private sector with purpose: stories of development

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PRIVATE SECTOR WITH PURPOSE: Stories of Development

PRIVATE SECTOR WITH PURPOSE: Stories of Development

PRIVATE SECTOR WITH PURPOSE: STORIES Of DEVElOPmEnT | 1

Contents

Message from the President of the Inter-American Development Bank 3Introduction 5

Chapter 1 Operational Highlights 6 Operational Highlights 6 Outstanding Portfolio by Sector and by Country, 2013 8 Outstanding Portfolio by Country Group, 2013 9 Private Sector at a Glance, 2010-2013 10 Chapter 2 Supporting Micro, Small, and Medium Enterprises 12 The Challenge and Working to Close the Development Gap 15 Tenda Atacado - Brazil 16 Early Stage Equity: Generating Economic and Social Value 18 Programa Emprender - Uruguay 19 IDB Group Technical Cooperation Grants 20 FINPYME - Regional 21 Chapter 3 Building Sustainable Infrastructure 22 The Challenge and Working to Close the Development Gap 25 Palmatir - Uruguay 26 Blue Power Energy - Nicaragua 28 Infrastructure 360º - Regional 29 Pozo Almonte and Calama solar Photovoltaic 30 Canadian Climate Change Fund 31

Chapter 4 Fostering Innovation 32 The Challenge and Working to Close the Development Gap 35 Subsole – Chile 36 The Shared Value Initiative 36 Banco Agricola – El Salvador 38 Innovations in Sustainability Awards - Regional 39 Chapter 5 Providing Basic Goods and Services 40 The Challenge and Working to Close the Development Gap 43 Vinte - Mexico 44 Alternative Insurance Company (AIC) - Haiti 46 Economic and Social Inclusion of Recyclers - Regional 47 Universidad San Ignacio de Loyola (USIL) - Peru 48 Chapter 6 Encouraging Green Growth 50 The Challenge and Working to Close the Development Gap 53 Using Remittances for Clean Energy in Haiti 54 Greenpyme - Regional 56 Green Credit Lines - Regional 56 Technical Assistance - Investment in Climate Change - Regional 57 Energy Efficiency Finance Facility - Nordic Development Fund - Regional 57

2 | PRIVATE SECTOR WITH PURPOSE: STORIES Of DEVElOPmEnT

Chapter 7 Promoting Gender Equality 58 The Challenge and Working to Close the Development Gap 61 Mibanco - Peru 62 Women entrepreneurship Banking 64 Sustainable women-led businesses in Colombia 65 Finpyme Mujer Empresaria - Regional 66 Danper - Peru 67 Socially Inclusive Hospitality in Jamaica 68

Chapter 8 Catalyzing Development through Partnerships and Knowledge Creation 70 Strategic Events and Forums 70 Annex Abbreviations 72


message from the President of the Inter-American Development Bank1

I am pleased to introduce “Private Sector with Purpose: Stories of Development,” which highlights examples of some the IDB Group’s most innovative private sector work. It features recent projects, initiatives, and programs from across our four private sector windows: the Structured and Corporate Finance Department (SCF), Opportunities for the Majority (OMJ), the Inter-American Investment Corporation (IIC), and the Multilateral Investment Fund (MIF), showing the wide variety and reach of our private sector operations.

The IDB Group’s private sector activities have contributed to the development of Latin America and the Caribbean. The Bank has gained recognition for investing in under-served project types and/or sectors such as small and medium size enterprises (SMEs) and in areas where the private sector has significant potential to promote the region’s growth through the development of financial services, infrastructure, and base-of-pyramid markets. From 2010 to 2013, our combined financing to private sector borrowers amounts to over US$7 billion through more than 500 projects spanning sectors from agribusiness to housing to infrastructure to financial markets.

Complementing our own financing, we have partnered with other investors, leveraging more than US$4.7 billion in additional funds to achieve transformational results. In addition to providing financing, we have fostered partnerships and introduced new products and initiatives such as the Canadian Climate Fund with a lending capacity of US$250 million, Infrastructure 360°, a partnership with Harvard University to recognize cutting-edge sustainable infrastructure, and the Women Entrepreneurship Banking program, which helps banks increase their lending to women-led businesses. With the help of Technical Assistance grants, we have introduced new products such as the Shared-Value Appraisal, through which we partner with clients to identify ways to drive business growth and generate social value, thereby improving the social and environmental impact of our projects to all stakeholders including: shareholders, employees, the surrounding community, and individuals within our clients’ value chains.

We have advanced these projects and programs in order to address the needs of current and future generations in Latin America and the Caribbean. We must continue to develop creative partnerships with the private sector in order to promote jobs and opportunities for all individuals in the region. We must work with others to leverage investment to satisfy growing demand for infrastructure and basic services, meet the needs of poorest segments of our populations, and enhance productivity in a highly competitive landscape.

I am confident that the changes underway in the IDB Group will catalyze further innovation and growth in our private sector activities. It will also enable the IDB Group to serve the region’s private sector more effectively and efficiently, helping to maximize its impact on the region’s development.

Luis Alberto MorenoWashington D.C.

1. The President of the Inter-American Development Bank (IDB) is also Chairman of the Board of Executive Directors of the Inter-American Investment Corporation (IIC) and Chairman of the Donors' Committee of the multilateral Investment fund (mIf).


“The private sector has a crucial role to play in the pursuit of sustainable growth and equal opportunities in Latin America and the Caribbean.“luis Alberto moreno President, Inter-American Development Bank


INTRODUCTION

As the key source of development financing for Latin America and the Caribbean, the IDB Group has been supporting the private sector since its foundation over fifty years ago, an acknowledgment of the critical role the private sector plays in the region's economic development. The Inter-American Development Bank (IDB) is best known for its work with governments in the region through its sovereign guaranteed (SG) operations and non-financial products to reduce poverty, tackle inequality, and promote sustainable economic growth. Those same fundamental goals drive the work the IDB Group does in partnership with the private sector through its non-sovereign guaranteed (NSG) operations, which include an array of financial and non-financial products.

This report—“Private Sector with Purpose: Stories of Development”— highlights some of the achievements to date associated with the IDB Group's four private sector windows.2 The report provides a compilation of case studies and examples of some of the group’s most innovative and impactful projects.

The portfolio of more than $7 billion3 outstanding, reaches multiple sectors of the economy throughout Latin America and the Caribbean. It is focused on providing financing for projects that are not only financially sustainable but also contribute important social and/or environmental benefits, an idea that not only resonates with our private sector clients, but also with our public sector stakeholders. This dual benefit drives our private sector clients to act as responsible corporate citizens because they recognize that acting in society’s interest is also in their own best interest. In fact, the priorities represented by every chapter in this report are ultimately beneficial both to society and to business, whether the topic is creating sustainable infrastructure, fostering innovation, encouraging green growth, making sure that low-income consumers have access to basic goods and services, or narrowing the financing gap for micro, small, medium, and women-led businesses. When the private sector acts as a driver of economic growth that fosters sustainable development while achieving high financial returns, it embodies the meaning of "private sector with purpose."

2. The IDB Group’s support of the private sector is currently carried out through four dedicated windows: Structured and Corporate finance (SCf), Opportunities for the majority (OmJ), the Inter-American Investment Corporation (IIC) and the multilateral Investment fund (mIf). The report features projects, initiatives and programs from across all four private sector windows.3. All monetary amounts in this report refer to US dollars, unless otherwise specified.

Stories of DevelopmentPRIVATE SECTOR WITH PURPOSE

People with a purpose

Click above or scan QR code to view the video

http://vimeo.com/81727044


2013 Outstanding Portfolio (USD 000s)* TOTAl

Volume numberPortfolio by product $7,225,603 501 A-Loans $5,892,089 366 Guarantees $217,204 11 TFFP guarantees $645,000 30 TFFP loans $328,408 11 Equity $142,902 83 Portfolio by country group $7,225,603 501 A/B $3,077,323 219 C/D $3,160,615 227 Regional $987,665 55

Approvals (USD 000s)*2012 2013

Volume number Volume numberApprovals by product $2,453,836 154 $3,285,635 158 A-Loans $1,754,367 114 $2,384,023 126 Guarantees $129,777 5 $32,979 4 TFFP uncommitted credit lines $359,000 22 $812,955 20

Uncommitted facilities $205,167 3 $50,000 1 Equity $5,525 10 $5,678 7 Approvals by country group $2,453,836 154 $3,285,635 158 A/B $935,813 52 $1,574,028 60 C/D $970,956 85 $1,161,584 89 Regional $547,067 17 $550,023 9

2013 PORTFOLIO HIGHLIGHTS

As of December 31, 2013, the value of the private sector portfolio exceeded $7 billion and consisted of 501 projects spread throughout 24 countries across Latin America and the Caribbean.

These operations are improving the lives of over 7 million people with support to solar, wind and clean energy, increased access to financial services, training through technical assistance and the provision of essential services such as housing, health and education. In addition, since 2010, the IDB Group has supported over $9.3 billion in non-sovereign climate and environmentally friendly investments. Projects supported included solar and wind energy, industrial practices and

technology aimed at reducing emissions, and Green Lines dedicated to the provision of financing for environmentally friendly investments. Lastly, since 2010, the IDB Group has reached over 8.9 million MSMEs through the provision of financial services specifically designed for their needs and through the promotion of inclusive supply chains which among other services provide training aimed at teaching MSME farmers agricultural best practices.

CHAPTER 1

Operational Highlights PRIVATE SECTOR WITH PURPOSE

TFFP - Trade Finance Facilitation ProgramGroup A. Argentina, Brazil, Mexico, and Venezuela. Group B. Chile, Colombia, and Peru. Group C. The Bahamas, Barbados, Costa Rica, Jamaica, Panama, Suriname, Trinidad and Tobago, and Uruguay. Group D. Belize, Bolivia, the Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Nicaragua, and Paraguay.* Reflects the combined portfolios of the Structured and Corporate Finance (SCF) Department, Opportunities for the Majority (OMJ), the Multilateral Investment Fund (MIF), and the Inter-American Investment Corporation (IIC).

CHAPTER 1: OPERATIOnAl HIGHlIGHTS | 7

2013 PORTFOLIO HIGHLIGHTS

(2010-2013)

KEY METRICS

Technical Cooperations (in USD millions) 498 Technical Cooperations (TCs) under execution* $507

Impact Evaluations $1.5Impact evaluations completed (#) 5

* 453 TCs under execution through MIF

mobilization (2013 closed projects - in USD millions)*B-Loans $697Co-Loans $2,371Equity $13

Trust Funds $10* SCF, OMJ and IIC only

Outstanding Portfolio mobilization (in USD millions)* B-Loans $3,200China Fund $50Clean Technology Fund $36

Canadian Climate Fund $21

Global Environment Facility $1.6

Third-Party Funds $108* SCF, OMJ and IIC only

OthersTaxes paid by clients (USD millions)* $4,534

Underlying International Trade transactions supported** 1,374* Taxes paid refer to income taxes paid by SCF, OMJ and IIC client companies. SCF & OMJ data are from 2010-2013. IIC data are from 2012. Data from previous years not available.** SCF only

8.9 million

mSmEs financed and/or supported

7 million

People with improved

living standards

$9.3billion

Climate-friendly investments

B-loans are financed by commercial or other institutional lenders and complement loans funded from the Bank’s own resources. Co-loans: Agreement or mechanism whereby third party resources are mobilized and combined with Bank loans to finance a specific operation or operations in a borrowing member country.Structured and Corporate Finance (SCF), Opportunities for the Majority (OMJ), the Multilateral Investment Fund (MIF), and the Inter-American Investment Corporation (IIC).


