Banco de Fomento Internacional, S.A. (BFI) is an investment bank in Santiago, Cape Verde, that has been providing its clients with a broad range of quality products and services since it was established in 2002.
Wanda Rich, editor of Global Banking & Finance Review, met with the CEO of BFI, Luis P. Rodrigues. They discussed how the custom-fit approach allows them to build valued partnerships with their clients, how the impact of COVID-19 must be accommodated to ensure sustainability, and much more.
How has BFI had to adapt operation as a result of the current pandemic?
The tremendous humanitarian fallout of the COVID-19 crisis will certainly have a correspondent disruptive economic impact. The path ahead is hence an insecure one, driven by plenty of uncertainty.
Being primarily an investment bank, investments will be considered, evaluated and ranked in a different way from now on. Upstream, we foresee three things. One, a regroup on the activity sector’s priorities; two, an even greater care and awareness for overall wellbeing, and three, an ever more meticulous project analysis. Downstream, investors will become more conservative.
Having said that, BFI did not in fact go through a rigid adaptation. Obviously, we had to adapt in terms of workflow as we had to be – and continue to be – aware of needs for remote working and the team’s capacities. However, in terms of business, BFI strategically preferred to specialise in projects and sectors that would pretty much continue to be of relevance in times to come. This includes green energy, environmental issues, health, infrastructure, tourism – all related to wellbeing and, for the most part, normally engaged with authorities. In this regard, the Board did not feel the necessity to adapt the strategic plan.
BFI differentiates commercial banking from investment banking. Why is this so important for Cape Verde?
It is as important for Cape Verde as it is for the rest of the world. Investment banks have different responsibilities and specialise in services that are very much custom-fit and custom-oriented, not mass offerings. Investment banks are much more related to structured projects at the macro level of the productive economy. Commercial banks are fundamental funding machines.
BFI, as an investment bank, attracts savings into productive projects, promotes foreign direct investment (FDI) into local projects, provides diversified investments in state-of-the-art sectors and engages in practices that aim to achieve a levelled wellbeing.
These principles and assumptions are important to the majority of countries, but are even more so for those considered developing countries, such as Cape Verde.
How does BFI assist companies in devising the best plan to obtain funds?
It’s difficult to standardise as each case is unique. Our approach is to place ourselves in our client’s mind, and understand their objectives in order to devise the best plan, regardless of the purposes – fund raising, balance sheet performance, debt restructuring etc.
We allocate a project leader and/or an account manager to follow up with the client. Before we engage ourselves with a project, we must feel confident that we can be of value. We want to create partnerships rather than be a simple service provider.
If we believe we can be of help, we introduce the project into our networking and try to maximise it. BFI works with the most recognised international institutions, with special emphasis on those that target Africa.
BFI is regularly involved in providing comprehensive finance packages for projects in various industries. What are BFI’s advantages compared to local banks, and what is its outlook for the business?
I rather like to think that BFI works with local banks. There is a complementary essence with local banks, mainly with the commercial banks. First and foremost, commercial banks are critical agents in gathering funds. That is why they are keen to evaluate more complex, medium and long-term projects; the simple house mortgages, personal finances and corporate day-to-day businesses do not consume all their needs and, mainly, do not adjust their balance sheet risk in time horizons. If a term deposit – a liability – is gathered for a medium or long period then a correspondent asset, period wise, should be part of their balance sheet. Also, the regulatory limitations – specifically in terms of credit exposure – and balance sheet dimension, prompt syndications between banks, which leads us to work with local banks. We are very keen to work with them.
In terms of outlook for the business, one cannot ignore the impact that this Covid environment has created, and will create. Rather than talking about the disruptive economic impact, I prefer to focus on the new opportunities that will be created. It is certain that the principal investing countries are facing economic impact, which may induce limitations in investment opportunities with a stronger impact on economies that are dependent on the economic performance of others.
But it is up to us – and businesses like ours – to promote alternatives and find the prosperous projects to invest in. COVID-19 is a major market disruptor that has led to unprecedented levels of innovation. Due to the lockdown, so many businesses have had to reinvent themselves with a new ‘business as unusual’ philosophy, a new wave of tools and a new way of keeping in touch. Education will be reimagined. Remote working is a reality. Sustainable sectors must accommodate these factors.
In terms of project preparation and development, is Cape Verde more challenging than elsewhere?
Cape Verde is indeed challenging. I cannot say if it is the most challenging, but it certainly is challenging. There are two main factors.
