“The municipality encompasses Tegucigalpa and Comayaguela and has a population of 1.2 million people, generating nearly half the country’s gross domestic product. IFC will provide three local banks—Banco Ficohsa, Banco Atlantida, and Banco de Occidente—a partial risk-sharing facility for 36 percent of their eight-year, $44 million syndicated local-currency loan to the municipality. The investment is expected to improve the municipality’s main road network, optimize its road investments, and support private sector development by reducing vehicle operating costs,” IFC reported.

“IFC’s support will help us meet our infrastructure needs, but more importantly these projects will generate much needed jobs in our city,” said Mayor Ricardo Alvarez. “Unemployment rates are very high; whatever local governments can do to improve the quality of life and generate jobs in partnership with the banking sector and international organizations like IFC is a positive contribution to our city.”

Banco Financiera Comercial Hondureña S.A. (Ficohsa), a key IFC partner in Honduras, was the loan’s structuring agent and lead arranger. The Central District Municipality and Ficohsa requested IFC’s participation to draw on its global expertise in road infrastructure and structuring subnational financing.

IFC provides subnational financing without sovereign guarantees to local governments and public enterprises for essential infrastructure investments. IFC’s risk-sharing product met the needs of local banks reaching single-borrower exposure limits, while allowing for financing that matches the long-term nature of the investments and the municipality’s local-currency revenues. IFC’s facility is the first from a multilateral organization to a municipality in Honduras without a sovereign guarantee.

Javier Atala, Ficohsa’s General Manager and Executive Vice-President said, “IFC’s support to local banks will help the municipality move beyond its current reliance on central government grants and short-term loans to finance its capital investment program, diversify its funding sources, and transition to long-term commercial financing.”

Roberto Albisetti, IFC Senior Manager for Mexico and Central America, said: “IFC is delighted to support our commercial bank partners in delivering our first long-term infrastructure financing for a municipality in Honduras. With this investment we will help provide road repairs and upgrades that are essential to the municipality’s continued economic growth. We will also help reduce the risk from flooding in the municipality, which is often exposed to natural disasters.”