PORTFOLIO BY SECTOR (USD 000s)

IDB Private Sector Group Outstanding Portfolio

501projects

A/B = $3 billionC/D = $3.1 billionRegional = $0.9 billion

Over

$7 billion invested in the region

RegionalC/D Countries

A/BCountries

PORTFOLIO BY COUNTRY GROUP

Volume (USD 000s)

number of Projects

$3,

077,

323

219

227

55

$3,

160,

615

$98

7,66

5 Agribusiness $245,331

Community Infrastructure $3,636

Energy $1,207,235

financial Institutions $1,699,014

Health & Education $6,973

Housing $293,900

Industries $1,004,388

Investment funds $267,697

manufacturing $61,872

Oil & Gas $129,530

Trade $1,088,434

Transportation $1,052,749

Water & Sanitation $76,923

Others $87,920

Mexico$534,652

47


Argentina$200,430

35

Uruguay$314,960

19

Brazil$1,219,579

54

Paraguay$535,548

24

Bolivia$44,597

20

Chile$604,929

29

Peru$270,779

30

Ecuador$249,453

24

Colombia$246,985

24Panama $709,211

25

Haiti$5,619

8

Guyana*$1,497

2

Trinidad & Tobago*

$3,2595

The Bahamas*

$0.552

Suriname*$3,502

2

Jamaica$66,462

8

Dominican Republic$184,771

8

Guatemala$320,814

13

El Salvador$140,148

13

Regional$987,665

55

CountryVolume (USD 000s)

Number of ProjectsHonduras

$117,346 14

Costa Rica$374,901

27

Nicaragua$96,754

24

PORTFOLIO BY COUNTRY GROUP

Belize*$2,461

4

*Technical Assistance grant funding only


IDB Group Key Metrics2010-2013

Measuring the key metrics associated with IDB Group private sector projects is a critical tool to gauge our success. The figures below represent the cumulative key metrics stemming from projects that were active from 2010 to 2013.4

4. January 1, 2010 to December 31, 2013. * The data for Energy produced (GWh) are cumulative for 2010-2013.

Private Sector at a Glance 2010-2013

Sustainable Infrastructure and Green Growth

Total capacity installed (in MW) 2,800

Low-carbon capacity installed (in MW) 900

Energy produced (GWh)* 8,200

Households with new or upgraded water supply 616,000

Households with new or upgraded sanitary connections 628,000

For further information on the IDB Group private sector contribution to Map Americas, please visit:

8.9 MILLION mSmEs fInAnCED AnD/OR SUPPORTED

4.5 mIllIOnPEOPlE SUPPORTED THROUGH InfRASTRUCTURE PROJECTS

6,500REnEWABlE EnERGY PRODUCED (GWh)*

PRIVATE SECTOR WITH PURPOSE


note: Data stems from projects active from 2010-2013.

fostering Innovation

Smallholder farmers supported

336,000

People trained 1,400,000

Gender*

Female Jobs created 14,600

Women Microentrepreneurs supported

4,445,000

Female students supported 8,200

*Gender tracking began in 2012

Providing Basic Goods and Services

Students benefitted by education projects

17,000

Teachers trained 6,200

Microentrepreneurs supported 7,700,000

Households with new or upgraded dwellings

664,000

336,000SmAllHOlDER fARmERS SUPPORTED

664,000HOUSEHOlDS WITH nEW OR UPGRADED DWEllInGS

163,000*

WOmEn TRAInED


CHAPTER 2

Supporting Micro, Small, and Medium Enterprises


CHAPTER 2: SUPPORTInG mICRO, SmAll, AnD mEDIUm EnTERPRISES | 13

Recognizing the contribution that micro, small, and medium businesses can bring to a country’s economy, the IDB Group invests in its success. It works with financial institutions throughout Latin America and the Caribbean to expand access to credit for small businesses, helping unleash their potential to grow, create jobs, and innovate.

$1.5 BILLIONVolume of Loans to MSMEs in the Outstanding Portfolio

$598 MILLIONdisbursed in 2013 to support MSMEs through financial institutions

8.9 MILLIONMSMEs financed and/or supported from 2010 to 2013



“The coming decade will be about employing a smart combination of finance, knowledge and innovation to satisfy the needs of MSMEs across our changing region.”Carl Muñana General manager, Inter-American Investment Corporation


THE CHALLENGE

Micro, small, and medium enterprises (MSMEs) contribute significantly to economic growth, job creation, and technological development, yet many face substantial challenges. Chief among them is a lack of access to credit. Despite major improvements on this front in recent years, MSMEs in Latin America and the Caribbean still face poorer access to finance, less favorable conditions, and higher costs than larger firms.

Working to Close the Development Gap

The IDB Group works with private lending institutions throughout the region to support financing for MSMEs in ways that make the most impact and contribute to sustainable economic growth, balancing financial returns with social and environmental gains. In 2013, it disbursed nearly $600 million directly to financial institutions to support MSMEs, and at year’s end its outstanding portfolio of these loans was around $1.5 billion. From 2010 through 2013, 8.9 million MSMEs benefited from this support.

Financing is done in partnership with banks and other lenders in communities across the region, through

financing lines tailored to meet specific needs—whether helping women-led MSMEs scale up their operations or enabling smallholder farmers to adopt greener technologies. From 2000 to 2011, the IDB Group made 151 discrete interventions (i.e. loans or equity investments) to 113 financial intermediaries. In addition to making credit available, the IDB Group provides lenders with technical assistance and innovative instruments that allow them to more accurately assess risk. This is a vital piece of the puzzle, since many small, informal businesses lack collateral or even a credit history.

One niche for the IDB Group is providing equity and capacity-building to MSMEs as well as seed and venture capital funding that comprises critical early-stage financing to dynamic enterprises. These funds not only provide vital long-term financing to businesses, but they also introduce structural changes needed to support growth—good corporate governance practices, professionalization of management, and improvements in operational processes.

5. Sources: Stein, P., T. Goland, and R. Schiff (2010). Two Trillion and Counting. Assessing the credit gap for micro, small and medium-size enterprises in the developing world, International finance Corporation and mcKinsey and Company

VALUE OF CREDIT GAP IN LATIN AMERICA5 ($ billion)

MSMEs* $330 - $410

SMEs**

$125 - $155

* Refers to formal and informal mSmEs.** Refers to formal SmEs.


Small and micro entrepreneurs in Brazil face several challenges in financing their operations and accessing training opportunities that could help their business grow from a survival-only mode to a more sustainable path. This scenario is particularly evident in the food and retail sector - a strong contributor to Brazil’s economy: cafés and restaurants represent 2.4% of Brazil’s GDP and account for six million direct jobs. In the absence of suitable financing and training opportunities, these Base of the Pyramid (BoP) entrepreneurs resort to informal lenders, find it difficult to expand their businesses, and lack technical skills.

CASE STUDY

TEnDA ATACADOTransforming Business Relations into Partnerships for Growth

Date of Approval 2010Loan Size $10 millionTotal Project Cost $20 millionCountry Brazil Sector Retail

“Tenda’s objective with its credit program is not to sell to clients, but to create shared value with those that walk into our stores.” Source: Tenda Company manager.


For further information on Tenda Atacado, please see

Through Tenda Atacado’s program targeting micro-entrepreneurs, over 89,000 Base of the Pyramid clients have access to finance through VoxCred.

89,000BASE OF THE PYRAMID CLIENTS FINANCED

Within Latin America, the value of the credit gap for MSMEs is estimated to be from $330 billion to $410 billion.

In order to help address this funding gap, the IDB Group approved a $10 million loan to Tenda Atacado, a leading Brazilian retail and wholesale distributor, in order to expand its credit program, VoxCred, to an additional 70,000 micro-entrepreneurs. Additionally, the Korea Poverty Reduction Fund approved a $270,000 grant to design and launch a training and capacity building program to complement the credit scheme that will engage 6,000 micro-entrepreneurs. At present, more than 180,000 clients use VoxCred, representing 15% of Tenda’s total sales. In addition, 85% of the credit lines were below R$400 (approximately US$200).


http://vimeo.com/m/58466305


Early Stage Equity: Generating Economic and Social Value

Small, young, and high-growth businesses - also known as “dynamic businesses” - contribute significantly to economic growth, job creation and technological development, thereby improving people’s lives. However, many of those businesses face substantial challenges to growth due to a lack of access to long-term financing, limited industry knowledge, informality, and low professionalization. In fact, approximately 40% of SMEs suffer from credit constraints and report that limited access to finance is a major barrier to growth.

The IDB Group plays a catalytic role in supporting these companies by providing equity and capacity building to seed and venture capital funds which offer financing to early stage, dynamic enterprises. By investing in funds, the IDB Group shares investment risk with other partners in the region and demonstrates that financial sustainability and positive social and environmental impact can be mutually attainable. Since 1996, the IDB Group has committed over $323 million in financing to more than 65 Venture Capital (VC) and seed funds. Including co-investments, the IDB Group has supported funds that total over $1.2 billion and reach SMEs in every sub-region of Latin America and the Caribbean (LAC). These funds not only provide long-term financing to SMEs, but introduce structural changes needed to support growth: the adoption of good corporate governance, the professionalization of management, and the improvement of operational processes.

The IDB Group has found that VC investing is a powerful tool for generating economic and social value. In fact, firms receiving VC from the IDB Group increased their revenues by 25% on average.

For more information please click here

Including co-investments, the IDB Group supported venture capital funds that total over $1.2 billion and reach SMEs in every sub-region of Latin America and the Caribbean.

The IDB Group Venture Capital portfolio provided capital to over 350 small businesses, which have generated over $1 billion in revenues and created more than 28,000 jobs.

28,000JOBS CREATED THROUGH 350 SMALL BUSINESSESbeyondBanking

Created in 2009, beyondBanking promotes sustainable social, environmental, and corporate governance practices by Financial Institutions in Latin America and the Caribbean through six strategic pillars: • accessBanking promotes financial inclusion strategies.• clearBanking strengthens corporate governance and transparency.• connectBanking disseminates innovative information and communication

technologies.• equalBanking supports gender equality and diversity in FIs.• learnBanking fosters financial education as a tool for responsible decision making.• planetBanking seeks to respond to the effect of climate change, thereby

reducing FIs’ direct and indirect environmental footprints.

beyondBanking contributes to the Bank of the Future—a bank business model that balances financial returns with social and environmental returns in an effort to foster a more inclusive financial sector.

http://www.fomin.org/en-us/HOME/Knowledge/idPublication/94291


Date of Approval 2006Equity Investment and Technical Assistance $3.2 millionCountry UruguaySector Finance

CASE STUDY

PROGRAmA EmPREnDER A New Opportunity for Dynamic Entrepreneurs

Access to start-up or seed capital as well as business contacts, are limiting factors for new entrepreneurs in Uruguay with high growth potential. In 2007, Prosperitas Capital Partners, in partnership with the IDB Group, the National Development Corporation (CND) and the Technological Laboratory of Uruguay (LATU), created the Comprehensive Program to Support Dynamic Entrepreneurship, known as Programa Emprender. The program supports the development of dynamic sectors in Uruguay through an integrated business model that supports companies with high growth potential. By building their business networks, promoting innovation and competitiveness, and providing know-how and financing, the program allows companies to expand

throughout the financial cycle and achieve economic development.

Programa Emprender is structured primarily around two subprograms: one of financial services intended for the most promising new companies and another to provide technical support to project ideas and entrepreneurs looking to build a stronger entrepreneurial ecosystem. In 2009, Fondo Emprender promoted the creation of the “Angel Investors Network,” made up of Uruguayan investors interested in ventures that have the potential for global expansion. By establishing the angel investment network, the program created the first Prosperitas risk capital fund, which helped fill the gap for seed capital.

