CAO Cases

Arne Hoel, The World Bank

Latin America & the Caribbean

Honduras / Ficohsa-01/ CAO Vice President Request

CAO Vice President Request
Date Filed
August 21, 2013
Case Status
Open - Compliance


Banco Ficohsa is the third largest bank in Honduras. Following earlier investments to support trade finance, housing and SME loans, in May 2011 the IFC Board approved an equity and sub-ordinated debt investment in Ficohsa (project #29257).


In the course of CAO’s compliance process in relation to Dinant, CAO became aware that Dinant was one of Ficohsa’s largest borrowers and as a result IFC had a significant exposure to Dinant through its equity stake in Ficohsa. As a result, the CAO Vice President initiated a compliance appraisal of IFC’s investment in Ficohsa in August 2013 to address the following questions:


a. how IFC has reviewed and supervised Environmental and Social (E&S) risks associated with Ficohsa’s portfolio and client base;

b. how IFC assessed the commitment and capacity of its client to manage these risks; and

c. whether E&S issues associated with Corporación Dinant (Dinant) and known to IFC were adequately communicated within IFC.


In its appraisal report, released December 2013, CAO concluded that IFC’s environmental and social performance with regard to its investments in Ficohsa merited further enquiry. In accordance with its Operational Guidelines, CAO proceeded to a compliance investigation of IFC.


CAO Action
CAO’s compliance investigation was conducted with input from an external panelist and focused on IFC’s performance. As such, the investigation does not make compliance findings in relation to Banco Ficohsa’s performance. 


The compliance investigation report describes material shortcomings of  IFC’s approach to its environmental and social obligations in relation to the Ficohsa investment


• Prior to investment, CAO finds that IFC took insufficient measures to identify activities where Ficohsa was exposed to environmental and social risk through its existing portfolio.


• The absence of an environmental and social (E&S) review process that was commensurate to risk in relation to this investment meant that IFC senior management and members of the IFC Board were not presented with an adequate assessment of the risks. This included additional exposure to Dinant, a company which IFC knew to be affected by a violent land conflict, as well as numerous other loans with potentially significant, but unassessed, environmental and social risk.


• These concerns notwithstanding, CAO finds that IFC’s supervision of this investment improved since late 2012. At this point, IFC conducted the gap analysis of Ficohsa’s environmental and social management system and supported the development of a corrective action plan.


• It is important to note that CAO finds no indication that IFC pursued its equity investment in Ficohsa with the intention to provide additional financing to Dinant. However, the investment increased IFC's exposure and facilitated a significant ongoing flow of capital to Dinant, outside the framework of IFC's environmental and social standards. This occurred at a time when IFC management was aware of serious unmitigated environmental and social risks regarding its agribusiness client.


• In relation to the underlying causes of the non-compliance identified in this report, CAO observes a primacy of financial considerations in IFC’s decision making. As a result, it is not IFC practice to review the environmental and social risk attached to the portfolios of its banking clients in the same depth as which portfolio credit risk is reviewed.


• In terms of the adequacy of IFC’s policies, procedures and standards, CAO’s findings raise concerns that IFC has, through its banking investments, an unanalyzed and unquantified exposure to projects with potential significant adverse environmental and social impacts. Absent disclosure of information related to these projects, this exposure is also effectively secret and thus divorced from systems which are designed to ensure that IFC, and its clients are accountable to project affected people for delivery on their environmental and social commitments.


• The findings of this report resonate with those of CAO’s 2012 Audit of IFC Investments in Third Party Financial Intermediaries, and suggest the need for a reassessment of IFC’s approach to the identification and management of environmental and social risk in its financial markets business.


CAO completed the investigation on June 13, 2014 and submitted the report to IFC for official response.  Following clearance by the President, the final investigation report and IFC’s response was released by CAO on August 11, 2014. 

In January 2016, CAO released its first monitoring report. The monitoring report considers actions taken by IFC in response to the findings of the investigation.

CAO continues to monitor IFC’s  response to its compliance findings. CAO will issue a second monitoring report in late 2017.


All documents, including CAO’s appraisal, investigation, and monitoring reports in English and Spanish, together with IFC’s response, are available under “View Documents” below.


Updated August 25, 2017


Project information

Project Name & Number
Ficohsa 26394, 27341, 29257
Global Financial Markets
Banco Financiera Comercial Hondureña S.A.
Latin America & the Caribbean
Environmental Category
$20m, $35m, $70.1m

Case Tracker



  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: In Process

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