U.S. Small Business Uses OPIC Loan to Support Lending to SMEs in Mexico
May 5, 2009
WASHINGTON, D.C. – A U.S. small business will use a loan from the Overseas Private Investment Corporation (OPIC) to provide lending to non-bank financial institutions (NBFIs) in Mexico, which in turn will serve as a source of much-needed capital for small and medium-sized enterprises (SMEs) in the country.
OPIC will provide a $25 million loan to Velifin, a newly-formed NBFI in Mexico. Velifin will in turn use the funds to provide credit financing to other Mexican NBFIs, called sofoles and sofomes, which are non-depository institutions that have typically relied on bank lines of credit for funding and have recently begun to approach the limits of their lending capacity.
By acting as a wholesale lender, Velifin will serve as a source of secondary financing for credit-constrained NBFIs, bringing increased liquidity to the underserved SME and microcredit sectors. Ultimately, Velifin intends to securitize its micro and SME loans, packaging its portfolio into investment grade debt products.
Seventy percent of the project’s financing will support SMEs, the remaining 30 percent micro enterprises. In addition, 50 percent of its portfolio is expected to target rural borrowers.
Velifin, which was established specifically to both generate attractive returns for investors and encourage the extension of credit to poor and underserved populations, is 50-percent owned by Cambridge Liquidity Partners, Inc., a U.S. small business which itself is owned by U.S. individuals.
“This project directly responds to a challenge – and opportunity – in the Mexican financial sector,” said OPIC Acting President Dr. Lawrence Spinelli. “Since there is strong demand for capital from both sofoles and sofomes and SMEs, and a limited supply of capital for the sector, Velifin will provide much needed liquidity at a critical time. OPIC is pleased to support a project with so many valuable developmental benefits.”