$3.7MIN ANGEL AND VENTURE CAPITAL FUNDS INVESTED

*as of 2013


For more information on technical cooperation grants, please refer to the Multilateral Investment Fund’s (MIF) Development Effectiveness report at:

Technical Assistance Grants

The IDB Group is increasingly using technical assistance grants to enhance the development results associated with its private sector operations. Funding for technical assistance supports client efforts to strengthen social responsibility, promote sustainability, identify opportunities for shared value, and improve environmental standards.

The IDB Group also tests innovative, market-based approaches for low-income households, farms, and businesses. It has been a pioneer in supporting business models that have the potential to enhance the lives of people at the base of the economic pyramid in Latin America and the Caribbean. The IDB Group partners with institutions from the private, public, and nonprofit sectors to help individuals and communities overcome poverty in the long term by addressing the lack of access to basic services, financing, markets, and skills.

At present, the IDB Group has 498 Technical Assistance grants under execution, the majority of which assist IDB Group clients access finance. In 2013, 97 technical cooperation grants were approved to support research, development of training programs, and funding for private sector pilot projects. Of these, 33 grants were for green growth initiatives or access to basic services; 37 provided access to finance; 22 focused on access to markets and skills for small businesses or youth, and 5 fell outside these three thematic areas. Technical cooperation grants also help clients learn how to achieve the highest social impact. Grants are instrumental in helping companies address questions about risk, design, and feasibility before they launch or scale up an initiative.

DEVELOPMENT EFFECTIVENESSREPORT 2013

Technical Assistance Grants - Under Execution Thematic Area Description Approved Amount

(USD million) Counterpart

Amount (USD million)

# of Operations

Access to Basic Services and Green Growth

Market-driven solutions for providing basic infrastructure and social services to low-income households and enterprises with a focus on reducing greenhouse gas emissions and supporting adaptation to climate change.

$100 $79 51

Access to Finance Access to financial products and services, such as microfinance and microinsurance, for low-income populations and access to SME finance, seed, and early stage financing for SMEs.

$148 $84 149

Access to Markets and Skills

Access to productive inputs, business skills, and market opportunities for youth and MSMEs.

$232 $322 92

Other Projects outside of the three thematic areas mentioned above (Access Areas)

$27 $39 206

Grand Total $507 $524 498

http://www.fomin.org/en-us/HOME/Knowledge/idPublication/94291


FINPYME Program: Reaching Micro, Small, and Medium Enterprises through Direct Investments and Knowledge Transfer

MSMEs require more than financing for sustainable growth. They also need technical assistance. Companies face constant management, planning, strategic, and other challenges that hinder their ability to compete on open markets. Over the years, the IDB Group has identified several key areas in which MSMEs are regularly in need of assistance. To respond to these needs, the IDB Group offers a comprehensive package of loans and value-added services for MSMEs through the FINPYME Program.

The FINPYME family of programs includes FINPYME Credit; FINPYME Diagnostics, FINPYME ExportPlus, FINPYME Family Business, FINPYME Integrity: GREENPYME, FINPYME Mujer Empresaria and FINPYME Technical Assistance. Through FINPYME, the IDB Group has deployed close to $5 million in technical assistance to the region, through 600 direct and indirect trainings and services benefiting more than 1,681 MSMEs. Over the same period, donors have approved more than $15 million in contributions to support key IDB Group initiatives. In 2013, donor approvals of technical assistance amounted to $5.9 million.

In 2013, donor approvals of technical assistance amounted to $5.9 million. More information on the FINPYME family of programs can be found at

Video – FINPYME Caribe

2013 AnnuAl RepoRt

e v o l v i n gevolving with our region/evolving with our clients

www.iic.org



https://annualreport.iic.org/file.php?lang=en


CHAPTER 3

Building Sustainable Infrastructure


CHAPTER 3: BUIlDInG SUSTAInABlE InfRASTRUCTURE | 23

As a key provider of development finance in Latin America and the Caribbean, the IDB Group plays a significant role in meeting the region’s critical infrastructure needs.It works to expand access to reliable, affordable, and sustainable energy, water, sanitation services, and to improve the transportation grid that enables companies to more efficiently bring their goods to market.

2,800 900Total capacity installed (MW)

Households with new or upgraded water supply

Households with new or upgraded sanitary connections

Low-carbon Capacity installed (MW)

8,200*

616,000

628,000

6,500*

Energy produced (GWh)

Renewable energy produced (GWh)


* The data for Energy produced (GWh) are cumulative for 2010-2013.


“I have witnessed firsthand the galvanizing role of sustainable infrastructure projects to systemically transform energy matrices, markets and the definition of ‘business-as-usual’ in the region.”

Hans Schulz Vice President for the Private Sector and non-Sovereign Guaranteed Operations, a.i.and General manager of the Structured and Corporate finance Department,Inter-American Development Bank.


THE CHALLENGE

In many parts of the region, a shortage of clean, reliable, and affordable energy and water puts companies—and countries—at a major competitive disadvantage. Technology gaps and insufficient access to financing often stand in the way of implementing renewable energy projects, making it harder for countries to diversify their electric supply and reduce dependence on polluting fuel sources. In the transportation sector, meanwhile, inadequate roads, congested seaports, and outdated airports increase costs, complicate logistics, dampen business growth, and obstruct regional trade integration. While many people tend to think of infrastructure as a problem for governments to solve, the private sector can play a critical supporting role.


The IDB Group has invested in numerous energy, transportation, and water and sanitation projects in the region. In 2013, it approved $427 million in private sector loans for infrastructure projects and mobilized another $30 million in investment from other institutions. Complementing its lending, the IDB Group has provided technical assistance and capacity-building products to enhance results. Such offerings, designed to address technical or regulatory shortcomings, often lead to stronger partnerships between the public and private sectors.

Energy projects have focused on alternatives to fossil fuels. With a goal of supporting $12 billion in private investment in climate change by 2015, it finances projects aimed at increasing power generation capacity from renewable sources—solar, wind, hydroelectric, biomass, and geothermal energy. It also fosters innovation by providing financial support to pilot projects and viability studies for the development of low-carbon, energy-efficient solutions.

Transportation is also a priority. As of December 2013, private sector operations in this sector amounted to a combined value of over $5.3 billion, leveraging over $850 million from its own account. Since 2011, the IDB Group has helped finance the construction of over 2,300 kilometers of roads, as well as two airports and a seaport, across seven countries in Latin America and the Caribbean.

PROJECT HIGHLIGHTS: PortfolioEnergy: 35 projects, Total project cost = $6.9 billionRenewable Energy: 27 projects, Total project cost = $4.6 billionTransportation: 23 projects, Total project cost = $5.3 billionWater & Sanitation 1 project, Total project cost = $250 million

2013 Approvals Energy8 projects, Total project cost = $2.5 billion

Video: Infrastructure that works Infraestructura – Una Asignatura Pendiente (Spanish)


In times of low rainfall, Uruguay supplies a greater portion of its electricity from fossil fuels—a more costly source that increases the country’s carbon footprint. Almost everyone in Uruguay has access to electricity; in 2012, nearly 98 percent of all households were connected to the grid. However, 60 percent of total generation capacity comes from hydroelectric power, so in times of low rainfall the country supplies a greater portion of its electricity from fossil fuels—a more costly and less predictable source that

also increases the country’s carbon footprint. Given a limited ability to pass along higher energy costs to final users, the government has enacted a power-saving plan to restrict energy consumption and avoid shortages. Still, domestic demand grew by nearly 2.6 percent in 2012 and is expected to increase by an average of 3.5 percent per year through 2033. This makes the need for additional generation capacity even more urgent. Uruguay has sought to diversify its energy matrix by promoting private sector participation in wind power generation.

CASE STUDY

PAlmATIR WInD fARmDiversifying Uruguay’s Energy Matrix

Date of Approval 2012Loan Size $41.7 million Total Project Cost $154 millionCountry Uruguay Sector Energy


In 2012, the IDB Group approved an 18-year loan valued at approximately $42 million to finance the construction of one of the biggest wind farms in Uruguay: Palmatir. It will add 50 megawatts of clean, more affordable energy to the system and ease dependence on both hydroelectric and fossil fuel sources.

The Palmatir Wind Farmwill avoid emitting 126,000 tons of CO2 per year.

126,000 TONS OF CO2 AVOIDED

In times of low rainfall, Uruguay supplies a greater portion of its electricity from fossil fuels—a more costly source that increases the country’s carbon footprint.


Date of Approval 2012Loan Size $50 million Total Project Cost $115 millionCountry NicaraguaSector Energy

CASE STUDY

BlUE POWER EnERGY Easing Nicaragua’s Dependence on Fossil Fuels

In 2007, 63 percent of Nicaragua’s electric grid capacity came from oil and diesel combustion. While the country gets some of its electricity from renewable sources, the energy sector remains dependent on fossil fuels, which places enormous strain

on the environment and the economy. Furthermore, constant power outages signal that the electricity supply is still insufficient in many parts of the country.

To help address this gap in electricity supply, the IDB Group approved a $50 million loan to fund Nicaragua’s second-largest wind farm, Blue Power & Energy, S.A. located in the southwestern part of the country. The project increases the share of renewable energy in the country’s energy mix from 29 to 34 percent. The IDB Group funded the project together with the Danish export agency Eksport Kredit Fonden.

A lack of investment in power generation has been a major problem in Nicaragua, which relies heavily on outdated diesel power stations to produce electricity.


Infrastructure 360°: A Partnership with Harvard University to further Sustainability

The Harvard Zofnass Program for Sustainable Infrastructure (HZPSI) has developed a comprehensive rating system to measure sustainability of infrastructure. HZPSI has a mission to research, develop, and promote methods, processes, and tools that define and quantify sustainability in infrastructure investments.

In collaboration with HZPSI, the IDB Group has implemented a rating system for infrastructure sustainability, known as the Infrastructure 360° Awards. The award program seeks to identify, assess, and reward sustainable infrastructure investments made by the private sector and public-private partnerships in IDB Group member borrowing countries.

As part of the award program, 12 finalist projects were selected out of more than 60 applications from 18 countries in the region. The HZPSI team prepared a case study on each of the finalist projects and was reviewed by a jury of internationally recognized experts. The first case study using the Infrastructure 360° criteria is the Palmatir Wind Farm project.

Winners

During the IDB Group Annual Meeting in March 2014, Metro Lima Line 1 (Peru), Los Cocos Wind Farm (Dominican Republic) & Aura Solar Photovoltaic Plant (Mexico) were announced as the 2013 Infrastructure 360° winners.

INFRAFUND: PROMOTING THE DEVELOPMENT OF RENEWABLE ENERGY PROJECTS THROUGH PUBLIC-PRIVATE PARTNERSHIPS

Infrafund is a fast-disbursing fund created to support the preparation of climate resilient and sustainable infrastructure projects. Infrafund is dedicated to assisting public, private and mixed-capital entities in latin America and the Caribbean in the identification, development and preparation of bankable and sustainable infrastructure projects.

Through Infrafund, the IDB Group provided an investment grant to the Taua Solar photovoltaic project in Brazil to foster the development of the industry and replication within the country. The Taua Solar project will be the first power generation project in Brazil to connect a photovoltaic system into the national Interconnected System.

For more information and video links to the 2013 winners: www.iadb.org/infrastructure360

Infrastructure 360° Awards Ceremony at IDB Group Annual Meeting, 2014

Infrastructure 360° Program Description

The Taua Solar project will be the first power generation project in Brazil to connect a photovoltaic system to the national electricity grid.



www.iadb.org/infrastructure360

http://www.iadb.org/en/structured-and-corporate-finance/scf-360awards/about-the-awards,7935.html


Chile’s northernmost electrical grid (Sistema Interconectado del Norte Grande) has one of the highest emission factors of any other major Latin American electricity grids, and energy consumption in Chile is estimated to grow annually between 6 and 7 percent by 2020.

