TriLinc has provided financing to a consumer lender based in Colombia, founded in 2006, that exclusively services public sector employees and retirees within over 300 small and medium size government agencies at the municipal, state, and federal levels. In Colombia, a relatively high percentage of the population lacks a borrowing history and, in many cases, a bank account, which creates a large financial gap in the country. Payroll deduction loans or “Libranzas” were created in Colombia in the mid-1990s to supply credit for this type of individual and have become an important credit product. Representing 35-40% of total consumer loans, this product is offered at comparable interest rates to other consumer products, and has a national lending cap. Following a robust three-stage credit underwriting process that incorporates screening and data collection, verification, and authentication as well as credit analysis and approval, the company’s competitive advantage lies within its time to disbursement, as loans are disbursed within 48-72 hours, whereas local banks typically disburse within 10-12 days. TriLinc’s financing will assist the company in originating new payroll deduction loans, which will provide middle income consumers with timely and flexible financing for voluntary private consumption.
Colombia is classified as an upper-middle income country by the World Bank1. Between 2010 and 2016, GDP growth rates averaged approximately 4.1%1. Although Colombia is still recovering from the major oil shocks in the recent years, the country has become more resilient due to its macroeconomic and structural reforms. One example of economic revitalization is through the country’s effort to expand access to financial services. In 2015, the IFC had invested a total of $45 million USD to local loan service providers2 . Furthermore, in 2017, the Inter-American Development Bank granted Colombia a $450 million USD loan for major financial system reforms.3 The country’s main exports are concentrated in petroleum, coal, emeralds, coffee, nickel, cut flowers, bananas, and apparel4. Conversely, the country’s main imports are focused in industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, and electricity4.
Colombia meets TriLinc’s standards for its performance across relevant growth, stability, and access metrics5. Ranked third for its ease of doing business in Latin America and Caribbean by the World Bank6 and as the 4th largest economy in Latin America with a GDP of $282.5 billion,7 the country benefitted from an estimated $268.1 billion in net foreign direct investments that flowed into the Latin America and Caribbean region in 2016.7 The Latin America and Caribbean region had a GDP growth rate of -1.4% in 2016, which is projected to increase to 2.5% by 2019.8
Additional Sustainability & Impact Highlights
- The borrower has a national presence with around a 130-person sales team originating loans through 33 branches in 81 municipalities throughout Colombia.
- The loans originated by the borrower range from $300 USD to approximately $25,000 USD, with an average of $3,000 USD. The majority of loans are extended to middle- and lower middle-income populations within the country. From 2012 to 2015, the borrower originated approximately $81 million worth of loans with over 17,000 active clients.
1The World Bank, World Development Indicators Database, Colombia, 2017. 2IFC Credivalores Press Release, 2015. 3IDB, Colombia Financial System Reform, 2017. 4CIA, The World Factbook, 2017: Colombia. 5There is no assurance that our investment in this company or this market will be successful. 6The World Bank, Ease of Doing Business, Latin America and Caribbean 2017. 7The World Bank, Data, Latin America & Caribbean, 2015. 8World Bank, Global Economic Prospects, 2017.
The above information is as of the initial date of investment: July 3, 2017.
There is no guarantee that TriLinc’s investment strategy will be successful. Investment in a non-listed LLC involves significant risks including but not limited to: ownership is restricted; no secondary market; limitation on liquidity, transfer and redemption of ownership interest; distributions made may not come from income and, if so, will reduce the returns, are not guaranteed and are subject to management discretion. TriLinc selects investments and conducts operations on behalf of its clients, and will face conflicts of interest. Investment with TriLinc is not suitable for all investors. Securities Offered through CommonGood Securities, LLC, a member of FINRA and SIPC.
An investment with TriLinc carries significant fees and charges that will have an impact on investment returns. Information regarding the terms of the investment is available by contacting TriLinc. This is a speculative security and, as such, involves a high degree of risk. Investments are not bank guaranteed, not FDIC insured and may lose value or total value. Some investments may have been made in an investment vehicle that is no longer open for investment. The highlighted investment may or may not have been profitable. There is no guarantee that future investments will be similar.
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