Norfund invests in Salvadorian bank to finance SMEs and renewables

May 31, 2022

Norfund has approved a USD 20 million loan to Banco Cuscatlán in El Salvador to increase the bank’s ability to provide loans to small and medium-sized enterprises and renewable energy projects.

Small and medium-sized enterprises (SMEs) are an important driver for growth in El Salvador’s economy, accounting for at least 43% of total output and 70% of employment, in what has traditionally been a remittance, consumer driven economy. The country is however one of the markets with the lowest levels of financial inclusion in Central America, with just 30% of the adult population holding bank accounts.

Banco Cuscatlán is the second largest bank in El Salvador. It has already had a growth of 20% of its portfolio of SME clients since 2019, and the bank has set a goal of increasing the SME loan portfolio by a further 12% per year over the next 5 years.

The bank is also working on developing a pipeline of green projects including renewable energy, energy efficiency, and environmental certification.

Norfund’s USD 20 million loan will complement the bank’s existing funding strategy, which is mainly driven by short term funding in the form of deposits, enabling more medium-term SME funding to strengthen the country’s productive sectors. The plan is that 25% of the capital that Norfund is providing will go to funding renewable energy.

By investing in Banco Cuscatlán, we can contribute to eliminate poverty by providing financing through financial institutions to small and medium companies and by offering green lines that promote the use of renewable energy in industry and commerce. We are pleased to partner with Banco Cuscatlán as the bank is taking concrete steps in building their sustainability framework even further.

Maria Esther Boquin, Investment Manager, Norfund