The European Investment Bank (EIB), the European Union's long-term financing institution, is providing 40m EUR (equivalent to some 41m USD) from its own resources to Banco Popular, Banco Intercontinental (Baninter), Banco BHD, Banco Nacional de Credito (Bancredito). The term of the loan is 12 years, including a four-year grace period.
The loan is the first of a new two part facility of 80m EUR, which the participating banks will on-lend in sub-loans in equivalents of between one and four million Euros. Private sector companies in the Dominican Republic wishing to access long-term finance in Euros or US dollars for medium sized projects, particularly those with the potential to create viable job opportunities and to generate foreign currency earnings, in the industry, agro-industry, tourism, transport, communications, mining & quarrying, productive infrastructure and related services sectors, will be eligible under the financing. The funds are being granted under the Second Financial Protocol of the Fourth Lomé Convention and will benefit from a parallel interest subsidy provided by the European Development Fund. The interest subsidy will be applied through the participating banks for the development of financial sector know-how and support for regulatory governance (it is intended that the Superintendence of Banking will receive half of the subsidy), environmental studies and also for technical assistance and training in sub-projects financed under the facility.
The principal benefit foreseen by the proposed operation is the provision of badly needed long-term financing (in hard currency) into a market where similar instruments are not readily available. As several banks share the loan, it should be a rather visible operation and introduce a certain degree of competition between them, designed to ensure an efficient use of funds. Accordingly the facility should make a substantial contribution both to the sustainable growth of the Dominican Republic's economy and the broadening and deepening of the country's financial sector.
This is the second operation that the EIB has financed in the financial sector in the Dominican Republic under the present Fourth Lomé Convention. A global loan operation of 20m EUR was previously granted by the Bank to Baninter and Banco BHD and signed in 2000 and 2001.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union. Currently, the Bank's financing in Africa, the Caribbean and the Pacific (ACP) is carried out under the provisions of the Fourth Lomé Convention, which was concluded in 1989 for a period of 10 years and is accompanied by two Financial Protocols. Under the second financial protocol, the total financial aid available amounts to EUR 14.6 billion, of which EUR 12 billion is grant aid from the EU member states, EUR 1 billion is managed by the EIB as risk capital finance, and up to EUR 1.6 billion is in the form of loans from the EIB's own resources. The EIB is at the moment working in close collaboration with the EU Member States and the European Commission to finalise criteria and operational guidelines of the newly created Investment Facility, set up by the New ACP-EU Partnership Agreement, signed in Cotonou in June 2000, which will replace the Lomé Convention. Under the Cotonou agreement the total financial aid available amounts to EUR 15.2 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU member states, EUR 2.2 billion is managed by the EIB under the Investment Facility, replacing risk capital finance, and up to EUR 1.7 billion is in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (loan amortizations will be invested in new operations), aiming at supporting technically, environmentally, financially and economically sound projects in the private or the commercially-run public sector.
The Republic of South Africa became an associate member of the Lomé Convention in 1997. The Bank has a separate lending mandate from the EU's Member States to provide long term financing for RSA totalling EUR 825 million over the period 2000-2006.