[China Co-Financing Fund] IDB administers USD 13 million loan from CHC to BanPro for DPR program to increase access to financing for agribusiness

On September 4, 2019, the private sector institution of the Inter-American Development Bank (IDB) Group, IDB Invest (formerly Inter-American Investment Corporation, or IIC), signed a 40 million USD loan package with Banco de la Producción (BanPro) for their Diversified Payments Rights (DPR) Program to support medium and small agribusinesses. Through this loan package, IDB Invest agreed to provide 27 million USD from its own funds, and the People's Bank of China (PBOC) would provide 13 million USD via the China Co-Financing Fund for Latin America and the Caribbean (CHC). The IDB Invest loan package was part of a larger 120 million USD loan structure by Credit Suisse, which also included funds from responsAbility, Multibank Inc, Athene Annuity & Life Assurance Company, Apollo TR Structured Credit LLC, and Aspen Bermuda Limited. The IDB approval date for this loan financing was June 21, 2019, and it refers to this project as "12582-01: Banpro DPR – Supporting middle-sized agroindustry producers in Nicaragua". According to BanPro's financial statements, the loan had a 6.47% interest rate and would mature in September 2024, indicating a 5 year maturity period. IDB Invest's project page also lists a 5 year maturity period and 1 year grace period, though this grace period does not seem to be present in BanPro's financial statements (see comments for more information). It appears the full 40 million USD was disbursed before the end of 2019 (C$ 1,353,524,000 is listed as a debt obligation on BanPro financial statements, which was approximately 40 million USD in 2019). At the end of 2021, only C$ 919,367,096 was listed in BanPro financial statements as a debt obligation, indicating about 25.9 million USD has not been repaid yet (based on the exchange rate at 12/31/2021). The diversified payment rights (DPR) securitization program the loan is funding is aimed at increasing the availability of credit at Banpro for agribusiness and small and medium enterprises. According to IDB Invest, "[a] DPR transaction is a financial future flow securitization used by financial institutions in emerging markets to obtain attractive access to international capital markets." The IDB Invest project page further specifies that "[u]nder the DPR Program, Banpro...will sell all its rights over its existing and future Diversified Payment Rights (“DPR”) to a Cayman Island Vehicle, NIC FLOWS SPV, Ltd., (the “SPV”). The proceeds from the DPR Program will be channeled by the SPV to Banpro as a payment for the DPRs sold." According to IDB Invest, the project was ‘in implementation’ as of July 2022. The China Co-Financing Fund was established on 14 January 2013 with a contribution of 2 billion USD by the People's Bank of China, and it is administered by the IDB. For more information, see Umbrella Project ID #86526.

Additional details

1. Transaction amount of 13 million USD is based on the IDB Invest project page, which says the amount provided by the CHC would be "up to" 13 million USD. It is assumed the 13 million USD was the amount actually loaned because the financial information on the IDB Project page lists 13 million USD as the syndicated amount, and sources from Banpro confirm that financing from the CHC was committed. However, it should be noted that IDB Invest project pages can often have out of date information, particularly in their descriptions. Thus, while there is significant evidence that funds from the CHC were used to finance this project, the exact transaction amount may be under 13 million USD. 2. The one year grace period is not included in loan details insofar as it appears a loan payment was made between the end of 2019 and the end of 2020; the amount listed as a debt obligation by BanPro in 2019 was C$ 1,353,524,000, while only C$ 1,229,100,012 was listed as a debt obligation in 2020. Because the loan was signed in September, however, it is possible that there was a full year grace period (September 2019 - September 2020) and the first payment occurred between September 2020 and December 2020. 3. 40 million / 1353.524 million = 0.02955248669. According to https://www.exchangerates.org.uk/NIO-USD-spot-exchange-rates-history-2019.html, the exchange rate on 12/31/2019 (which likely was used for currency conversions for a 2019 end of the year report) was C$1 NIO = $0.0296. Indicates the full 40 million USD loan was disbursed by the end of 2019. 4. Banco de la Produccion (Banpro) was founded in 1991. It is the largest (private) bank in Nicaragua and is ranked among the 20 largest banks in Central America. 5. IDB Invest, a member of the IDB Group, is a multilateral development bank committed to promoting the economic development of its member countries in Latin America and the Caribbean through the private sector. IDB Invest finances sustainable companies and projects to achieve financial results and maximize economic, social and environmental development in the region. With a portfolio of $12.1 billion in asset management and 333 clients in 24 countries, IDB Invest provides innovative financial solutions and advisory services that meet the needs of its clients in a variety of industries. 6. IDB Invest has a track record working with Banpro. In 2018 IDB Invest approved a US$20 million senior credit line to support the Bank’s efforts to build a green portfolio (US$10 million disbursed as of January 2019). The engagement included technical assistance and a US$1.5 million guarantee facility to enhance collateral to make viable to offer green lines to smaller companies and agricultural producers. Finally, Banpro is part of IBD Invest TFFP program with an approved line of US$30 million. 7. The loan may have been secured by (i.e. collateralized against Diversified Payment Rights sold by Banco de la Producción, S.A. This issue warrants further investigation.

Number of official sources

9

Number of total sources

12