Fund invests in a leading Peruvian microfinance institution

Luxembourg and Cusco
June 05, 2024 Fund has announced a landmark investment in Caja Municipal de Ahorro y Crédito Cusco S.A. (Caja Cusco), a leading microfinance institution in Perú, through a senior loan totaling USD 15 million equivalent in local currency. The loan has a 5-year maturity and is structured as a synthetic facility. Moreover, this loan is an innovative instrument designed to combine environmental and financial benefits.

Caja Cusco presents a compelling opportunity for Fund to foster a long-term partnership with an important player in the region’s microfinance sector, a sector with great development impact potential and of interest for the fund. By partnering with Caja Cusco, the Fund aims to support small-scale producers in rural areas of Peru, where agribusiness plays a crucial economic and social role. This transaction will enhance access to finance for micro, small, and medium-sized enterprises (MSMEs), while supporting them in implementing or growing their sustainable practices. Caja Cusco is a great partner due to its commitment to supporting rural smallholders in the agricultural sector, as it has shown great interest and leadership with various initiatives aligned to this objective. Moreover, this investment will enable Caja Cusco to keep expanding and diversifying its funding sources by attracting new financiers that may help Caja Cusco meet its long-term environmental and social objectives.

The earmarked funds are expected to catalyze Caja Cusco's efforts in financing sustainable practices, promoting biodiversity conservation, sustainable use of natural resources, and climate change adaptation. The combined financing and technical support will foster a sustainable customer base, build resilience to climate change, and lead to environmental benefits and improved productivity.

"This investment demonstrates our commitment to fostering sustainable development in Peru's agribusiness sector focusing on smallholders," said Michael Evers, Chairperson of the fund’s Board of Directors. "Caja Cusco's robust Environmental and Social Management System (ESMS) and dedication to promoting sustainable practices within the agriculture sector align perfectly with our mission. We are confident that Caja Cusco's strengthened capabilities and expanded green portfolio will significantly contribute to achieving our shared sustainability goals." he added.

“In terms of impact, Caja Cusco sets an example for other microfinance institutions in the country. It is one of the few CMACs that has established a robust ESMS, enabling it to better assess and manage environmental and social risks," said Yovana Enriquez, Chief Financial Officer of Caja Cusco. "Additionally, our commitment to promoting sustainable practices within the agriculture sector, such as financial products tailored to the risks and requirements of each region and crop, supports smallholders in adopting practices like installing biodigesters and cultivating native species."

complement the investment, Fund will provide technical assistance to strengthen Caja Cusco's sustainability strategy and expand its green portfolio. The efforts will be directed at increasing Caja Cusco’s capacities to foster a positive footprint within its clients and increase resilience and adaptation to climate change. The support is expected to be complemented with interventions with end-clients that may have a lasting environmental and social impact.

The projected development impact of this investment is substantial, contributing towards several Sustainable Development Goals (SDGs), including Zero Hunger (SDG 2), Decent Work and Economic Growth (SDG 8), Climate Action (SDG 13), Life on Land (SDG 15), and Partnerships for the Goals (SDG 17).

“This transaction is a milestone in an extensive effort by the fund in Peru. Through numerous interactions with various stakeholders and key players in the country, the fund gained a comprehensive understanding of the needs within the microfinance sector, as well as the specific requirements of Caja Cusco and its end-clients. This investment will enhance their capabilities to support smallholder producers with tailored financial products, further develop their green lending strategy, and help guide Peruvian MSMEs towards more sustainable production methods.” said Hector Gomez Ang, Director for the fund at Finance in Motion.