Latin America and the Caribbean

Bolstering a Bank's Ability to Grow Amid the Crisis: Banco Continental, Paraguay

Banco Continental became Paraguay’s largest locally owned bank through innovation, sound management, and a strong balance sheet. Paraguay is one of Latin America’s poorest countries, and Continental grew by catering to low- and middle-income customers.
 

But the global financial crisis threatened to restrict its ability to expand. Paraguay’s banking system — like many others in Latin America — is dominated by foreign banks. Local banks often struggle to compete because they lack economies of scale and have higher funding costs than foreign banks.

Continental was strongly capitalized. But IFC recognized that the bank’s ability to expand services to small and medium enterprises was constrained — both in the capital, Asunción, and in remote rural areas. The bank lacked institutional investors, and relied solely on individual local shareholders to meet its capital needs for growth.
 

“We wanted to project solidity and prove to markets and clients that Continental was as solid as international banks,” said Oscar Diesel, the bank’s director and one of its shareholders.

In March, IFC was able to mobilize one of its crisis-response initiatives to strengthen Continental’s ability to grow and compete. In its first transaction, the IFC Capitalization Fund invested $20 million in Continental.

Continental, which employs more than 500 people and serves more than 40,000 customers, is now better positioned to continue pursuing its strategy — which includes expanding loans to small and medium enterprises, particularly in economically important sectors such as agribusiness. IFC’s involvement also sends a strong signal of confidence for customers and prospective investors in the bank. The transaction also enables Continental to benefit more broadly from IFC’s global expertise.

“IFC is helping open doors to us in foreign markets,” said Carlos Moreno, Continental’s general manager and a shareholder, “It brings us best practices and lessons learned, which help us compete with the international banks here.”