In 2012, the IDB Group approved the Pozo Almonte and Calama Solar Photovoltaic Project, which is one

of the first large-scale solar energy projects in the region. It consists of the construction, operation, and maintenance of three solar power plants located in northern Chile in the Atacama Desert. The estimated total cost of the project is $82.7 million, of which the IDB Group has committed $20.7 million of its own financing and another $20.7 million via Canadian Climate Fund (C2F) financing.

The project will help to bridge the gap between energy supply and demand by using a local energy source that is clean, competitive, and abundant in the country and that can be developed quickly to boost the growth of the Chilean economy.

The project will develop local energy sources to diversify Chile’s energy matrix, whose current generating capacity is 75 percent dependent on imported fuels.

Chile’s dependence on fossil fuels has caused an increase in the cost of energy, making electricity prices in Chile among the highest in the world.

CASE STUDY

POZO AlmOnTE AnD CAlAmA SOlAR PHOTOVOlTAICCapturing Solar Power to Diversify Chile’s Energy Matrix

Date of Approval 2012Loan Size $20.7 millionCanadian Climate Fund Loan$20.7 millionTotal Project Cost $82.7 millionCountry ChileSector Energy


C2f Homepage IDB Group Climate Blog

C2f fact Sheet

C2f Video

The project will replace fossil fuels with a renewable energy resource for power generation for the mining industry, which consumes 18 percent of the country’s electricity and accounts for 19 percent of the country’s gross domestic product. This project is the first step in reducing the long-term cost of energy and is expected to reduce carbon dioxide emissions by 56,000 tons annually.

Pozo Almonte video link

56,000TONS OF CO2 EMISSIONS EXPECTED TO BE AVOIDED ANNUALLY

THE CANADIAN CLIMATE FUND (C2F)In 2012, Canada committed $250 million to create the Canadian Climate fund (C2f). The fund, which aims to catalyze private sector investment in climate change mitigation and adaptation in latin America and the Caribbean, will be managed by the Private Sector of the IDB Group. The C2f, the Canadian government seeks to leverage up to $5 billion in private sector investments and reduce greenhouse gas (GHG) emissions by up to 50 million metric tons.

The IDB Group works with private sector clients to identify climate-friendly investments in need of financing. Investments can range from energy-efficient buildings for a campus expansion to water reduction measures for upgraded hospital facilities. Priority areas for the fund include renewable energy, energy efficiency, biofuels, sustainable agriculture, forestry and land use, GHG emission reduction projects, as well as adaptation projects to reduce climate change vulnerabilities. C2f will co-finance private sector climate projects in latin America and the Caribbean that need concessional financing to be viable.




CHAPTER 4

Fostering Innovation


CHAPTER 4: fOSTERInG InnOVATIOn | 33

Throughout the region, the IDB Group supports private sector initiatives to modernize operations, employ new technologies, and implement best practices across all sectors—critical steps to thrive in a competitive global economy. The IDB Group works with clients to rethink the way they do business and nurtures innovation from the farm to the production line to the boardroom.

1,400,000People Trained

336,000Smallholder Farmers Supported



“If you want to invest in global food security, if you want to invest in preventing hunger in all corners of the world, then invest in Latin American agriculture.”Luis Alberto Moreno President, Inter-American Development Bank


THE CHALLENGE

In most Latin American and Caribbean countries, investment in innovation is markedly lower in than the world’s most advanced economies. This gap puts the region at a competitive disadvantage, since the capacity to innovate generates improved productivity and added value. While public policies and public resources can lay a solid foundation for innovation—for example, by investing in the educational system and giving priority to research institutions and technology centers—the private sector plays a pivotal role in putting innovation into practice.

One area in which innovation is especially critical is agriculture, which accounts for one in five jobs in the region and 30 percent of all trade, with half the region’s food produced by small-scale farmers.6 Latin America and the Caribbean as a whole is already the world’s largest net food exporting region, and the agricultural sector has enormous potential for growth. As IDB President Luis Alberto Moreno has said, “If you want to invest in global food security, if you want to invest in preventing hunger in all corners of the world, then invest in Latin American agriculture.” Farmers and producers throughout the region have an opportunity to improve their own livelihoods and help meet the demand for food, fuel, and fiber around the world. To do this effectively and sustainably, they need to boost productivity, update technologies, and adopt climate-friendly practices.


The IDB Group supports a range of private sector projects that focus on innovation. In the agricultural sector, They work with small farmers throughout the region—from sesame producers in Bolivia to mango growers in Haiti to dairy producers in Uruguay—to improve production techniques, capture more value and create inclusive business models. Whether the project aims to make an agricultural practice more sustainable, modernize

a manufacturing operation, improve packaging, streamline distribution, redesign the way a service is delivered, or promote cleaner energy, the focus is on using technology and knowledge transfer to achieve greater efficiency, productivity, and competitiveness.

Innovation can also be a powerful tool to meet social goals, such as when a new financing mechanism expands women’s access to loans or a renewable

energy project shrinks a company’s carbon footprint. Through its initiatives to promote “shared value,” the IDB Group works with businesses to identify steps they can take to improve their own competitiveness and at the same time address critical needs in the communities where they operate.

PROJECT HIGHLIGHTS: PortfolioAgriculture46 projects, Total project cost = $1 billionManufacturing47 projects, Total project cost = $5.2 billion

2013 Approvals Agriculture13 projects, Total project cost = $265 millionManufacturing11 projects, Total project cost = $47 million

6.“The next Global Breadbasket: How latin America Can feed the World” Inter-American Development Bank, 2014


Chilean labor is becoming increasingly competitive. For the agribusiness sector, the competition is heightened by a shrinking labor pool, which in effect increases labor cost.

Within this context, Subsole, the largest Chilean-owned fruit exporter in the country, needs to attract and retain a

reliable and sustainable workforce to keep productivity high while remaining competitive. One of the company’s biggest challenges is how to tackle the seasonality associated with agricultural labor markets. With a workforce of over 2,300 employees and a total labor force of 22,740 during harvesting season, Subsole has become increasingly dependent on seasonal workers. These labor constraints place stress on company resources to promote steady growth.

In 2011, the IDB Group approved a $32 million loan to support Subsole’s capital expenditure program to increase production, expand cold storage and processing facilities, and create jobs throughout its supply chain. A portion of the IDB loan financed a 300 kilowatt

solar photovoltaic plant, which is the first industrial-size installation of this type in the Atacama Desert. Subsole is the first fruit exporter in the country to rely on a renewable energy to power its irrigation needs. In addition, under the Shared Value pilot program, the IDB Group provided Subsole with tailor-made consulting services to help the company create a strategy to stabilize and retain its workforce. The IDB Group is currently working with the company to implement this innovative approach that aims to improve productivity, reduce operating costs, and include women in agriculture.

Subsole has achieved strong results including an increase in output by 21 percent, the creation of 2,400 direct jobs as well as 22,000 indirect jobs in 2012

Subsole is the first fruit exporter in Chile to rely on solar energy to power its irrigation needs.

CASE STUDY

SUBSOlEPartnering with Industry Leaders to Promote Climate Smart Agribusiness

Date of Approval 2011Loan Size $32 million Total Project Cost $40 millionCountry Chile Sector Agribusiness


SHARED VALUE CASE STUDIES

Subsole - Chile, agribusiness

Universidad San Ignacio de Loyola – Peru, education

Caribe Hospitality – Jamaica, tourism

THE SHARED VALUE INITIATIVE: INNOVATIVE AND INCLUSIVE BUSINESS MODELS In 2012, the IDB Group expanded its strategy to maximize development results by offering tailored consulting services to its clients. The IDB became the first multilateral development bank to join the global Shared Value Initiative, a group of like-minded leaders and investors seeking to maximize business and development results. members include the Rockefeller foundation, nestlé, and Intel among others. The IDB Shared Value practice provides clients with tailor-made consulting services that are focused on developing inclusive business strategies to help the client overcome a current business challenge by finding a community-based solution.

The shared value approach integrates business growth opportunities and local communities’ needs. It identifies investments or programs that produce higher financial returns and simultaneously deliver positive social or climate impacts, benefiting both companies and their stakeholders.

The IDB Group Shared Value Appraisals were created to increase the social impact of private sector investments. This approach seeks to match business objectives with socioeconomic needs or constraints, affecting both the competitiveness of the company and its surrounding communities, with an emphasis on women, indigenous peoples, and African descendants. Shared value appraisals are designed and implemented in a way that incorporates relevant aspects that target the development of these three key groups.

Shared value appraisals assist private sector clients in identifying innovative solutions and improving the design and implementation of operations while optimizing resource allocation. Increasing the social effects of private sector investments through a shared value approach is particularly relevant in latin America and the Caribbean, where the private sector plays a key role for economic growth, job creation, and poverty alleviation.

The IDB Group partnered with Subsole to develop an actionable business strate-gy that generates financial returns and social benefits for the surrounding com-munity. for details see: “The fruits of Their labor: A Case Study in Shared Value”

for more information on the Shared Value Initiative including case studies and videos please visit: www.iadb.org/sharedvalue

alone. Project benefits affected the entire value chain and included 1,300 suppliers—among them many small and medium agricultural producers.

OVER 2,400 DIRECT AND 22,000INDIRECT JOBS CREATED

IN 2012.

www.iadb.org/sharedvalue


Date of Approval 2013Loan Size $5 million guaranteeTotal Project Cost $100 million Country EL Salvador Sector Financial Sector

CASE STUDY

BAnCO AGRÍCOlA Innovative Business Models to Finance MSMEs

Small shop owners are a vital part of the cultural, social, and economic landscape of El Salvador. Almost two-thirds of such microbusinesses are owned by women.

Overall, micro, small, and medium enterprises (MSMEs) account for 43 percent of the country’s GDP and employ 65 percent of the workforce. Shop owners and other small-scale entrepreneurs find it difficult to obtain commercial loans, as they often lack financial track records or sufficient assets to qualify. Women face particularly high obstacles: they tend to have smaller businesses, fewer savings, less education, and more family duties than men.

Banco Agrícola, the largest bank in El Salvador, has expanded its customer base to provide financial services to MSMEs, including mom-and-pop shop owners at the base of the economic

pyramid. It has two partners in this effort: Industrias La Constancia, the country’s largest soft drink distributor, which will screen and select microbusiness owners who qualify for financing; and FUNDES, an international organization that supports MSMEs, which will provide technical assistance to the loan recipients. These two partners had already been working together to provide training to small businesses, making them ideally suited to join this large-scale project.

The IDB Group is mitigating Banco Agrícola’s risk with a $5 million guarantee that will provide credit risk coverage to the bank’s microbusiness segment. The loans will help cover entrepreneurs’ needs for equipment, physical infrastructure improvements, and working capital. The joint effort by Banco Agrícola and

its partners provides an innovative way to effectively serve microenterprises and address a market failure that has long undermined growth. The business model capitalizes on the organizations’ expertise and core business in a way that benefits an important sector of the Salvadoran economy. With the support of the IDB Group, Banco Agrícola is expected to increase its MSME portfolio by 23.5 percent—mainly in commerce, industry, and services—and reach over 15,000 entrepreneurs by 2017.

For more information about innovative business models focusing on the Base of the Pyramid, click here

http://www.iadb.org/en/topics/opportunities-for-the-majority/idb-opportunities-for-the-majority-serving-the-base-of-the-pyramid-in-latin-america,1377.html


Innovations in Sustainability Awards In 2012, the IDB Group launched the Innovations in Sustainability Awards, in order to recognize and reward projects that embody innovation and support greater development impact in the region.

2013 winners: • Best Sustainability Operation Award: MSME Downscaling Facility / BanBif Risk

Sharing Guarantee Facility. BanBif uses psychometric testing to increase access to credit to MSMEs.

• Best Sustainability Product or Process Award: Infrastructure 360º Awards. The awards recognize outstanding sustainability practices in infrastructure investments in the region. Projects are assessed through a partnership with the Harvard Zofnass Program.

