Local Currency Fund II Expansion (IDBI-12241-01)

Regions
  • Latin America and Caribbean
Geographic location where the impacts of the investment may be experienced.
Financial Institutions
  • IDB Invest (IDBI)
International, regional and national development finance institutions. Many of these banks have a public interest mission, such as poverty reduction.
Bank Risk Rating
FI
Environmental and social categorization assessed by the development bank as a measure of the planned project’s environmental and social impacts. A higher risk rating may require more due diligence to limit or avoid harm to people and the environment. For example, "A" or "B" are risk categories where "A" represents the highest amount of risk. Results will include projects that specifically recorded a rating, all other projects are marked ‘U’ for "Undisclosed."
Borrower
Locfund II, L.P.
A public entity (government or state-owned) provided with funds or financial support to manage and/or implement a project.
Sectors
  • Finance
The service or industry focus of the investment. A project can have several sectors.
Investment Type(s)
Loan
The categories of the bank investment: loan, grant, guarantee, technical assistance, advisory services, equity and fund.
Investment Amount (USD)
$ 10.00 million
Value listed on project documents at time of disclosure. If necessary, this amount is converted to USD ($) on the date of disclosure. Please review updated project documents for more information.
Project Cost (USD)
$ 10.00 million
Value listed on project documents at time of disclosure. If necessary, this amount is converted to USD ($) on the date of disclosure. Please review updated project documents for more information.
Campaign Documents
Primary Source

Original disclosure @ IDBI website

Updated in EWS Nov 23, 2018

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Project Description
If provided by the financial institution, the Early Warning System Team writes a short summary describing the purported development objective of the project and project components. Review the complete project documentation for a detailed description.

According to the banj, in January 2015, the IDB approved a Loan to Locfund II comprised of an A Loan of up to US$15 million funded by IDB with its Ordinary Capital resources and up to US$7.5 million in a Co-Loan from the China Co-Financing Fund (the "China Fund") to provide financing in local currency to microfinance institutions ("MFIs"), contributing to reduce the MFIs' foreign exchange risk exposure and to support the expansion of their local currency lending capacity to micro- and small-sized enterprises ("MSEs") in Latin America and the Caribbean ("LAC").

The IIC, as member of the IDB Group, will support Locfund II's expansion through a Loan of up to US$10 million (the "IIC A Loan"). Thus, the number of MFIs reached and final clients benefited will also increase. Locfund II expects to increase the number of MFIs' clients by 13% totalizing 241,000 final beneficiaries during its life.

People Affected By This Project
People Affected By This Project refers to the communities of people likely to be affected positively or negatively by a project.

1. Overview of Scope of IIC Environmental & Social ("E&S") Review. The environmental and social review of the proposed transaction was carried out through desk research of pertinent information from the client. This included a review of basic credit procedures applied by Locfund II.

2. E&S Categorization and Rationale. The portfolio of microfinance loans is considered low risk given the concentration in commerce and services. Through its MFIs, Locfund II has reached roughly 1.3 million microfinance sub-borrowers with an average sub-loan of US$1,233. Per the IIC's Environmental and Social Sustainability Policy, this Financial Intermediary ("FI") operation has been categorized as FI-3.

3. E&S Risks and Impacts. The E&S risks of underlying transactions are considered negligible. Nevertheless, Locfund II has developed and applies an exclusion list, along with other local law requirements. These procedures have been developed as a result of historic funding from a range of other Development Finance Institutions ("DFI") lenders

4. Mitigation Measures. Locfund II will be required to ensure that all underlying microfinance loans comply with the IIC Exclusion List, and applicable local environmental and social laws. Locfund II has illustrated the incorporation of basic E&S procedures into its manuals.

5. E&S Action Plan. No E&S Action Plan is required.

Investment Description
Here you can find a list of individual development financial institutions that finance the project.
Financial Intermediary
A financial intermediary is a bank or financial institution that receives funds from a development bank. A financial intermediary then lends these funds to their clients (private actors) in the form of loans, bonds, guarantees and equity shares. Financial intermediaries include insurance, pension and equity funds. The direct financial relationship is between the development bank and the financial intermediary.

Contact Information
This section aims to support the local communities and local CSO to get to know which stakeholders are involved in a project with their roles and responsibilities. If available, there may be a complaint office for the respective bank which operates independently to receive and determine violations in policy and practice. Independent Accountability Mechanisms receive and respond to complaints. Most Independent Accountability Mechanisms offer two functions for addressing complaints: dispute resolution and compliance review.

Client Contact Name: Veronica Cespedes
Title: Director, ESG & Technical Assistance
Phone number: +(591) 2 279 9046
email address:
vcespedes@locfund.com

How it works

How it works