Created by a merger of Popular, a microfinance savings & loan company sponsored by Grupo Financiero Covelo, with two sister entities, Bancovelo is the leading regulated microfinance organization in Honduras, with a loan portfolio of approximately $50 million and a network of 23 agencies and seven offices spread across rural and urban Honduras, with four additional agencies planned. In making the transition from S&L to commercial bank, Bancovelo will meet increased capital requirements and will be empowered to make commercial loans.
To capitalize the new entity, ACCION Investments in Microfinance, SPC, a portfolio company sponsored by ACCION International to provide financing to microfinance institutions worldwide, assembled a consortium of five international shareholders, each of whom invested $2 million to take equal 11.76 percent stakes in the new bank. Along with ACCION Investments, these shareholders include IFC, a member of the World Bank Group; the Belgian development entity BIO; the Netherlands development institution FMO; and Banco Centroamericano de Integracion Economica (BCIE – CABEI). An additional $7 million in financing was provided by Fundacion para la Promocion de la Pequena y Microempresa ‘Jose Marie Covelo.’
In addition to its equity stake, ACCION will provide technical assistance through three resident advisors: Manuel Torres, who will act as Bancovelo’s general manager; Fernando Cantor, commercial manager; and Luis Albinez, training and capacity-building manager. ACCION has been providing technical assistance, including the transfer of credit methodology and microfinance industry best-practices, to Popular since mid-2006. The creation of Bancovelo exemplifies ACCION’s new business model-combining equity investment with technical assistance for MFIs.
Bancovelo’s mission is to be an efficient, profitable and professional bank that offers high quality financial products and services to urban and rural markets, operating with a strong sense of social responsibility and a firm commitment to improving clients’ quality of life. Eighty-five percent of Bancovelo’s clients live in cities; 71 percent of those are women working in retail and industry sectors; and 48 percent are classified as ‘poor,’ with an average loan size of $550. At the end of 2007, Bancovelo had approximately 24,000 clients, an amount the bank expects to triple within five years. At present, only 1 percent of loans to micro, small and medium enterprises in Honduras are financed by commercial banks, although such enterprises account for about 25 percent of GDP.
Maria Otero, president and CEO of ACCION International, said, “We are delighted to be part of Bancovelo’s coming of age as a commercial bank. In our partnership over the past year and a half we’ve seen Bancovelo develop state-of-the-art credit methodology, information management and institutional capacity. We have every confidence that the bank will continue to grow rapidly in a sustainable way — and so fulfill its mission to create opportunities for Honduras’s microentrepreneurs.”
Victor Rheinboldt, president of the board of directors of Bancovelo, said, “The launch of Bancovelo is a significant step towards expanding access to finance to small and micro enterprises in Honduras, which have been underserved until now. We are very pleased with the financial and operational support that ACCION has provided to help Bancovelo reach this milestone, and we look forward to ACCION’s continued support.”