In November 2020, Triodos Microfinance Fund and Triodos Fair Share Fund provided a USD 15 million senior debt facility to Banco Agrícola, as part of a syndicated facility initiated by the International Finance Corporation (IFC). Regional manager Alejandro Solis Aguilar: “This facility has a clear earmark: Banco Agrícola will use the funding to expand its lending activities to MSMEs and in particular to women-owned SMEs. Furthermore, the funding is instrumental in Banco Agrícola’s ambition to increase housing finance for lower and middle-income households, and to finance climate related assets, including green energy and green buildings.”

Digital channels

The vast majority of El Salvador’s enterprises can be characterised as MSMEs. According to the latest enterprise survey carried out by El Salvador’s General Directorate of Statistics and Censures, this is as high as 99.7%. However, financial inclusion remains low; just over 40% of these businesses have a bank loan or line of credit. This low rate stems from lenders’ perception of the higher risk of small businesses because of their insufficient credit history, financial information, and collateral to secure financing.

“This unmet financing need underlines the urgency and importance of Banco Agrícola’s strategy to increase its focus on this market segment”, says Alejandro Solis Aguilar. As part of this strategy Banco Agrícola will develop dedicated MSME products and services and will digitalise its MSME product line. Many of the bank’s clients are already familiar with digital services and this trend is expected to continue. “The COVID-19 pandemic has accelerated and highlighted the importance of digital channels for Banco Agrícola. In the coming years, the bank will further digitalise its products and processes, with digital customer service and online loan applications.”

The impact of COVID-19 is also felt in El Salvador. The country’s growth projections are mixed; the economy is expected to decelerate during 2020-2022, as it is highly influenced by the slowing economic activity in the United States. However, the government has a strong mandate for change and to create economic opportunities, also by tackling organised crime.  This small Central American country (with 6.5 million inhabitants) has among the highest homicide rates in the world.

Alejandro Solis Aguilar: “In these challenging times, Banco Agrícola has an important role to play, and it is well-positioned to do so. Its funding is strong, the bank has always shown resilience in times of challenges and recognises the need and importance of improving the social and economic circumstances for all Salvadorians.”