The executive tells how the restructuring of the Bank has developed in the government of Guillermo Lasso.
Fabián Carrillo has been in charge of the Development Bank of Ecuador for four and a half months and is determined to generate expansion processes of the financial entity that allow increasing the quotas for access to credit from $ 500 million to $ 1,126 million. The current manager, and who had held the position of Vice Minister of Finance in the Lenín Moreno government, arrives at the position at the invitation of the Minister of Finance, Simón Cueva, and with the acceptance of the members of the Board of Directors. The executive recounts how the Bank’s restructuring has developed, In order to generate a virtuous circle that combines good projects, to achieve results, if three elements are combined, good projects, good executors and access to credit in better conditions are combined.
During these days, President Lasso offered the GAD better credit conditions such as lowering rates and extending terms, exactly how are they thinking about it?
As a general framework I can tell you that first our team has sought to put the house in order. And we seek to finance good projects in good conditions, in which good executors participate. Our team is ensuring that initiatives are grounded in well-done studies, with relevant designs and consistent budgets. We are also organizing four units: one for costs, another for pre-investment, another for climate change and another for app. For example, in the cost section, unit costs are analyzed for the first time and have seen quite a few opportunities for improvement. As for good executors, we want the GADs to be managed with orderly finances and with management models that allow the services to be sustained. This comes with better financing.
What are these new financing conditions?
In these four months we have increased the total aggregate quotas from $ 500 million to $ 1,126 million. We have just communicated this to the Association of Municipalities this week. In this way, we have practically doubled the quota for access to financing. A second element is the reduction of the rate from 7.5% to 5.5% for potable water and sewerage projects. And finally it has been decided to extend the terms also for drinking water and sanitation that were up to 15 years, to a term of up to 25 years.
Since when do the new conditions apply?
The projects that they present from January will have access. At the moment the Bank is already in the process of closing the year. With this, it is possible to promote the process of productive reactivation, but also the provision of safe water, within the process of combating chronic malnutrition.
How do they achieve this doubling of the term, where does this money come from?
It is challenging without a doubt, but one of the objectives is to double the size of the Bank, to double the portfolio in 2021 and 2025. Under what considerations ?: the Bank’s equity amounts to $ 700 million and this will allow us to leverage assets between $ 5,000 million and $ 7,000 million. At the risk of the Bank’s equity, we can attract resources abroad, to channel them under better credit conditions. The money can come from multilaterals such as CAF, the French Development Agency, the World Bank, the IDB. Also from investment banks like the China Development Bank.
How much could they get and what shapes would they use for it?
We have identified the possibility of closing operations for $ 2,165 million in 2022. Regarding the figures, we can ask investors to invest resources in the Bank. Resources are raised and loans are given. Financial policy dictates that a bank can grow between 9 and 10 times its equity. The idea is that we contract an operation with the CAF, they lend us, the Bank lends to the GADs for drinking water projects. The Bank pays with what the GADs pay.
But then, for now, everything will be based on credits with multilaterals that give a low rate, not securitizations or other figures …
We do not rule out any figure. However, the challenge is costs. Country risk is still high, although there has been a significant reduction. Nor do we rule out having agreements with the local financial system. We are also working with Conafips to have a greater impact on development issues in the territories. With private banks and medium and large cooperatives we seek to undertake development projects. We are also working on optimizing the treasury and, for example, we are directing our investments in securities to credit.
Is the BDE at risk of losing in this model?
One of the strengths of the Bank is the business model, we collect with a pledge of income in accordance with the law. Therefore, our past due portfolio is 0%. There are several credits that require sovereign guarantee, but we are also looking for other operations without the need for guarantee and that they would be at 4 and 4.5%.
The quota that you mention will double, in how long would it be delivered?
We expect to place or generate a portfolio for projects between $ 300 million and an additional $ 400 million next year. We are also working on monthlyizing the Bank’s goals. But I want to emphasize that this is not an effort by the Bank alone, but a joint effort, which is accompanied by the Bank.
Can you comment on the general situation of the Bank?
The Bank’s financial structure is $ 2,400 million in assets, about $ 1,700 million in liabilities, and $ 700 million in equity. It is an entity with great expectations of growth, since now it is like half of a medium commercial bank. Regarding risk, it has a AAA- rating as of last September, which is the best that a public banking entity has in the country. This allows us to dream of having a balance expansion in terms of quality and quantity. Our profitability is in the double digits. The Bank does not focus on placement goals, but it does focus on having better projects, as we have mentioned. In any case, this year $ 137 million has already been delivered so far and we could close the year with $ 280 million. In 2022 we have set a goal to disburse between $ 650 million and $ 680 million, of which $ 300 million to $ 400 million are for water and sewerage. (I)
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