• Best Sustainability Technical Cooperation or Fund Award: Expanding Private Sector Investment in Biodiversity and Ecosystem Services. The IDB Group developed a technical cooperation to make the business case for investing in biodiversity by assessing a company’s impact and dependency on ecosystem services.

IDB Innovations in Sustainability Awards video:


https://www.youtube.com/watch?v=FvWk5VMLtdY


CHAPTER 5

Providing Basic Goods and Services


CHAPTER 5: PROVIDInG BASIC GOODS AnD SERVICES | 41

How can private sector investment be harnessed more effectively to fill people’s unmet needs for basic goods and services? The IDB Group has been a pioneer in addressing this question. Within its private sector operations, it works with companies to develop market-based solutions to expand access to housing, insurance, health care, education, and other essentials. The goal is to address market failures, bring low-income populations into the formal economy, and create jobs—in other words, to expand access to opportunities.

664,000Households with new or upgraded dwellings

Micro-entrepreneurs financed

17,000

7,700,000

6,200Students benefitted by education projects

Teachers trained



“This is the decade in Latin America with an unprecedented number of its citizens being lifted from poverty, and yet 70% of the population remains either poor or vulnerable and excluded from access to basic goods and services. The private sector has demonstrated that it is capable of delivering quality and affordable goods and services to underserved markets through new innovative business models. New Base of the Pyramid business models are an essential part of the solution. With public sector support through enabling frameworks and access to long term development financing, these models can grow into a transformative ecosystem and a robust industry focused on serving the Majority.”

Luiz Ros manager, Opportunities for the majority.


THE CHALLENGE

Governments in Latin America and the Caribbean have made major strides in tackling extreme poverty, but large percentages of people in the region are still poor or struggle just above the poverty line. In fact, the broad base of what is known as the economic pyramid (see box below) comprises as much as 70 percent of the population in some countries and represents a huge untapped potential. Yet private sector investment targeting this group has been fragmented and insufficient. This has further hampered people’s access to markets and exacerbated social exclusion.

In some countries, meanwhile, the growing demands of an emerging middle class have put a strain on basic services. One case in point is higher education. Expanding access to a university education boosts productivity, fosters innovation, and promotes development—yet supply cannot always keep pace with demand. Private institutions are stepping in to fill the gap, and in some underdeveloped areas, they provide the only option for a higher education.


In 2007, the IDB Group became the first development finance institution to establish an investment unit to focus exclusively on bringing market-based solutions to the base of the economic pyramid (BoP). The strategy is to promote and finance sustainable business models that engage private companies, local governments, and communities in developing and delivering quality products and services for those in the lower income levels in Latin America and the Caribbean. The unit also invests in innovative social funds that aim to bring goods and services to low-income areas, and partners with other “impact investors” to expand access to capital for microenterprises.Private sector initiatives are also helping

companies fill unmet demands for higher education while creating more opportunities for low-income students. In Peru, for example, the IDB Group is helping to finance a campus expansion at the Universidad San Ignacio de Loyola, a private university that focuses on technical and business-oriented disciplines. A student loan guarantee fund created as part of the project aims to put a degree within the reach of more students from disadvantaged groups. In 2013, the IDB Group approved 7 projects in higher education with a total value of $67 million—initiatives that together benefited more than 14,000 students.

PROJECT HIGHLIGHTS: PortfolioHealth & Education13 projects, Total project cost = $138 millionHousing16 projects, Total project cost = $654 billion

2013 Approvals Health & Education10 projects, Total project cost = $120 millionHousing 3 projects, Total project cost = $94 million

For more information on Base of the Pyramid projects:click here

To read the brochure on Opportunities for the Majority, click here.

The Base of the Pyramid (BoP) is defined as the population with income below $3,260 per capita per year (2005 PPP). Through the use of Purchsing Power Parity (PPP) exchange rates, it is feasible to make comparisons across countries, ensuring that the income values correspond to a similar standard of living in each country.

Video: - Opportunities for the Majority


http://www.iadb.org/en/topics/opportunities-for-the-majority/idb-opportunities-for-the-majority-serving-the-base-of-the-pyramid-in-latin-america,1377.html

http://browndigital.bpc.com/publication/?i=92819



Vinte is a midsize homebuilder engaged in the construction of sustainable housing for low- and middle-income families in Mexico. Vinte focuses on developing environmentally-friendly construction materials and materials that use new technologies to find affordable

and sustainable housing solutions. Innovations include rooftop solar cells and wall meters to monitor electricity, water and gas consumption. Such innovation not only saves homeowners maintenance costs and reduces their environmental footprint, but also helps maintain or increase their property’s value.

In order to support an innovative homebuilder while simultaneously reducing Mexico’s mortgage lending gap, the IDB Group in coordination with

CASE STUDY

VInTEAffordable, Environmentally-Friendly Housing for Low and Middle-Income Families

Date of Approval 2012Project Size - MXN$200 million, Partial

Credit Guarantee - MXN$ 150 million – Loan - MXN$ 106.5 million – Equity- MXN$ 50 million – 5-year

Revolving Credit Line Total Project Cost MXN$ 506.5 million ($ 41 million)Country MexicoSector Housing

The project will construct 20,000 homes for 78,500 low- and middle-income people in six cities by 2017.

78,500BENEFICIARIES IN 6MEXICAN CITIES EXPECTED

BY 2017.


Grupo Financiero Banamex, approved a partial credit guarantee to support Vinte’s successful MXN$200 million bond issuance in 2012 and took an MXN$106.5 million equity stake in order to enable Vinte to expand its operations to other Mexican states. The combined IDB Group exposure also includes a 5-year revolving line for up to MXN$50 million.

With the IDB Group's support, Vinte’s 5-year business plan includes the construction of approximately 20,000 dwellings for low- and - middle income families by 2017. The new homes are expected to benefit at least 78,500 people in six Mexican cities. In 2013, Vinte built 3,166 homes and increased the company’s revenue by more than 20%.

3,000HOMES BUILT

IN 2013

According to the Mexican Housing Authority, Mexico has an estimated deficit of approximately 8.9 million homes - a number that increases annually by 200,000. Furthermore, mortgage financing is limited to approximately 10% of the total labor force.


Date of Approval 2012Loan Size $2 million Total Project Cost $8 millionCountry Haiti Sector Financial Markets

CASE STUDY

AlTERnATIVE InSURAnCE COmPAnYProviding Insurance to Base of the Pyramid Clients

In 2012, after the magnitude 7.0 earthquake that hit the country in January 2010, the IDB Group approved a $2 million subordinated loan to support a recapitalization plan of the Alternative Insurance Company (AIC), which is one of the leading local insurance companies in Haiti. It offers traditional products such as auto, commercial, property, health, and life insurance and has been expanding into Base of the Pyramid (BoP) markets with micro-insurance products, in partnership with leading Haitian microfinance institutions.

The company was left in a vulnerable financial condition after the earthquake, but the recapitalization allowed AIC to implement a strategic plan and expand its services to more people at the BoP.

In the past two years, AIC has grown 35 percent and since 2012, the company has served 67,000 BoP clients, of whom 44% are female beneficiaries, with life insurance, health insurance, funeral insurance, and micro-insurance. In addition, through AIC, 23,000 individuals have access to a basic package of health services.

In Haiti, less than 3 percent of the total population of 10 million receives social insurance7 and less than 2 percent health insurance. Optimistic calculations indicate that at most 300,000 people are insured countrywide.

67,000BOP BENEFICIARIES44% FEMALE

7. Social insurance is defined as government assistance in case of sickness or unemployment. Traditionally these programs are funded through taxes.


Date of Approval 2011Technical Assistance $2.2 millionTotal Project Cost $6.6 million Country RegionalSector Waste Management

CASE STUDY

ECOnOmIC AnD SOCIAl InClUSIOn Of RECYClERS

In the Latin America and Caribbean region (LAC) there are an estimated 4 million people who derive their livelihood from the hazardous and unsanitary work of recycling street trash. Despite its importance, recycling work is accorded neither social nor economic recognition. While informal recyclers are in some cases supplying 90% of the recycled materials used in industry, those persons receive only a tiny fraction (perhaps 5%) of what is reaped by the intermediaries to whom they sell their materials. Moreover, in most cases this is their only source of livelihood, meaning that they remain trapped in the cycle of poverty.

In May of 2011, the IDB Group launched a regional program to help transform the

recycling market in LAC. The program has adopted a collective approach to bring about systemic change in three areas: (i) in the economic and social conditions of informal recyclers and their families, by upgrading their skills and making their activities more profitable and secure, providing them better access to basic services, and changing the public perception of the recyclers from that of a “social problem” to that of a “social, environmental and economic asset”; (ii) in public policies, by improving municipal capacities to work with informal recyclers and to develop inclusive waste management systems, while strengthening the regulatory framework and creating laws for enforcing rules and policies

in the sector; and (iii) in the private sector, in various aspects that range from including recyclers in the value chains and encouraging greater market responsiveness and transparency to facilitating the traceability of recycled materials used as inputs.

To date, 10 municipalities have signed exclusive collection contracts with recyclers’ organizations bypassing intermediaries, 10 municipalities have approved the local requirements regulating separation at origin for domestic waste making it more efficient for recyclers to manage waste, and 2 firms have incorporated supply policies that include buying materials directly from recyclers’ organizations.


Date of Approval 2013Loan Size $23.5 millionTotal Project Cost $79 millionCountry PeruSector Education

CASE STUDY

UnIVERSIDAD SAn IGnACIO DE lOYOlA Education as a Path for Development

Through the Universidad San Ignacio de Loyola Project (USIL), the IDB Group will support the expansion of a university that seeks to include students from a more economically diverse background and will double its enrollment from 12,000 to 25,000 students over the next 10 years. Currently, approximately half of USIL’s students are women, and about one quarter (3,088 students) are young working adults. In addition, over half of USIL’s students receive tuition discounts of 50% or more. Universidad San Ignacio de Loyola (USIL), a leading top-tier private university that offers a curriculum focused on technical and business-oriented disciplines.

In order to decrease the drop-out rate of low-income students, a portion of the IDB Group loan will be used to establish a $2 million student loan guarantee fund and support the expansion of a Peruvian government scholarship program (“Beca 18”) that provides scholarships to economically disadvantaged youth at risk.

The USIL project also received a shared value appraisal which focused on developing a financially viable business strategy to strengthen the socioeconomic diversity of USIL’s student population. Although USIL already has indigenous and female students within its student body, the university strives to further diversify enrollment and to attract outstanding students from marginalized

ENROLLMENT EXPECTED TO INCREASE FROM

12,000 TO 25,000 BY 2022.


geographic areas and vulnerable family backgrounds. Especially for Peru’s growing lower and emerging middle class, affordable student financing from commercial sources is scarce or even impossible to obtain. By offering these students and commercial banks a guarantee fund backing both loans and scholarships in case vulnerable students drop out, USIL and the IDB Group are making the case that, regardless of gender, race, or class, everyone should have access to higher education.

In 2010, 309,000 students sought admission to Peru’s public universities though only 64,000 places were available. As of 2013, only 3 out of 10 high school students had access to higher education. For people without access to higher education, the opportunity for advancement through higher-paying jobs is simply out of reach.

EDILAR - SUPPORTING TEACHERS WITH EDUCATIONAL MATERIALS AND TECHNOLOGYIn order to improve the quality of education offered in mexico, the IDB Group approved $11.4 million in loans to purchase educational materials, technology, and continuing education services designed to support teachers in their role as educators. As a result, more than 11,400 teachers have been able to finance purchases of Edilar educational products and services with microloans. In 2013, the fInPYmE family Program helped formalize the company’s corporate structure by establishing a board of directors and training key members of management in good governance practices.

