Finnfund

Finnfund has granted a five million dollar long-term loan to Nicaragua’s Banco de Credito Centroamericano (Bancentro). The credit is part of a $15 million loan package  together with the Belgian Investment Company for Developing Countries (BIO) and the Swiss Investment Fund for Emerging Markets (SIFEM).

The credit facility provided by these development finance institutions will significantly reinforce Bancentro’s capital base and liquidity, which is important in the current financial market crisis. A bank operating in a poor developing country currently has no access to long-term credit from private sources.

Bancentro finances companies and private persons

Bancentro is one of Nicaragua’s major commercial banks and has a well diversified loan portfolio, including an important share of the market for corporate finance and commercial lending. The bank was established in 1991 when Nicaragua dismantled political obstacles to privately owned banking operations. Bancentro is part of the Lafise financial group, which operates in Central American and Caribbean countries.

For 2007, Bancentro reported a result of 17 million dollars on a balance sheet total of $795 million. Steady and rapid asset growth combined with good sustained profitability reflect the bank’s purposeful and professional leadership and good risk management.

Strong demand for investment finance and working capital

In 2007 Bancentro initiated a lending program aimed at micro credits, to further augment their existing program for small and medium-sized enterprises and private individuals. As in many other developing countries, the micro credit market segment is generally outside the scope of conventional banking in Nicaragua. This impedes the operations of enterprises, particularly in poor rural areas where unemployment is a major social problem.

Loans in the micro credit program are generally in the range of 1000-10 000 dollars, with a maturity no longer than thirty six months. The loans are used to finance purchases of machinery and equipment and provide working capital. These loans have been in great demand and the loan portfolio is expected to total 35 million dollars by the end of the year. At that time about 10 000 companies will have received loans, creating some 20 000 new jobs.

Financial institutions in emerging economies are valued Finnfund partners

Trustworthy and well managed financial institutions are important partners for Finnfund in countries that do not receive direct investments from Finland. Nicaragua is a good example, the second poorest country in Latin America and one of the poorest in the world.

The credit facility for Bancentro is an excellent example of cooperation between European development finance institutions. Working together, they can offer a significant loan package without assuming an excessive credit risk for any one institution. Their similar operating principles and operational objectives provide a natural framework for collaboration.

For more information at Finnfund, please contact Mr Jyrki Halttunen, Treasurer, tel. +358 9 3484 3318, firstname.lastname@finnfund.fi