Oikocredit, VDK Spaarbank and BANK IM BISTUM ESSEN eG to finance innovative program for centers of small-scale businesses by Fedecrédito
The Inter-American Development Bank (IDB) has closed a $19 million syndicated loan with three impact investors to support a new credit facility that will finance the revamping of municipal marketplaces in El Salvador.
The IDB’s Opportunities for the Majority, an initiative that supports and promotes private sector engagement with low-income communities throughout Latin America and the Caribbean, will loan US$10 million to the new credit facility. Three impact investors, Oikocredit, VDK Spaarbank (a Belgian Bank with a microfinance investment portfolio managed by Incofin Investment Management), and BANK IM BISTUM ESSEN eG have joined as B-lenders to the facility, each contributing US$3 million.
The funds will finance the construction and remodeling of physical, technological, functional, and business and administrative management infrastructure of these municipal marketplaces, community institutions that serve as both sources of locally-produced, affordable goods, and as central locations that host microentrepreneurs and small business owners. Most of the beneficiaries will be women heads of low-income households who sell food, fruits and vegetables, clothing and crafts in the municipal markets.
“Bringing social investors into this deal was a win-win for everyone,” states Kristin Dacey, Syndications Officer for the transaction. “The B-Lenders were introduced to a new client via a highly impactful project, and the client was able to nearly double the proceeds for the transaction while having everything streamlined through IDB and in one contract.”
The new facility has been created by the Federation of Savings and Loan Associations and Workers’ Banks (Fedecrédito), a privately-owned cooperative financial institution, which will use its network of 48 savings and loan associations and seven workers’ banks to channel proceeds from the IDB syndicated loan to municipal governments in El Salvador to revamp their marketplaces.
El Salvador has more than 260 markets administered by municipal governments, in settings ranging from urban neighborhoods to small towns. While these historic marketplaces remain popular throughout the country, they face increasing competition from supermarkets and other chain stores.
The new credit facility supported by the IDB’s Opportunities for the Majority Initiative will help ensure that municipal marketplaces remain a vibrant part of the local economy and a cradle of entrepreneurship and innovation.
The IDB loan is for a seven-year term, with a two-year grace period, at a Libor-based interest rate. The syndicated portion of the loan is for five years with a one-year grace period.
- Romina Tan Nicaretta