Project Description

This summary covers a $20 million joint equity investment by Banco Universal S.A. (UniBanco), of Ecuador (UBE) and Orca Credit Holding LLC, of the United States (Orca) affiliates of Grupo Morisaenz-Ribadeneira (GMR) of Ecuador, to set up a financial institution, Financiera Universal S.A. (FINU) in Peru. The $18 million in guarantees will provide risk coverage against transfer restriction and expropriation for a period of up to ten years

FINU will act as a microcredit subsidiary of UBE in Peru. Its main focus will be providing income-generating microenterprise loans, with an average size of $1700. If operations are successful after two years, then FINU will seek approval in 2012 for a banking license and expand its operations to function as a deposit-taking bank. FINU is expected to employ about 300 people and open sales points outside big cities across the country. Its projected cumulative net income is approximately $15 million for the next five years.

Environmental Categorization

The project is a Category FI under MIGA’s environmental review procedures.

Development Impact

MIGA’s proposed guarantee would play an important role in facilitating long-term cross-border flows from UBE into its new subsidiary in Peru focusing on micro and consumer credit. FINU’s lending operations are overwhelmingly targeted to the poorest sections of society.

One of the main objectives of the World Bank Group’s Country Partnership Strategy for Peru for 2007-2011 is accelerating the private sector led growth and supporting the government’s efforts in fostering the sound development of domestic financial markets.

The proposed project is fully consistent with this objective.  MIGA’s participation in the project is also aligned with key agency priorities, which include encouraging South-South investments.