Shared Value in Education: USIL Student Guarantee Fund Video. click here

https://www.youtube.com/watch?v=X0ccTKLnXY4


CHAPTER 6

Encouraging Green Growth


CHAPTER 6 : EnCOURAGInG GREEn GROWTH | 51

Investment and innovation must come together on a large scale to mitigate and adapt to the risks of climate change. The IDB Group works hand in hand with the private sector throughout Latin America and the Caribbean to enhance energy efficiency and expand the use of clean technologies. It provides extensive financing, as well as technical expertise and assistance, to cultivate green, sustainable growth.

11,700Households accessing clean energy for the first time

600,000Hectares of forest under sustainable management

8,200* 6,500*

Energy produced (GWh)

Renewable energy produced (GWh)

2,800 900Total capacity installed (MW)

Low-carbon capacity installed (MW)

* The data for Energy produced (GWh) are cumulative for 2010-2013.



“Green growth is the best way to meet the region’s growing energy needs, leverage innovation in technology and processes, and significantly reduce the costs of climate impacts.”

Hans Schulz Vice President for the Private Sector and non-Sovereign Guaranteed Operations, a.i.and General manager of the Structured and Corporate finance Department,Inter-American Development Bank.


THE CHALLENGE

The Latin America and Caribbean region is vulnerable to climate change because of its geography, population distribution, infrastructure, and reliance on natural resources for economic activity. The cost of climate impacts to the region is estimated to reach $100 billion per year by 2050, and a similar annual investment would be needed to reduce the region’s carbon footprint to levels in line with global climate stabilization goals.8 The scale, timing, and scope of these efforts will require both public and private sector initiatives. The private sector needs to strengthen its environmental commitment and adopt internationally accepted best practices to avoid and mitigate harmful impacts. It can also take the lead in implementing energy-efficient production methods, using low-carbon technologies, and creating new economic, financial, and business opportunities that contribute to sustainable development.


The IDB Group supports private sector investment in clean energy throughout the region. Wind farms in Uruguay and Mexico and large-scale solar energy projects in Chile and Peru will expand the capacity for power generation and diversify the region’s energy mix. In Central America, meanwhile, private sector projects supported by the IDB Group enable companies to reduce dependence on low-quality, polluting bunker fuel. The IDB Group is also a key player in financing green growth.

It supports venture capital funds that emphasize low-carbon technologies, create incentives for banks to offer loans for energy upgrades, and work with microfinance institutions that develop green lending programs for small businesses. By mobilizing resources from international sources, it has lowered barriers to private investment in energy efficiency, as a way to demonstrate the commercial viability of going green.

The cost of climate impacts to the region is estimated to reach $100 billion per year by 2050.

Over $9.3 billion in climate & environmentally friendly investments supported since 2010.

8. “The Climate and Development Challenge for latin America and the Caribbean: Options for climate-resilient, low-carbon development.” Washington: IDB, 2013.

PROJECT HIGHLIGHTS: PortfolioRenewable Energy27 projects, Total project cost = $4.6 billion


Remittances have the potential to be an innovative financing mechanism for clean energy, where the sender uses remittances to purchase energy products for family members in Haiti. Over 1 million Haitians live in the United States, contributing in large part to the estimated $1.8 billion in remittances that the country receives, or about 20% of its GDP as of 2008. This revenue increased the availability and number of sustainable energy products for Haitian consumers using remittances as the financing source. Simultaneously, a new business model was created for a remittance partner, Food Express, enabling it for it to diversify its activities and scale up quickly.

The IDB Group and its partners provided funding for Arc Finance to work with Food Express / SogeXpress to test the remittances model in Haiti. By 2013, over 5,000 products were sold, mostly consisting of small solar systems to power lanterns, lights, and small appliances. The program is estimated to have helped over 26,000 people, half of whom lived in provinces outside of the country’s capital of Port-au-Prince. Improvements to living standards included the use of electricity in general household use, extending studying time and supporting child education, increasing levels of safety and security, and providing energy cost savings of $220,000, with an estimated $760,000 in savings through early 2014. By 2013,

CASE STUDY

USInG REmITTAnCES fOR ClEAn EnERGY In HAITI

Date of Approval 2011Technical Assistance $757,000Total Project Cost $1,050,000Country HaitiSector Renewable energy

Remittances & Solar energy in Haiti


http://youtu.be/4D_JohMQ1U8


the project avoided the emissions of 489 tons of CO2e and it is estimated that 1,200 tons of savings are expected by 2014.

This effort continues to grow and the IDB Group is exploring ways to expand the business models using agents for increased distribution. The project showcases a promising business model – one that does not rely on government subsidies – to sell lamps locally, thus stimulating the market for renewable energy products in Haiti while also providing opportunities for income generation for the beneficiaries.

By 2013, the project helped over 26,000 people gain access to clean energy products such as small solar systems to power lanterns, lights, and small appliances.

26,000 PEOPLE GAINED ACCESS TO CLEAN ENERGY PRODUCTS

Almost 88% of Haiti’s population had no access to electricity – the lowest coverage in the Western Hemisphere even before the devastating 2010 earthquake.


GREENPYME: Technical Assistance Focusing on Climate Change

GREENPYME seeks to boost the competitiveness of SMEs in Latin America and the Caribbean by promoting a more rational use of energy resources through good energy practices and investment in more efficient, environmentally friendly technologies and equipment. In 2013, the IDB Group GREENPYME program continued to transfer knowledge and tackle issues related to climate change. GREENPYME consultants have conducted 180 energy audits during this business planning period in Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. As of December 2013, the program has also conducted 24 energy-efficiency workshops, which were attended by 775 entrepreneurs; 13 trainings benefiting 165 engineers from the region; and 7 trainings benefiting investment and credit officers of local banks.

Green Credit LinesGreen credit lines help mitigate climate change or provide environmental benefits.

• To date, more than $1 billion in loans and guarantees provided throughout the region

• Banco General in Panama = 1st green credit line, $20 million loan Banco General to raise a green credit line portfolio of $65.95 million allocated to 14 projects9 that jointly have contributed to reduce carbon dioxide emissions by 68,000 tons.

• 11 green projects10

• This initiative has been replicated in other countries in Central America, where four additional green credit lines totaling $62.5 million have been approved.

GREENPYME consultants have conducted 180 energy audits in Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

9. final beneficiaries of the facility are 5 small and medium enterprises, 3 small-scale renewable energy projects (two projects with hydroelectric capacity of 10mW and one project with hydroelectric capacity of 3.51 mW), 5 construction projects that are lEED (leadership in Energy and Environmental Design) certified, and 1 project for acquisition of energy-efficient manufacturing machinery.10. Balam fund I, $50 m, (mexico) Banco Itau, $100 m (Brazil) Banco BICE, $50 m (Chile), Banco Promerica, $15 m (Costa Rica), Banco Atlantida, $20 m (Honduras), BHD Bank, $17.5 m (Dominican Republic), Bancolombia, Col $50 m, (Colombia), Banco ficohsa, $10 m (Honduras), leasing Operations de mexico, mX$ 45 m, (mexico) Banco General, $20 m (Panama) BBVA Bancomer, $20 m (mexico)


Sustainability Report 2013

INTER-AMERICAN DEVELOPMENT BANK

IADB 2013 Sustainability Report


http://www.iadb.org/en/topics/sustainability/sustainability-report,1510.html


Technical Assistance: Identifying Investment Opportunities in Climate Change

In 2012, the IDB Group approved technical assistance funding for climate-friendly projects in Mexico. The initiative helps Mexican financial intermediaries identify investment opportunities related to climate change and develop and commercialize appropriate financial products and services.

The Mexican government has estimated that energy efficiency measures could reduce the country’s projected 2030 energy consumption by 18 percent, significantly reducing greenhouse gas emissions. Financial intermediaries, including commercial banks and national development banks, are well positioned to invest in energy efficiency through loans and guarantees.

Thanks to resources from the Clean Technology Fund, the IDB Group can assist participating banks with both financial and technical support in a number of areas: energy efficiency, clean production, cogeneration, biomass, and other projects intended to reduce energy consumption. The technical assistance effort is expected to include energy audits and feasibility studies to analyze whether the climate and environmental projects can be implemented.

Energy Efficiency Finance Facility with the Nordic Development Fund

In 2012, the IDB Group approved a $50 million Energy Efficiency Finance Facility to provide small-scale loans to companies investing in energy efficiency or looking to meet their own energy needs from renewable sources. The facility—which includes $9.4 million in support from the Nordic Development Fund (NDF) to mitigate risk—offers loans ranging from $500,000 to $5 million per project. Thanks to an additional $1.4 million from NDF, the program also provides technical assistance grants for energy audits and feasibility and engineering studies. More than 25 of these detailed studies have been conducted for a wide range of agribusiness clients producing everything from beef to shrimp to wheat to peanuts; a hospital, university, and airport; and commercial buildings, recycling centers, and manufacturing plants. The studies have identified challenges but also demonstrated the financial viability of implementing innovative biomass and solar projects and energy efficiency measures, with estimated investments of over $60 million that could result in reductions of one million tons of greenhouse gas emissions.

Energy efficiency measures couldreduce Mexico’s projected 2030 energy consumption by 18 percent.

IDB Group approved a $50 million Energy Efficiency Finance Facility to provide small-scale loans to companies investing in energy efficiency or looking to meet their own energy needs from renewable sources.

Climate Solutions within the Private Sector


CHAPTER 7

Promoting Gender Equality


CHAPTER 7: PROmOTInG GEnDER EqUAlITY | 59

Recognizing the critical role women play in economic and social development, the IDB Group invests in projects that foster gender equality in the workplace and enable women-led small businesses to reach their full potential. Through a range of business solutions—including financing, training, and technical assistance—the IDB Group empowers women in the private sector and helps bridge the gender gap in entrepreneurial success.

14,200*

Female jobs created

163,000Women trained

4,445,000Women microentrepreneurs supported

8,200 Female students supported

*This number is for 2013.note: Data stems from projects active from 2010-2013.


“Latin American women are among the most entrepreneurial in the world. But they are still greatly underrepresented as owners of SMEs. If we can help them grow their businesses, it will be a triple win: for the women and their families, for the banks that serve them or could serve them, and for raising the growth rates of the economies of the region. Empowering women is fundamental to our hopes for achieving systemic impact.”

Nancy Lee General manager, multilateral Investment fund.


THE CHALLENGE

In Latin America and the Caribbean, as in the rest of the world, women are powerful drivers of the economy. They are participating in the labor force in ever-greater numbers, and their rising incomes have contributed to a 30 percent reduction of extreme poverty in the region over the last decade. Women also have tremendous clout as consumers, making an estimated 80 percent of a family’s purchasing decisions—food, clothing, appliances, child care, education. Yet with all the progress, women in Latin America and the Caribbean still face significant barriers. Female employees are often concentrated in low-paying jobs in the service sectors, earn less than their male counterparts in the same positions, and have less access to training, technology, and business support. Of the top 500 companies in Latin America and the Caribbean, only 15 percent have women in upper management.11 Women entrepreneurs, meanwhile, represent a vast underutilized resource. The number of women-led small businesses is increasing, yet these entrepreneurs often lack the credit, technology, networks, and training required to access large corporate clients and export markets.


The IDB Group is committed to promoting gender equality and women’s empowerment by implementing a diverse portfolio of projects designed to help women entrepreneurs - including farmers - grow their businesses, increase women’s participation in quality jobs, and enhance women’s leadership in business and in the community. Beyond improving access to finance through the signature women entrepreneurship Banking initiative women entrepreneurs also benefit from projects like one with the Bucaramanga Chamber of Commerce in Colombia which spawned nearly 250 women-led businesses and created 1,400 jobs. Other initiatives help women gain

access to markets: The Haiti Hope Project—a $9.5 million public-private partnership with Coca-Cola, USAID, and TechnoServe—is creating sustainable economic opportunities for Haitian mango farmers and their families. In partnering with larger corporations such as the Chilean fruit company Subsole, the IDB Group has been able to identify and leverage opportunities to advance gender-sensitive practices and improve the work environment for women employees.

