Banco Familiar SME Financing Partnership

The proposed operation includes: a partial credit guarantee of up to 28.5 billion Guaraníes (“PYG”) to be issued in favor of the Instituto de Previsión Social (“IPS”). IPS will provide a loan in Guaraníes to Banco Familiar S.A.E.C.A. (the “Loan”) for up to PYG27 billion, and the Inter American Investment Corporation (“IIC”) will grant a guarantee in favor of IPS covering the credit risk of Banco Familiar (“Guarantee”) under the Loan. The IPS disbursement will be made through a Trust Manager, Agencia Financiera de Desarrollo, through whom IPS will receive payments for the Loan. The Loan will have a term of up to five years, with a grace period of up to two years, and semi-annual amortization. The use of funds for the Loan will be to finance small and medium enterprises (“SMEs”) in the productive sector of Paraguay.

1.      Project Description

The proposed project is a partial credit guarantee of up to PYG28.5 billion to be issued in favor of IPS. IPS will provide a loan in Guaraníes to Banco Familiar S.A.E.C.A. (the “Loan”) for up to PYG27 billion, and the IIC will grant a guarantee in favor of IPS covering the credit risk of Banco Familiar (“Guarantee”) under the Loan. The use of funds for the Loan will be to finance SMEs in the productive sector of Paraguay.

2.      Environmental and Social Categorization and Rationale

This operation is classified as an FI-2 under the IIC’s Sustainability Policy. Based upon the nature of this transaction (i.e. a partnership to provide medium term funding to SMEs in the productive sectors), there are likely to be moderate to significant indirect environmental, social or health and safety (“ESHS”) and labor impacts and risks. Banco Familiar’s portfolio is concentrated in consumer goods (49%), but has some exposure in agriculture (14%) and livestock (3%), which present risks in the form of deforestation and land-use change, particularly in the Chaco.

3.      Environmental and Social Risks and Impacts

Sub-project environmental and social risks may be related to occupational health and safety, supply chains, deforestation, land-use change, and pesticide/chemical use. Banco Familiar will be required to manage these risks through the development and application of an Environmental and Social Management System (“ESMS”) with strict oversight given to operations in the Chaco or where deforestation is of heightened risk. Banco Familiar will be required to apply the Exclusion List, National Laws, Good Practice Guides in the context of Agriculture, Livestock, and Agro-Industry on-lending, and use a satellite monitoring program for agriculture and livestock on-lending. Additionally, deforestation with IIC’s use of proceeds will not be permitted.  Banco Familiar will be required to report annually, and provide monitoring reports of client activity.

4.      Mitigation Measures/Environmental and Social (“E&S”) Action Plan

For project inquiries, including environmental and social questions related to an IDB Invest transaction please contact the client (see Investment Summary tab), or IDB Invest using the email divulgacionpublica@iadb.org.

As a last resort, affected communities have access to the IDB Invest Independent Consultation and Investigation Mechanism by writing to mecanismo@iadb.org or MICI@iadb.org, or calling +1(202) 623-3952.