32311 - Danamon SME

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Summary of Investment Information

Project Number

32311

Company Name

BANK DANAMON INDONESIA, PT TBK

Date SPI Disclosed

Aug 27, 2013

Country

Indonesia

Region

East Asia and the Pacific

Projected Board Date

Sep 27, 2013

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Oct 2, 2013
Signed : Nov 19, 2013
Invested : Dec 11, 2013

Sector

Commercial Banking - General

Project Description

The proposed investment consists of a debt facility to PT. Bank Danamon Indonesia, Tbk. (“Danamon” or the “Bank”), an existing IFC client, to support the Bank grow its lending activities to small and medium enterprises (“SMEs”). The proposed project will allow Danamon to continue strengthening and growing its SME portfolio. The proposed project is consistent with both IFC’s Indonesia and financial markets strategy and roles to provide long-term financing to a bank that serves SMEs, in frontier regions of Indonesia and beyond the large cities as supported by Danamon’s widespread distribution capacity, and promote sustainable urbanization.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
Equity

Development Impact

(1) Promoting economic development in frontier provinces: The Project will directly improve access to finance in the frontier areas of Indonesia where Danamon is planning to expand its portfolio to SMEs. This will in turn drive innovation, economic growth, job creation, and poverty reduction. The strategic alliance between IFC and Danamon will help the Bank grow its SME portfolio and maintain Danamon''s position as the largest SME private player within the SME competition league.
(2) Increasing SME access to long-term finance: The Danamon partnership in this Project will allow IFC to support the SME''s investment in fixed assets and other long-term financing needs. The market potential is challenging with 300,000 bankable SMEs needing access to financial services in Indonesia. Danamon plans to contribute towards reducing this unattended market demand by rolling out its SME expansion plan with its broader product offering.

(1). Provide scarce long-term funding in US$ to Danamon to fund the growth of its SME business: IFC is providing financing to help the Bank grow its SME loan volume and support the Bank''s effort to diversify its funding and better manage its assets and liabilities at the time of limited access to long-term US Dollars financing. IFC''s facility will support long-term lending to SME in frontier regions of Indonesia.
(2). Supporting the long-term partner: Most of Danamon''s main business segments are also strategic areas for IFC (e.g. microfinance, Sharia, and SMEs). IFC will continue to provide support to Danamon to maintain its position as one of key players in the Indonesian banking sector.

E&S Category Rationale / Risks and Mitigation

This proposed project involves a senior loan aimed to support the Bank''s financing to SMEs and the overall portfolio risk is considered to be medium. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. The Bank''s SME lending accounts for approximately 15 percent of the total portfolio and its main sector exposure includes trading, F&B, construction, and other sectors with medium environmental and social (“E&S”) risk profile. For this project Danamon will be required to screen and monitor all its lending SME''s activities against the IFC Exclusion List and the applicable E&S laws and regulations.

The main E&S risks and impacts of the project derive from the E&S risks of the Bank’s lending activities, the capacity and system in place to manage these risks, and the Bank’s practices with regard to labor and working conditions. Danamon’s current E&S system focuses on national compliance and will be upgraded to include the Exclusion List. As part of supervision IFC will provide guidance to Danamon to further enhance its E&S risk management system through use of more detailed screening procedures for undertaking E&S risk management in its lending activities. Overall Danamon was found to be in compliance with Indonesian labor laws and regulations and in line with the requirements of IFC Performance Standard 2 on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

Mr. Pradip Chhadva
Director of Treasury, Capital Market, FI and Transaction Banking
PT. Bank Danamon Indonesia, Tbk.
Menara Bank Danamon
Jl. Prof. Dr. Satrio Kav. E4 No. 6
Mega Kuningan, Jakarta 12950
Indonesia
Phone: (+62 21) 5799 1001-03
Fax: (+62 21) 5799 1160

Website: http://www.danamon.co.id

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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Task Description	Anticipated Completion Date
Nominate a new E&S Officer/Manager	On or prior to Commitment
Establish an environmental & social management system (“ESMS”) including guidelines for its implementation	On or prior to Disbursement
Implement the ESMS	On or prior to Disbursement
Undertake the IFC Online E&S training	Within 3 months after Disbursement

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