32409 - I&M II

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Summary of Investment Information

Project Number

32409

Company Name

I AND M BANK LTD

Date SPI Disclosed

Apr 3, 2013

Country

Kenya

Region

Africa

Projected Board Date

May 6, 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 : May 29, 2013
Signed : Jul 16, 2013
Invested : Aug 1, 2013

Sector

Commercial Banking - General

Project Description

The proposed project is part of a funding package to I&M Bank Ltd, Kenya (“I&M” or “The Bank”). The project is aligned to IFC’s financial markets strategy for Kenya and is aimed at supporting I&M in providing long-term financing to SMEs and the agribusiness sector in Kenya. The project will also contribute to expanding banking services outside of the main urban cities in line with the country’s new devolved governance structure. This will be achieved by leveraging I&M’s strong brand positioning and distribution capacity.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

i. Enhance access to finance for SMEs and the agribusiness sector: The Project will allow I&M to grow its SME and agribusiness portfolio and provide these two crucial segments of the economy with access to longer term funding, enabling them to undertake investment projects with more appropriate financing structures.
ii. Generate a demonstration effect: The Project is expected to lead other financial institutions take a more active role in the SME and agribusiness financing arena, thus increasing access to finance for these priority sectors.
iii. Enhancing regional competition and service. The project will contribute to the success of the East African economic community by supporting a systemic local bank that has a growing regional footprint.

i. Long Term Funding: Long term funding is scarce in the Kenyan market. Accordingly, the Project would allow I&M to prudently increase the tenor of its credit facilities.
ii. Better Asset Liability Mismatch: Through the Project, I&M will diversify its funding base, hence improving its liquidity risk profile.
iii. Long-Term Partnerships: The Project will strengthen the long term relationship between IFC and I&M, a well positioned bank in Kenya with regional operations. Hence, it is expected to develop opportunities to work with I&M''s subsidiaries and partners among the region.
iv. IFC''s stamp of approval: Through this project, IFC will encourage prudent balance sheet risk management across the banking sector. At the same time, it could allow I&M to attract additional long term funding as it continues its regional expansion program.

E&S Category Rationale / Risks and Mitigation

The proposed project comprises a US$50 million senior loan to support I&M Bank’s lending activities to local SMEs in Kenya. The proposed project aims at supporting local SMEs which significantly lack access to long-term financing in order to make investments they need to increase productivity and competitiveness of their business, develop new markets, and hire more people. In addition, IFC would also be supporting the expansion of opportunities for the bottom of the pyramid (“BOP”) population in rural areas as well as agribusiness by leveraging I&M’s strong brand positioning and distribution capacity.

The transaction will be classified as FI type 2 in accordance with IFC’s Environmental and Social Review Procedure. I&M’s current portfolio includes 14% project/ corporate finance. After wholesale and retail trade; the primary sector focus for the bank is real estate followed by Manufacturing.

The lending provided entails medium E&S risks and impacts that are generally site-specific, largely reversible and readily addressed through mitigation measures. For this Project the Client will be required to screen all loans against the IFC Exclusion List and the Kenyan E&S laws and regulations, and in addition its project/corporate finance activities against the IFC Performance Standards. The client will especially be required to demonstrate successful implementation of its ESMS in all its subsidiary operations.

The key E&S risks of this project are associated with the capacity of I&M Bank Kenya and its subsidiaries to implement the necessary Environmental and Social Management System (ESMS) across all of its operations to effectively manage the E&S risk of its portfolio. To date, the E&S performance of I&M Bank Kenya has had some gaps. Although the bank has developed an Environmental Management System and has designated an ESMS officer, the implementation of the system at the bank needs to be improved and therefore, I&M is currently implementing a project to improve upon it. I&M was found to be in compliance with the requirements of PS2 on Labor and Working conditions.

Task Title & Description	Anticipated Completion Date
Nominate officers	05/31/2013
Establish SEMS	06/28/2013
Formalize procedures	06/28/2013
Develop guidelines	06/28/2013
Staff Training	12/31/2013
I&M will deliver to IFC 6 copies of completed due diligence checklists undertaken in the second half of 2012 for 3 Category A and 3 Category B projects as per its due diligence checklist. At least two of these should have been completed by an I&M subsidiary. I&M will also deliver to IFC examples of E&S covenants in loan documentation.	12/31/2013

Contacts

For Inquiries About the Project, Contact

Contact Name: Gauri Gupta
Contact Title: Head - Corporate & Strategic Planning
I&M Bank House, 2nd Ngong Avenue
P.O. Box 30238 - 00100
Nairobi GPO, KenyaTel: (+254) 20-2711994-8, 3221002Fax: (+254) 20-32713757/2716372

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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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