WASHINGTON, January 23, 2023 – The Multilateral Investment Guarantee Agency of the World Bank Group (MIGA) has issued a guarantee to JPMorgan Chase Bank N.A. of the United States against the risk of non-payment of a Colombian peso-indexed loan of $300 million to Banco de Comercio Exterior de Colombia S.A. (Bancóldex) for a period of up to 3.5 years.
In the current worldwide economic downturn, Colombia faces high inflation reflected through elevated food and energy prices. The aggregate impact of the COVID-19 pandemic, political uncertainty, and a reduction in financing options has resulted in a sharp increase in local market funding costs. This has affected medium, small, and micro enterprises (MSMEs) that contribute 40 percent of GDP and generate 80 percent of employment in Colombia. Despite their importance to the economy, MSMEs are underserved by the traditional local lending institutions with an estimated financing gap of $38.6 billion.
The MIGA-guaranteed loan will support Bancóldex’s objectives of strengthening the availability of funding for MSMEs, increasing financial inclusion across the country with a focus on gender pursuant to a new gender action plan, and transforming the market toward modernization, green finance, and innovation. MIGA guaranteed another loan to Bancóldex in 2020, which was instrumental in helping Bancóldex respond rapidly to the emerging COVID-19 pandemic.
“Through this second guarantee supporting a loan to Bancóldex, MIGA is contributing to reducing the financing gap for MSMEs in Colombia, a critical segment of the economy,” said Hiroshi Matano, Executive Vice President of MIGA. “Increasing lending capacity to MSMEs, including those owned by women, will show the benefits of inclusive business models as the financial and social viability of these transactions is demonstrated. We are also pleased that a portion of the loan will be targeted for climate financing.”
Bancóldex is a majority state-owned bank created to promote and finance activities related to exports, in addition to carrying out rediscount operations to finance the national industry. With the MIGA-guaranteed loan, Bancóldex will continue to offer longer term financing opportunities to approximately 40,000 MSMEs in key economic sectors such as information and communications, administrative and support services, manufacturing, wholesale and retail trade, repair of motor vehicles, transportation and storage, construction, lodging and hotels, health services, professional, scientific and technical activities, insurance and financial activities, and agriculture activities. This represents about 2 percent of the 1.9 million formal MSMEs in the country while reducing the MSME financing gap by approximately 1 percent.
“MIGA’s guarantee enhances Bancóldex’s ability to provide liquidity to more MSMEs in Colombia. Support from MIGA is significant because MSMEs generate more than 80% of employment and account for 90% of local companies,” said Javier Díaz Fajardo, CEO of Bancóldex.
Colombia has a large and sophisticated financial system that has made some progress on financial inclusion. Inequalities, however, persist and access to finance remains a fundamental constraint across business sizes, gender, income levels, and regions. For instance, 11.8 percent of Colombian women entrepreneurs abandon their businesses because of the lack of finance, vs. 4.9 percent for men entrepreneurs. Only 14 percent of MSMEs are women-led companies. With the MIGA-enabled loan, Bancoldex will decrease disparities between genders in terms of access to finance and loan conditions.
In addition, Bancoldex has committed to use part of the loan for climate adaptation projects, making it MIGA’s first guarantee to include such a goal. Projects in the categories of renewable energy, energy efficiency, sustainable transport, and agriculture will benefit from the available financing.
“JPMorgan is focused on supporting projects that address environmental and social inclusion in Colombia and in the rest of the Latin American region. This is an innovative transaction executed in challenging markets. We look forward to future opportunities in this front,” said Miguel Anacoreta, Managing Director and Head of Latam & CEMEA Sales and Debt Capital Markets.
Bancóldex is Colombia’s business development bank that promotes the productivity and competitiveness of local companies with a sustainable approach. The bank focuses on structuring financial and non-financial products with the participation of public, private international, national, and territorial actors.
About JP Morgan
Information about JP Morgan can be found at www.jpmorgan.com
MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment in emerging economies by helping to mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war and civil disturbance; and offering credit enhancement to private investors and lenders.
Since its creation, MIGA has issued nearly $70 billion in guarantees across 122 developing countries in support of nearly 1,000 projects.
Elizabeth Howton, (202) 458-5922, email@example.com
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