The IDB Group is also committed to promoting gender equality throughout its projects and ensuring the equal participation of women and men in

project decision-making and access to project-related benefits. For example, a project with Grupo CEIBA in Guatemala found that male ex-gang members had trouble securing jobs due to many reasons including their tattooed bodies. The project assisted these young men by developing their skills and worked with private sector companies to sensitize them on the need to hire qualified young men.

PROJECT HIGHLIGHTS: Portfolio$142 million lent through the weB$5 million for Technical Assistance

11. http://www.catalyst.org/knowledge/women-labor-force-latin-america


In Peru, the microenterprise sector is one of the most dynamic of the region, serving as the main source of employment in the country and providing jobs for nearly 70% of the economically active population. In total, there are approximately 3.1 million microenterprises with less than 10 workers. This constitutes 98% of all the entrepreneurial units and generates approximately 42% of the country’s total GDP.

In 2010, in order to help address this financing gap, the IDB Group developed two interlinked projects: a $36 million loan to Mibanco, the fifth largest bank in Peru and the largest specialized in micro and small enterprises, and the $7.4 million Strengthening Women’s Entrepreneurship in Peru (SWEP) project

to provide women entrepreneurs with training and direct assistance.

The Mibanco loan focused on providing financing for women-led businesses by tailoring existent product lines to serve the needs of women entrepreneurs.

Since 2010, Mibanco has had substantial impact by providing loans to over 95,000 women microentrepreneurs, a quarter of whom were first time borrowers, to finance projects to upgrade business facilities or purchase new equipment. With the support of the IDB Group, Mibanco has expanded its “Crecer Mi Negocio” product targeted at microentrepreneurs to reach an additional 56,000 female microentrepreneurs to date.

CASE STUDY

ClOSInG THE GAP: Providing Female Entrepreneurs with Financing and Training

Date of Approval 2011Loan Size $10 millionTotal Project Cost $36.2 millionTC Grant $3 million Country Peru Sector Microfinance

56,000FEMALEENTREPRENEURS FINANCED


The SWEP project, which provided training and direct assistance to micro and small women-led businesses, was organized into two components the ‘Salta Program’ and the ‘10,000 Women Certificate Program’.

Mibanco is currently the financial institution with the largest number of clients from the microenterprise sector (more than half a million) in Peru. It is also the Peruvian financial institution with the highest number of first-time clients in the banking system (23.3%), making it the most powerful agent in providing access to finance in Peru

Microenterprises led by women are more likely to face difficulties in accessing credit because of reasons traditionally associated with legal impediments or cultural norms restricting female labor force participation and business activity, as well as lower education levels. In Peru, over 65% of women have not completed high school thereby decreasing their access to credit.

THE SALTA TRAINING AND IMPACT EVALUATION The International food Policy Research Institute (IfPRI) conducted an impact evaluation of the Salta Program encompassed within the mibanco Project. The evaluation assessed the effects of the short group sessions on the 100,000 women beneficiaries and their businesses.

The evaluation showed that:• 80% of training participants began to separate their household and business finances• 70% started preparing growth strategies for their businesses • more women assigned themselves a fixed salary • fewer women made use of informal credit• Women-led firms were more efficient in their use of labor

10,000 WOMEN CERTIFICATE PROGRAM The 10,000 Women Training Program , sponsored by Goldman Sachs, provided over 700 women with intensive tailor-made training to assist them in developing their micro-businesses. The program was evaluated by IfPRI, and determined that training participants modified their behavior which resulted in positive business outcomes including an increase in employees, salaries and sales.


Women Entrepreneurship Banking (weB)

Women entrepreneurs have tremendous potential to contribute to job creation, growth and competitiveness in Latin America and the Caribbean (LAC). Between 2000 and 2010 income growth among women in LAC contributed to a 30% reduction in extreme poverty. However, women-led businesses continue to be smaller, have lower growth rates over time and have less access to finance than those led by their male counterparts.

The IDB Group works to strengthen women’s roles as entrepreneurs and to increase access to quality financial products for women-led MSMEs in Latin America and the Caribbean. Launched in April 2012 during the Summit of the Americas in Cartagena, Colombia, weB is an initiative implemented through the Promoting Small Enterprise Financing Program. The weB initiative resulted from research and on-the-ground experience demonstrating that women-led SMEs make up a high-growth yet underserved segment of economic activity in Latin America and the Caribbean.

The weB initiative provides two kinds of incentives. The IDB Group's initial goal was to finance up to $50 million in credit lines, partial credit guarantees, and risk-sharing mechanisms to strengthen tenor and liquidity in institutions seeking to expand loans offered to women-led MSMEs. The IDB Group will also provide up to $5 million in technical assistance grants to transfer knowledge of effective lending models for women-led MSMEs and to train loan officers and credit managers in these products and services. This unique combination of capital and technical assistance is maximizing the success of forward-looking financial institutions to ensure that women-led MSMEs have equal access to financing.

The goal of this initiative is to provide an array of incentives to help financial intermediaries fund the costs of finding and implementing strong models suited to women-led MSMEs and to share some of the initial risk. To achieve this objective, the IDB Group is tapping its regional experience, and its knowledge of relevant models in other regions, to bring the best ideas to interested financial intermediaries.

Banco Pichincha, the leading bank in Ecuador, was the first to officially inaugurate the weB initiative in 2012. The IDB Group signed a $12.8 million loan that will expand lending to women-led businesses in Ecuador. To date, the weB has achieved early-stage results by enrolling 11 institutions to receive either financing or technical assistance, or a combination of both. Through the approved projects, over 100,000 women beneficiaries will be reached within the next five years.

With US$ 110 million in operations and currently eleven banks executing operations, weB projects are expected to reach approximately 100,000 women beneficiaries within 5 years.


Date of Approval 2008Technical Assistance $1.2 million Total Project Cost $2 million Country ColombiaSector Retail

CASE STUDY

SUSTAInABlE WOmEn-lED BUSInESSES In COlOmBIA

In Colombia, as in the rest of the world, women-led businesses are still underrepresented, but are increasingly important for economic performance, innovation, and growth in general. An estimated 96% of all enterprises are microenterprises; of these, more than 50% have been created by women. Due to the significant difficulties women face in developing their businesses (lack of information, lack of capital, limited access to financial services and marketing channels), close to 40% of microenterprises created by women closed during the first three years. Promoting the creation of women-led businesses is a key factor in improving Colombia’s economy.

In 2008, the IDB Group partnered with the Bucaramanga Chamber of Commerce to promote the creation

and growth of women-led businesses with a $2 million grant for the cities of Bucaramanga, Barrancabermeja, Cucuta, and Cartagena, Colombia. The project activities included: (i) trainings for women entrepreneurs in business management and ICT (Information, Communications and Technology) skills; and (ii) supporting women entrepreneurs in the design and implementation of business plans, identification of sources of financing, and development of business networks.

As a result of project activities, 247 women-led businesses were created, reaching average sales of $25,000 during the first year. These newly created businesses increased sales by 134% in the second year of the program and created 1,400 new jobs. The project also supported

172 existing women-led businesses to improve sales, productivity, and processes. Furthermore, the project sensitized 6,000 women on the importance of generating their own income by conceptualizing, developing, and starting up new productive businesses.

6,000FEMALEENTREPRENEURS TRAINED

IN BUSINESS SKILLS


FINPYME Mujer Empresaria

In 2013, the IDB Group launched FINPYME Mujer Empresaria, a program aimed at women-led SMEs to make to their businesses more competitive. The program is the result of the WEAmericas (Women’s Entrepreneurship in the Americas) initiative and the FINPYME Mujer Empresia Trust Fund with the support of the U.S. government. Through the initial launching events held in Peru and El Salvador, 98 beneficiaries from Peru and 86 beneficiaries from El Salvador participated. As part of this program, a diagnosis of each SME’s competitive position, strengths, and weaknesses was provided, and a detailed plan to improve company competitiveness was handed out to each participant. In addition, technical assistance was offered to 70 percent of the SME participants, depending on their level of commitment to the program. The assistance offered will address the following key areas: financial management, strategic planning, marketing, human resource management, and innovation.

Through the FINPYME Mujer Empresaria events held in Peru and El Salvador in 2013, 98 beneficiaries from Peru and 86 beneficiaries from El Salvador received tailor-made services on how to strengthen their businesses and increase their competitiveness.


Date of Approval 2014Loan Size $38.5 millionTotal Project Cost $66 million Country PeruSector Agribusiness

CASE STUDY

DAnPERPromoting Sustainable Agribusiness and Positive Social Impact

A $38.5 million loan from the IDB Group will strengthen efforts by a Peruvian agro-industrial company to help the community in general and women in particular. The loan will enable DanPer—which produces fresh, frozen, and preserved food—to increase asparagus and avocado production, invest in irrigation infrastructure, and evaluate energy efficiency measures at the company’s industrial facilities. The project will include a rigorous Social Impact Assessment to analyze how DanPer’s extensive corporate social responsibility programs have been effective in addressing employee and community needs in ways that make good business sense.

The company’s programs include an onsite health clinic through which employees

and their families access to preventive health care. Because many employees are women, the clinic focuses on pregnancy, mothers, and children. DanPer has also acted on behalf of local communities and negotiated with municipal authorities to secure the delivery of basic water and electricity services. The company has a nongovernmental organization which provides basic business training, funding, and advice to local microenterprises, an effort that has spawned a bakery, an Internet business, a grocery store, and a taxi service. The company also supports more than 250 smallholder farmers with work-related financial services, and generates business opportunities for more than 600 suppliers of services in transportation, packaging, and metal mechanics.

Currently, DanPer employs about 6,500 workers, including 3,100 women (80 percent of whom have children). With the addition of 1,500 direct jobs, total direct and indirect employment is estimated to exceed 15,000 jobs.

8,000 EMPLOYEES AND THEIR FAMILIES ACCESS FREE HEALTH AND EDUCATION SERVICES


While Jamaica is one of the Caribbean’s top tourist destinations, beyond the sun-splashed image most tourists see it is a country that struggles with high rates of poverty, unemployment, and crime. At year-end 2013, unemployment was over 15 percent, with disproportionate rates for young men and even worse for young women.

As a mission-driven lender, the IDB Group looks for opportunities to drive sustainable and impactful private investment. One such investment was a $6.75 million loan to Caribe Hospitality to build the Marriott Courtyard Kingston Hotel. The Caribe investment offered the IDB Group an opportunity to promote green growth and drive sustainable business performance through the company’s engagement with local stakeholders and community.

The Bank worked with the client to pursue a sustainable carbon footprint for the project, resulting in the Marriott Courtyard becoming the first Leadership in Energy and Environmental Design (“LEED”) certified building in Jamaica. Beyond the environmental angle, the Bank wanted to discover where potential gains for the hotel’s bottom line intersected with social value creation, especially in terms of jobs and empowerment. The Bank deployed its Shared Value Appraisal to surface potential investments that could benefit both the company and the community.

After interviews with the multiple players, the Shared Value team did an extensive cost benefit analysis of particular actions—for the construction company, the hotel’s developers and operators, local training organizations, and the community at large—and came

CASE STUDY

SOCIAllY InClUSIVE HOSPITAlITY in Jamaica

Date of Approval 2013Loan Size US$ 6.75 millionTotal Project Cost US$ 21.42 millionCountry Jamaica Sector Tourism

“The key to success in this mutual cooperation project was coordinating regular meetings with several key players, always trying to make efficient use of time.”

- Daniel Campos, General Director of Caribe Hospitality.


up with recommendations for optimizing cost savings for the hotel and generating value creation for the community.

