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IDB Group supports Guatemalan bank's expansion into microfinance

The Inter-American Development Bank Group will provide up to US$70 million in loans to Banco G&T Continental (G&TC) of Guatemala to support the expansion of credit for microenterprises and small businesses.

G&TC, Guatemala’s second largest commercial bank in terms of assets, started a “downscaling” process to serve microentrepreneurs in 2006 with assistance from the IDB’s Multilateral Investment Fund, a leader in promoting microfinance in Latin America and the Caribbean.

Guatemala has at least 750,000 microenterprises and small and mid-size businesses, which generate about half the jobs and around 40% of its gross domestic product. Despite their economic importance, most of these enterprises have little or no access to formal credit.

Under the new project, the IDB will provide G&TC up to US$45 million. Of that amount, US$35 million will be provided by the IDB’s Structured and Corporate Finance Department and US$10 million by the Opportunities for the Majority initiative.

In addition, the IDB Group’s Inter-American Investment Corporation, which specializes in financing for small and mid-size businesses, may provide G&TC a loan of up to $25 million.

“This transaction will foster competition in Guatemala’s microfinance sector, contributing to its efficiency and promoting the democratization of credit,” said Financial Markets Division Chief Daniela Carrera-Marquis, of the IDB’s Structured and Corporate Finance Department.

G&TC plans to expand its own lending portfolio for microenterprises and small and mid-size businesses. It will also provide access to other financial services such as ATMs, savings accounts, remittances and microinsurance for low-income clients of other Guatemalan microfinance institutions.

The loans will help G&TC diversify its funding sources and its access to long-term financing at a time of turmoil in international financial markets.

G&TC is active in the corporate, retail and micro banking segments. In August 2008 its assets stood at US$3.2 billion, its lending portfolio at US$1.7 billion and its deposits at US$2.2 billion. The bank has a network of 266 branches, 600 subagents and 1,650 ATMs throughout Guatemala.

The IDB is the leading source of long-term financing for economic and social development in Latin America and the Caribbean. Its Structured and Corporate Finance Department is responsible for its non-sovereign guaranteed operations, which include loans and credit guarantees for private sector businesses and state-owned companies.

The Opportunities for the Majority initiative supports business models designed to provide affordable, better quality goods and services to low- and moderate income people, who constitute a majority of Latin America and the Caribbean’s population.