eco.business Fund invests USD 15 million in Mercantil Banco to promote sustainable agri-business growth in Panama

Article originally published on eco.business Fund's website on 29/07/2024. LACIF contributes to eco.business Fund through technical assistance and financial instruments.

The eco.business Fund has invested USD 15 million in Panama's Mercantil Banco S.A. This investment aims to support sustainable growth of agribusiness Small and Medium Enterprises (SMEs) in Panama by focusing on responsible use of natural resources and climate change adaptation.

Access to credit for agribusinesses in Panama has been traditionally limited and has seen significant reductions over the past two decades. The recent trend of 'de-risking' by international lenders has exacerbated this issue, making it difficult for local financial institutions to secure the long-term financing needed for key economic sectors. The Country’s government has committed to supporting local agricultural production and fostering a favorable investment climate to address these issues. eco.business Fund’s investment aims to help bridge this financing gap, ensuring that responsible agribusiness producers continue to receive the support they need.

Mercantil Banco boasts an impressive SMEs portfolio in Panama and a strong commitment to sustainable practices. The Bank's strategic focus includes increasing and diversifying its client portfolio, particularly among SMEs engaged in agribusiness and tourism. This transaction aligns well with the eco.business Fund’s objectives, as it will support the competitiveness of certified companies under the Fund’s approved sustainability labels or those adopting sustainable activities outlined in the Fund’s “green list”.

The investment from the eco.business Fund will support Mercantil Banco in broadening its green portfolio. This includes continuing to identify and encourage existing clients to adopt sustainable practices, particularly in the production and processing of key agricultural commodities. The focus will be on incorporating activities and products targeted by Mercantil’s new strategy, which emphasizes sustainability and environmental responsibility.

Michael Evers, Chairperson of the eco.business Fund, remarked, “In addition to promoting sustainability in agribusinesses, this investment is expected to contribute to job creation and balanced economic growth, particularly in underdeveloped rural areas of Panama, highlighting the importance of specialized financiers like the eco.business Fund in supporting sustainable development in the region.”

The eco.business Fund's advisory services have been instrumental in enabling Mercantil Banco to see new opportunities in sustainable financing, including working with certified businesses and engaging in green-list activities. This partnership is expected to have a significant impact, fostering a higher share of certified production in the region, which will contribute to the sustainable use of natural resources and biodiversity conservation.

Ignacio Vollmer, CEO of Mercantil Holding Financiero Internacional, said: "We recently developed the Corporate Environmental and Social Policy, which is aligned with Mercantil’s mission, strategy and objectives in terms of environmental and social responsibility. In this way, we reiterate our purpose of creating value for the organization and stakeholders through adequate management and approach of the principles of stewardship established in relation to environmental and social risks. We will continue advancing on our agenda of sustainable financial products, including credit and investments."

Hector Gomez Ang, Director for the Fund at Finance in Motion, eco.business Fund’s advisor, added, "Our aim is to catalyze environmental and social impact by channeling funding to Mercantil Banco’s agribusiness customers who are adopting sustainable practices. The Bank’s extensive outreach makes it an ideal partner for us in promoting sustainable agriculture and fostering long-term environmental benefits. We believe this collaboration will have a substantial impact, encouraging other market participants to drive positive change in the sector."