The first is that Cape Verde’s GDP ranks in between the 10th and 20th percentiles according to international indicators. Its banking sector is also characterised by its limited dimension. Unfortunately, when discussing projects with international partners, dimension is critical. It seems that the positive aspects of Cape Verde are relegated. Thus, it becomes our challenge to emphasise that Cape Verde, according to the World Bank, is one of the top-ranked countries in Sub-Saharan Africa in governance indicators, particularly in the fight against corruption. It also has one of the best business climates in the region with stable political institutions. People are well educated and, as far as foreign policy is concerned, the country remains closely linked to Western Europe, which is a major source of tourism and FDI. The exchange rate cooperation agreement with Portugal guarantees the Cape Verdean Escudo convertibility with a fixed parity. Cape Verde has liberalised all economic and financial operations with foreign countries, and investors are able to open bank accounts in a foreign currency. It is a challenge.
The second challenge is an internal one. A Cape Verdean bank in the middle of the Atlantic Ocean constructed a portfolio of projects with significant and relevant parties in different countries over the past almost 19 years, and strives to achieve greater accomplishments. Given the circumstances, that is another challenge for us – one we undertake with pleasure.
How does BFI help maximum business value?
Customers are at the centre of our strategy. That is the concept for maximum business value. As I had the opportunity of mentioning, BFI is not a simple service provider. We take care of our clients’ projects as if they were our own.
In our line of business, we have the chance to gather plenty of information in different areas, industries, projects etc. Our accumulated experience – meaning critical information, our main commodity – and relationships with our network allow us to determine and prioritise functions, stages and definitions that maximise value for our clients’ businesses.
It has been very useful and important in assessing and following up projects, mainly those under the umbrella of project finance where details may influence outcomes.
Why use a project finance structure as opposed to corporate finance?
Nowadays, long-term infrastructure projects call for solutions that ease some critical issues for their promoters and/or the beneficiaries.
The main aspect is that the amount of debt that can be raised in project finance is based on the project’s ability to repay debt through the cash flows generated by that project alone. In corporate finance, lenders can generally claim for guarantees and collateral assets of the entire company, or even from other entities.
Is that an advantage? We believe so, mainly for long-term projects, which are normally – but not only – participated in by state entities. There are normally turn-key solutions which are optimal. These projects include an A-Z effort: the identification of the need, the formatting of the solution, the choice of partners, suppliers and stakeholders, determining the funding structure, following up the project and closing the deal. Project financing is greatly appreciated in governments that are keen to provide new infrastructures but have budget limitations. This solution may levy public debt issues, increase FDI and establish a financial reputation.
How do you organise the project financing structure to reduce risks?
As I mentioned, there are a number of efforts that go into project finance. One must choose the right partners, assess all risks and ensure a mitigation plan. It is, indeed, a complex procedure.
We rely mainly on our expertise, past experiences, the quality of our partners and, obviously, on the risk mitigation instruments available in the market. Foreign exchange, country risk, operational and other coverages all have entities and instruments defined to address risks. But risks exist in any business. The purpose is to mitigate them as much as possible.
I would say that the best way of mitigating risks is to have an experienced industry partner in the project.
As we specialise in specific sectors, we are at ease with this type of project.
What are the challenges and opportunities you see for investors right now?
That’s a very difficult and broad question for a short answer!
It depends on the type of investor. If it is a private investor or an institutional one, it depends on the magnitude of the investment, the risk tolerance one may assume and the nature of the investment (direct investment versus passive investment). There is a long list of parameters that define the challenges and opportunities for investors. Again, for BFI, each case is unique and our organisation is ready to assess the best opportunities through its private banking unit.
Nevertheless, there are general certainties one may claim: one, that the most daunting challenges a modern investor faces are the volume, means of communication and speed of information available, and two, that if you stay loyal to your principles and investment definitions you will always find interesting opportunities.
Looking back, what was 2020 like for BFI and what is it going to be like in 2021?
The latest strategic plan approved was in 2019, for the three subsequent years.
2020 was the year of consolidation of policies and actions that substantiated the guidelines of the strategic plan undertaken. It was a year of implementing a new IT system, introducing more and better governance policies and consolidating best banking practices. We reinforced our network of partners and knowledge. There were two main drawbacks: we were unable to visit our clients as much as we wished and used to, and the professional training that was projected fell short. Both of these constraints were due to the limitations imposed on travel.
Financially, we reinforced our balance sheet. We will have, shortly, our General Assembly.
For 2021, we will continue striving for excellence, hopefully finishing the implementation of major policies and actions in progress and increasing the proximity with our clients.
We are, in some ways, optimistic about new projects/mandates and about the result of the most recent developments, both structural and technological, that were introduced in 2020 with regard to attracting new customers. We expect 2021 to be a demanding but profitable year. We are very excited and look forward to accomplishing our clients’ goals.