Narrative
Full Description
Project narrative
On August 15, 2017, the Inter-American Development Bank (IDB) signed two loan contracts with the Government of Colombia for the Financial System Reform Support Program II: a $400 million loan that IDB issued from its ordinary capital (Loan 4074/OC-CO), and a $50 million loan from the People's Bank of China (Loan 4074/CH-CO) via the China Co-Financing Fund for Latin America and the Caribbean (CHC). The $450 million of loan financing authorized by IDB was designed to cover the total project cost. The CHC loan carries the following borrowing terms: a 20-year maturity, a 5.5-year (66-month) grace period, a 0.75% commitment (credit) fee, no management fee, and an annual interest rate of 3-month LIBOR plus a 0.1% funding margin (also known as the ‘Bank’s Cost of Funding’) and a 0.85% IDB lending spread. This program included several components intended to increase the financial system's contribution to Colombia's growth: (1) enhancement of financing for productive development (particularly in the agricultural sector) and public-private partnerships through strengthening of public institutions and guarantee systems; (2) improving the regulation and monitoring process of the financial system to support the development of the capital markets and financial transparency; and (3) increasing financial inclusion for those without bank accounts by improving the volume, quality, opportunity, and access to financial services for the population. The program also sought to improve access to financing for micro, small, and medium-sized enterprises (MSMEs). Portions of the program, such as financial system transparency and development capital markets, were specifically aimed at meeting requirements to join the Organization for Economic Cooperation and Development (OECD). Colombia's Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público) and the National Planning Department (Departamento Nacional de Planeación) were responsible for project execution. The final loan disbursement took place on August 29, 2017. This project has reached completion; however, its precise implementation start and end dates are unknown.
Staff comments
1. The CHC loan contract can be accessed in its entirety via https://www.dropbox.com/s/97oj37qtm4ksk3i/CONTRATO%20DE%20PR%C3%89STAMO%20No.%204074%3ACH-CO%20.pdf?dl=0. 2. AidData has estimated the all-in interest rate (2.25%) by adding average 3-month LIBOR in the third quarter of 2017 (1.3%) to the funding margin during the third quarter of 2017 (0.1%) and the IDB lending spread during the third quarter of 2017 (0.85%). 3. According to the CHC loan contract, the ‘Bank's Cost of Funding’ means a cost margin calculated quarterly relative to a three (3)-month LIBOR Dollar Interest Rate, using the weighted average cost of funding instruments applicable to the Flexible Financing Facility, expressed in terms of an annual percentage, as determined by the Bank. AidData identified this cost margin via https://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=EZSHARE-1436601171-376. 4. The China Co-Financing Fund for Latin America and the Caribbean was established on January 14, 2013 with a contribution of $2 billion by the People's Bank of China. It is administered by the IDB. For more information, see umbrella Record ID#86526. 5. The IDB refers to this project as ‘CO-L1214 : Financial System Reform Support Program II’. Financial System Reform Support Program I was not financed with support from the China Co-Financing Fund for Latin America and the Caribbean. 6. A full list of the reforms, programs, and financial instruments used to reach the goals of the Financial System Reform Support Program II can be found on pages 5-8 of the IDB's Project Close Report (Informe de Terminación de Proyecto). 7. The IDB lending spread data are drawn from https://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=EZSHARE-1436601171-376.