Caja de Ahorros Panama – COVID-19 Response
On June 30, 2020, MIGA issued a guarantee covering a US$150 million non-shareholder loan provided by Banco Bilbao Vizcaya Argentaria, S.A.(BBVA) to Caja de Ahorros (CA) of Panama for a period of 5 years against the risk of Non-Honoring of Financial Obligations by a State-Owned Enterprise (NHFO-SOE).
The MIGA-guaranteed loan from BBVA will help finance CA’s response to the economic crisis brought on by COVID-19. Proceeds from the BBVA loan will be used to provide liquidity in the form of working capital to small and medium enterprises (SMEs) and other companies, helping them play their crucial role in creating jobs and reactivating the Panamanian economy. These loans from CA will be all the more timely as global turmoil has forced private bank credit to pull back.
CA was established by the Government of Panama (GoP) in 1934 with a social mission to encourage good savings habits, offer financial education programs, and contribute to solving the country’s housing deficit by providing mortgages to lower and middle-income households in Panama. Its extensive network, with over 50 branches and over 250 ATMs spread across the country, including in areas with little private bank presence, allows CA to fulfill this important social function by fostering financial inclusion. These efforts have earned CA national recognition as the “Bank of the Panamanian Family” (El Banco de la Familia Panameña). CA has over 2,000 employees, of whom 56 percent are women.
This Project is a Category FI-2 project according to MIGA’s Policy on Environmental and Social Sustainability (2013) because the existing and proposed portfolio comprises business activities that have potentially limited adverse environmental and social risks and impacts that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. CA is a wholly-owned financial institution of the GoP, which has two primary social objectives: (i) helping provide adequate housing to the low-income segments of the Panamanian population; and (ii) helping encourage financial literacy and personal savings. It has approximately 60 branches across Panama.
MIGA analyzed the portfolio of CA for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of the end of December 2019, consistent with its objectives, retail banking and consumer loans comprise approximately 95% of the CA portfolio. The remaining 5% of the portfolio is comprised of corporate loans (over 4%) and MSME loans (less than 1%). Within retail banking and consumer loans, approximately 65% is mortgages, 30% is personal loans and the remaining 5% is automobile loans, other loans for retail goods and credit cards. Over 70% of the corporate loan portfolio is in construction and real estate, and the remaining approximately 30% is retail, hotels and services. MSME lending is primarily in the services and real estate sectors. CA does not do any project financing and has no exposure to MIGA Exclusion List sectors or sensitive and high-risk sectors including coal, palm oil and extractive industries.
As indicated above, the proceeds of the Loan Facility will be used to support corporates and MSMEs coping with the COVID-19 crisis. MSME lending is expected to be achieved in large part through a network of financial intermediaries. As described above, these loans will be short-term (less than 36 months in tenor) to help companies address short-term, immediate needs resulting from the economic consequences of the COVID-19 pandemic. Given limited risk in the portfolio and the short-term nature of the loans, the applicable E&S requirements for most of the portfolio are the MIGA Exclusion List, applicable national environmental and social laws and regulations and key objectives of relevant MIGA Performance Standards. Given the portfolio and the use of proceeds, the Project will not include high-risk activities that may include (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks.
CA’s commitment to environmental responsibility is codified in its Code of Ethics and Conduct (Código de Ética y Conducta, August 2019). CA is in the process of developing an Environmental and Social Management System (ESMS) for its operations, which will include an Environmental and Social Policy; procedure for review and categorization of proposed transactions and an indication of environmental and social requirements commensurate with the risk of the transaction. To that end, CA has prepared a draft Environmental and Social Risk Manual, which is based on national law and the Equator Principles.
CA has a Business Continuity Plan (BCP) in place, which is consistent with the requirements of an emergency preparedness and response plan as per Performance Standard 1.
CA has an external communication mechanism in place that allows it to receive, track and respond to inquiries and complaints from the public regarding their operations. They also have Human Resource Policies and procedures in place, which are in line with national requirements and cover conditions of employment and compensation, working time, leave (maternity, paternity, sick), compensation and benefits, workers code of conduct, workers grievances and redress mechanism, whistleblower policy, retrenchment policy and the responsibilities of the employees and the employer.
Based on MIGA’s review and applicable E&S requirements, an environmental and social action plan (ESAP) will be agreed with CA prior to entering a MIGA guarantee. The ESAP will be implemented within an agreed timeframe. The ESAP will be expected to contain the following items:
- Update and finalize the Draft Environmental and Social Risk Manual to reflect the requirements of Performance Standard 1.
- Appointment of an Environmental and Social Officer responsible for implementation and management of the ESMS
- Develop and Implement a training program for staff on the Environmental and Social Risk Manual.
CA will report periodically to MIGA on the breakdown of the portfolio, implementation of the ESMS and all applicable E&S requirements.
The project will support CA’s provision of credit, in the form of working capital, to corporates and SMEs that have been affected by the COVID-19 crisis. In the context of constrained credit markets, these loans will allow these companies to maintain their operations, helping them play their crucial role in creating jobs and reactivating the Panamanian economy.