invest Independent Consultation and Investigation Mechanism.
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Project Number: 
Expected Consideration Date by the Board: 
Date Posted: 
Fedecredito Remittance Funding Company
Sponsoring Entity: 
Federacion de Cajas de Credito y Bancos de los Trabajadores
Financing Requested: 
US$15 million
Financial Services
Environmental and Social Category: 
Scope Objective: 

The IIC’s participation will consist of a US Dollar denominated note subscription to Fedecredito Remittance Funding Company Ltd. (the “Issuer”) in an amount of up to US$15 million (the “Note”).  IFC and responsibility have already purchased US30 million in notes of this issuance. IIC’s Note will have an individual maximum tenor of 7 years with a 2-year grace period (the “Financing”). The proceeds of the Financing will be used to increase its lending activities for low-income housing and MSMEs.

Brief Project Description:
The Fedecredito System (“FDCS”) comprises 48 Cajas de Credito (“CC”) and 7 Bancos de los Trabajadores (“BDT”). Fedecredito is a second-tier FI, 100% privately-owned and supervised by El Salvador’s “Superintendencia del Sistema Financiero”. It was established in 1943 and its mission is to help develop an effective FDCS by providing its members with training and specialized technical services. The FDCS in turn constitutes the largest network of financing service providers in El Salvador, present in 187 of the 262 municipalities of the country. Fedecredito only provides financing to their member entities. The CCs and BDTs funnel this funds into the local market. As of December 2016, the FDCS was the 5th largest lender in the country with a loan portfolio of US$1.4 billion (market share of 11%), deposits of US$740 million and more than 961k credit users serving mainly low-income families and MSMEs. FDCS’ portfolio distribution is as follows: MSMEs 35%; consumer loans 53% and housing 12%
Fedecredito is an existing client of the IDBG. In 2010, the Bank approved a US$19 million A/B Loan to increase financing for municipal market modernization. Fedecredito has also received funding and technical assistance from the Multilateral Investment Fund (“MIF”) to improve its ability to serve the poorest segments of the country’s population; and support modernization and institutional strengthening.

Environmental Review: 

1. Overview of Scope of IIC E&S Review
Internal documentation related to environmental processes, social procedures and policies was reviewed to evaluate Fedecredito’s capacity to manage the E&S risk its lending activities that will be financed with the IIC’s use of funds.
2. Environmental and Social Categorization and Rationale
The sub-projects/transactions to be supported have a low to medium risk potential. Therefore, per the IIC’s Environmental and Social Sustainability Policy, the FI has been categorized as FI-2.
3. Environmental and Social Risks and Impacts
The main E & S risks of this projects are associated with Fedecredito’s capacity to identify and manage the E & S risks associated with FDCS lending activities for low-income housing and MSMEs. The potential risks associated with its main lending activities include i.e. non-compliance with national law, pollution, biodiversity impacts, community impacts, etc.
Fedecredito has in place an Environmental and Social Management System to identify and manage the E & S risks of the portfolio. Its systems include adequate E & S procedures and has an Environmental and Social person to manage E & S risks and impacts. Additionally, Fedecredito has in place an internal Grievance Mechanism, an Ethic Code and different policies related to Human Resources activities for hiring staff, over time work, and compensation.

4. Mitigation Measures
Fedecredito will be required to ensure that all loans supported comply with the IIC Exclusion List, applicable E & S local laws, and the IIC’s environmental and social guidelines.  To enable the Issuer to better understand the IIC’s requirements, Fedecredito will be required to attend the IIC’s Environmental and Social Risk Management training workshop for financial intermediaries online training course on Environmental and Social Risk Management. IIC requires that its FI clients develop and implement an External Communication Mechanism to review inquiries or complaints from any interested party regarding the E & S risks and impacts of their operations.

Contact Information: 

For inquiries about the Project, contact: 
Client Contact name:  Gelson Vinicio Valladares
Title: Gerente de Administración con funciones de Gerente Ambiental y Social
Phone number: (503) 2209-9679
email address:  gelson.valladares@fedecredito.com.sv