BIO increases presence in the banking sector in Central America

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Making leasing accessible for SMEs

BIO has committed a USD 5 million senior loan to Banco Improsa SA to support the bank in further growing its leasing business in Central America through its offices in i.e. Nicaragua, Honduras, El Salvador and Guatemala. This investment will help increasing the leasing offer to local companies who are often unable to get the credit they need to expand their operations. As leasing services still have a low penetration in the region, the support to Banco Improsa shows a growing perspective.

Banco Improsa was established in 1986 by a Costa Rican family as a services company and became a fully-fledged bank in 1995. In 1997, it went partly public on the stock exchange in Costa Rica to strengthen its capital base and attract new investors. Banco Improsa has since its inception focused on SMEs and has launched since then several programs and products to service SMEs, which today constitute its main client base.

Leasing plays an important role in reinforcing the private sector emerging markets, as it helps undeserved markets such as SMEs, to gain access to finance. In countries lacking the financial infrastructure to provide affordable credit to small businesses, the purchase of a major piece of equipment is often impossible. Leasing makes equipment available to even the smallest businesses and works by separating the economic use of an asset from its legal ownership – granting firms the right to use a piece of equipment in exchange for periodic payments to its owner. Because the equipment itself acts as collateral, firms without other assets or credit history can enter into leasing contracts. Leasing is effective in countries with weak bankruptcy laws and poor creditor rights and can have a substantial impact on the development of the private sector by supporting entrepreneurial activities, catalyzing investments and enabling sustainable growth of businesses. In addition, leasing benefits opening economies as it helps domestic firms’ access foreign technology when they have neither the financial resources nor the expertise to import capital goods.

The impact of BIO’s intervention will be three-fold:

* Support the stability and deepening of the Central American financial sector by providing finance to a leading niche player with local and regional expansion plans

* Support private companies in BIO’s eligible countries in Central America, a region with limited access to local financing

* Improve the financial fundamentals of the bank by allowing it to access long term financing and diversifying funding sources.

    With this investment, BIO further consolidates its position in Central America.