Two promising shared value opportunities for the project in Kingston were identified. The first revolved around increasing the involvement of locally owned businesses, too often bypassed by large tourism operators which instead source materials and raw goods from Miami. This recommendation focused on helping the company with how to integrate micro, small, and medium enterprises—especially those owned or run by women—into its supply chain.

The second recommendation addressed the high youth at risk problem thanks to high youth unemployment and how to improve the employability for economically disadvantaged youth

in Kingston, who in absence of job opportunities engage in marginal activities—such as street vendors or windshield cleaners —or turn to outright crime. With the help of the Private Sector team, the hotel construction company worked with a local training program to identify high-potential at-risk young men from volatile neighborhoods to participate in a paid internship program on the construction site. This internship program provided them with new professional skills which they can market to future employers.

“The key to success in this mutual cooperation project was coordinating regular meetings with several key players, always trying to make efficient use of time,” said Daniel Campos, General Director of Caribe Hospitality. He said the process was a positive experience for the company — and most

importantly, he added, it will have a positive impact in Jamaica and Caribe’s business success there.

While the Kingston hotel project is expected to bring considerable benefit to the community, some returns on social investments won’t be evident until the hotel opens for business in mid-2015. But one modest step forward — taken as a result of the IDB Shared Value Appraisal — has already made a difference in the lives of five young men, who participated in the six-month paid internship for at-risk youth and were subsequently hired as full-time employees by the construction company.

At year-end 2013, unemployment in Jamaica was over 15 percent, with disproportionate rates for young men and even worse for young women.


Strategic Events and Forums

The value proposition of the IDB Group goes beyond its financial products, encompassing significant non-operational work activities, such as local business executive roundtables, regional conferences, multi-stakeholder dialogues involving many of the key thought leaders in this space, and dissemination of mapping studies and information regarding the business models it finances.

By sharing knowledge and establishing best practices, the IDB Group promotes development and fosters innovation. Through its strategic events, the IDB Group strives to stimulate the exchange and dissemination of best practices, lessons learned, new trends and successful experiences from practitioners in Latin America and the Caribbean. It seeks to generate a space where synergies between various actors can take place, both from the public and private sectors.

The BASE Forum has become the regional platform to discuss issues regarding the BoP. The BASE I Forum took place in São Paulo, Brazil, in June 2011 and gathered more than 800 people from all around the world, including business leaders, thought leaders, representatives of multilateral organizations, government officials, impact investors, members of the media, and representatives of not-for-profit organizations. The event

CHAPTER 8

Catalyzing Development through Partnerships and Knowledge Creation

PRIVATE SECTOR APPCheck out the IDB Group tailor-made App featuring private sector operations, case studies, videos, slideshows, an interactive project cycle, and an online loan application form. The app is available on the iTunes App Store and google play (search “IDB Private Sector”).


CHAPTER 8: CATAlYZInG DEVElOPmEnT THROUGH PARTnERSHIPS AnD KnOWlEDGE CREATIOn | 71

focused on innovation and small and medium enterprises (SMEs) and had more than 70 experts from 15 countries attend the event. In June 2013, BASE Forum II was held and focused on how to implement business models that serve low-income markets without putting commercial viability at risk. The event took place in Medellín, Colombia and had 1,700 attendees. It attracted massive media coverage and had 19 sponsor companies. During the two-day event, 93 panelists participated and hailed from Latin American, Asia, Europe, and the United States.

IIC’s Sustainability Week offered workshops to raise awareness about environmental and social risks and helped participants recognize the advantages of using strategic methods to manage these risks and turn them into business opportunities. The event also provided an opportunity to offer companies the specialized knowledge and tools they need to identify and adopt energy-efficiency measures that will lower their energy costs and reduce their ecological footprint. The Inter-American Forum on Microenterprise (Foromic) is Latin America and the Caribbean’s leading forum on issues related to microfinance and micro, small and medium enterprise development. Experience shows that financially active and empowered MSMEs constitute one of the most effective ways to overcome the challenges of poverty. Over 3,200 participants attended the event, exchanging knowledge and ideas across sectors.

PPPAmericas facilitates knowledge exchange and new relationships, so that governments and the private sector may both benefit from developing projects together. Through the IDB Group's work to strengthen capacity for Public Private Partnerships (PPPs) in the region, PPP project investment has increased by over 50% and the number of projects has grown 25% over the last decade. In 2013, 500 participants from 27 countries gathered in Cartagena, Colombia to attend the 5th PPPAmericas conference.

Impact Investors. The IDB Group has developed strong relationships with several impact investors such as Oikocredit, Calvert Foundation, Dexia, and Inconfin and has become part of important networks such as the Global Impact Investing Network, Impact Base, and Global Impact Investment Map. Through its participation in GIIN’s Investors’ Council, the IDB Group promotes impact investments to further the sustainable economic development in Latin America.

Partnership with NextBillion. The IDB Group promotes inclusive business models through blogs written by its investment officers or clients on NextBillion.net, which was created in 2005 by the World Resources Institute’s Market and Enterprise Program and which brings together the community of business leaders and practitioners in the field of BoP business. The IDB Group is featured as a partner on the website, along with Ashoka, the Citi Foundation, Acción, and the Calvert Foundation.

VIDEO STORYTELLING The IDB Group selected several highly developmental projects, including the University of San Ignacio de Loyola, Panama Canal, and Pozo Almonte projects, and worked on site with clients to discover the development results of each project. View the videos at: http://iadb.org/scf.

The IDB Group uses the Impact Reporting and Impact Investment Standards (IRIS) to track social and environmental performance across its portfolio.

NextBillion.net

http://iadb.org/scf


AbbreviationsAIC Alternative Insurance CompanyBA Banco Agrícola S.A.BoP Base of the pyramidC2F Canadian Climate Fund for the Private Sector in the AmericasDE Development EffectivenessDFI Development finance institutionFI Financial intermediaryGHG Greenhouse gasGIIN Global Impact Investing NetworkHZPSI Harvard Zofnass Program for Sustainable InfrastructureIDB Inter-American Development BankIIC Inter-American Investment CorporationIFPRI International Food Policy Research InstituteILC Industrias La ConstanciaIRIS Impact Reporting and Investment StandardsLEED Leadership in Energy and Environmental DesignMDB Multilateral development bankMIF Multilateral Investment FundMSMEs Micro, small, and medium enterprisesNDF Nordic Development Fund NSG Non-sovereign guaranteedOMJ Opportunities for the MajoritySMEs Small and medium enterprisesSCF Structured and Corporate Finance DepartmentSG Sovereign guaranteedSWEP Strengthening Women’s Entrepreneurship in PeruTC Technical cooperation grantUSIL Universidad San Ignacio de LoyolaWEAmericas Women’s Entrepreneurship in the AmericasweB Women Entrepreneurship Banking

Inter-American Development Bank Private Sector GroupThe Structured and Corporate Finance Department (SCF) works with clients at all stages of the investment process to realize breakthrough sustainable developmental and financial results. Backed by a broad mandate, SCF offers unique industry experience and market knowledge. Tailored, long-term funding and risk mitigation products are coupled with internationally recognized social and environmental practices. For every transaction, SCF forms a custom, cross-disciplinary team that brings together the best financial and technical solutions, focused on finding ways to turn investment objectives into financial results with high development impact.

SCF provides structured and corporate finance to a variety of entities — private utilities and infrastructure operators, banks and financial market institutions, state-owned entities without a sovereign guarantee, and private firms. Target sectors include energy, energy efficiency, transportation, water and sanitation, manufacturing, agribusiness, sustainable natural resources, banking, healthcare, education, and tourism among others. SCF also leverages its own funding with co-financing from global commercial banks, regional banks, or institutional investors. Grant resources are often used to fund technical, economic, financial, credit, environmental, social, and institutional studies to assess the feasibility of implementing project activities with a high development impact.

Opportunities for the Majority (OMJ) is the only operational team in a DFI that is exclusively focused on originating and financing Base of the Pyramid (BoP) business models with private companies. Through OMJ’s work, the IDBG has forged new partnerships with social investors, investment funds, companies, other DFIs, regional banks and business schools. Since its conception, OMJ has worked to enhance its value proposition to its unique client market comprised of private sector players who are developing market-based models in Latin America to serve unmet needs of the region´s BoP population. Through its variety of products (loans, credit guarantees, and non-reimbursable technical assistance), OMJ reaches corporations, financial institutions of all sizes, micro, small and medium enterprises (MSMEs) and funds, in order to support projects that directly benefit BoP families.

The Inter-American Investment Corporation (IIC) promotes private sector development in Latin America and the Caribbean with a focus on small and medium enterprises (SMEs). It helps companies streamline management processes and provides them with financing in the form of equity investments, loans, and guarantees.

The IIC is focused on its mandate to promote the economic development of Latin America and the Caribbean by encouraging the establishment, expansion, and modernization of the private sector, particularly SMEs. Through its commitment to fulfill this mandate, the IIC has grown to become one of the most important partners for SME financing in the region, providing a variety of loan and equity products as well as technical assistance services. Supporting the private sector has helped the IIC not only maximize its development impact, but also achieve its strategy to ensure the financial viability and long-term sustainability of its operations.

The Multilateral Investment Fund (MIF) promotes the development of private sector-led innovation benefitting poor and vulnerable populations in Latin America and the Caribbean. It is the largest international technical assistance provider to the private sector in the Region. The MIF complements other IDBG windows by serving as a development laboratory, experimenting and testing development solutions which can be adopted by private- and public-sector agents. The MIF is committed to results-based project measurement, rigorous impact evaluation, and active knowledge sharing so that the most promising solutions are widely known and can be taken to scale. The MIF’s MSME client focus, higher risk tolerance, and ability to combine grants, equity and lending, give it a distinctive role within the IDBG private sector.

This report refers only to private and non-sovereign guaranteed operations of the IDB, the operations of IIC and of MIF.

lead authors and coordinatorsSandra DarvilleTracy GarciaSabine Prinz

Editing and proofreading Pablo Anton DiazHelio Bertachini NetoTatiana Fontes SoaresTracy GarciaMax-Emanuel HatzoldRamona Kammerer Sabine Prinz

Design coordination and typesettingRyan ClennanTracy Garcia Amy KimmettSabine Prinz

Contributing authors and analystsPablo Anton DiazSilvio Audi Viviane AzevedoPaola de Baldomero Zazo Vanessa Ruperez BenitoHelio Bertachini NetoCynthia BoruchowiczDavid CrowleyRuben Doboin Tatiana Fontes SoaresKaren FowleMaria Lourdes Gallardo Rosalia Grassi CaorsiMaria KronsteinerRosario LondoñoAngela MillerTetsuro NaritaElizabeth NicolettiEnrique Palacios AltamiranoEmmy PepperElisabeth ReschCornelius RoschanekFlavia SandovalIchiro Toda

Special thanks toDaysi AndradesVeronica Reyna ArreazaBettina Boekle-GiuffridaKelle BevineMartin ChrisneySanola Daley Patrick Doyle Ana Lucia EscuerdoJozef HenriquezJulie Katzman Nancy LeeCarl MuñanaDana MartinLuis Marquez Leonardo MazzeiTomas MillerElee Ismael MuslinNicolas ReyesLuiz RosGema SacristanHans SchulzYuri SoaresKatilin Solymosi

“It is clear that the private sector, and private sector models, can be a major agent of change for resolving what have been intractable problems. It will take our commitment to promoting systemic solutions and innovative environmental and social programs to increase our impact and that of our private sector partners.”Julie Katzman Executive Vice President, Inter-American Development Bank


Our deal is with the future.

private sector with purpose: stories of development

Documents

development gap

catalyzing development

private sector windows

private sector operations

aprivate sector

innovative private sector

development of latin

finpyme regional