Banco ProCredit El Salvador
El Salvador, the smallest country in Central America in terms of land area, has a population of 6.2 million (source: Multipurpose Household Survey – 2011, General Statistics and Census Board). As in other Central American countries, the Salvadoran economy was hit hard by the 2008-09 global financial crisis, and is only gradually recovering. Output growth has been sluggish, owing to low rates of private investment, declining competitiveness, and weather-related shocks. However, given that El Salvador is firmly anchored in a fully-dollarised currency regime, inflation remained low (source: International Monetary Fund). By the end of 2012 GDP growth had risen to 1.6% (source: International Monetary Fund, preliminary figures for 2012).
The Salvadoran financial system consists of 12 banks and 10 non-banking financial institutions such as co-operatives and credit unions. At the end of 2012, the sector's total assets amounted to USD 13.4 billion, representing an increase of 4.6% compared to 2011. The banks' total loan portfolio increased from USD 8.4 billion in 2011 to USD 8.9 billion in 2012.
The banking system appears well capitalised and liquid. At end-2012, the average capital adequacy ratio was 17%, while overdue loans dropped to under 3% of total loans and were fully covered by provisions. During 2012, total bank deposits increased by just 2.5%, while credit to the private sector grew by 4% (source: International Monetary Fund, preliminary figures for 2012). At the end of 2012, the ratio of total deposits to GDP was 43.2%, while loans came to 39.2% of GDP.
Banco ProCredit El Salvador has the longest history of all the institutions in the ProCredit group. The seed was sown in 1988, when IPC, together with the Konrad Adenauer Foundation, established a loan fund for the Salvadoran small business association AMPES. The fund initially served only the members of the association, but this restriction was later lifted in order to allow the fund to reach a greater number of small and very small businesses. In keeping with the goal of achieving greater outreach, it was decided to transform the entity into a funding institution (a regulated finance company which is restricted to certain banking activities). In addition to AMPES, other shareholders included the Inter-American Development Bank, the Central American Development Bank (BCIE) and the NGO Fundasal.
The new institution, Financiera Calpiá, focused exclusively on micro lending and experienced dynamic growth from the start, quickly establishing itself as the leading provider of microfinance in the country. However, its shareholder structure, made up of public institutions and NGOs, inhibited its development. In addition, because the individual shareholders had only a small stake in the institution, they were hesitant to take major decisions or become directly involved in Calpiá's operations, thus giving management free rein to pursue goals that were not always in line with the institution's mission. Not surprisingly, the pace of growth began to slow, and the institution became less efficient. As a result, in 2001 ProCredit Holding, IPC and their partners decided to acquire a majority share in Calpiá and transform it into a fully-fledged bank, now known as Banco ProCredit. This long-drawn-out and expensive process was finally completed in June 2004.
Today Banco ProCredit is the only bank in El Salvador that focuses on the provision of banking services to very small, small and medium-sized enterprises.
In 2013 Banco ProCredit El Salvador set new standards in the market by introducing an Environmental Management System, the intention of which is to reduce the negative environmental impact of the bank’s own operations and those of the companies it finances. In this context, the bank launched a “green finance” service for business clients, offering loans specifically designed for energy efficiency, renewable energy and other environmentally friendly projects. In addition to having a positive impact on the environment, these “green loans” can be an opportunity for modernisation and innovation, enabling very small, small and medium Salvadoran businesses to improve their productivity and their competitiveness.
Recruitment and staff development is another important area in which the bank invests intensively to ensure that employees understand the social and responsible role the bank plays in the market and are qualified to provide excellent customer service.