32726 - BFL RSF

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Summary of Investment Information

Project Number

32726

Company Name

BFL SME RISK SHARING FACILITY

Date SPI Disclosed

Apr 28, 2014

Country

Lao People's Democratic Republic

Region

East Asia and the Pacific

Projected Board Date

May 30, 2014

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jan 18, 2026

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Mar 31, 2015
Signed : Apr 9, 2015

Sector

Other Non-Banking Financial Institution (NBFI)

Additional Project Attributes

Blended Finance

Project Description

The proposed investment is for an unfunded Risk Share Facility (“RSF”) of up to USD10 million with IFC and Banque Franco-Lao (“BFL” or the “Bank”) sharing the potential risks arising from BFL’s portfolio of Lao SME credits (the “Project”).
The project is expected to receive the first loss coverage from the government of Lao People''s Democratic Republic utilizing funding from the International Development Association.
With IFC sharing in the risk of credit loss in the SME portfolio, the Project is expected to provide a risk reduction benefit to BFL and encourage BFL to increase its exposure limit to SMEs sector in Lao PDR. This will result in increasing access to finance to abroad range of SMEs in Lao PDR.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	5.0
Loan
Equity

Development Impact

The Project is expected to have significant development impact:
(i) Access to finance for SMEs: The Project will increase access to finance for the underserved SME market, which represents the largest portion of enterprises in Lao PDR.
(ii) Demonstration effect: Successful implementation of this project would encourage other banks and financial institutions to undertake SME financing as a viable option for their future services.

(i) Structuring: IFC''s experience with structured finance products and SME financing will help structure an appropriate product customised for the SME sector in Lao PDR.
(ii) Risk mitigation: IFC''s involvement in the structure provides comfort and risk mitigation for BFL to expand its portfolio in SMEs financing.
(iii) IFC will support BFL with advisory services to improve its risk management aimed to assessing and managing risks arising from lending to the SME sector.

E&S Category Rationale / Risks and Mitigation

The project has been categorized as FI-2 according to IFC’s Environmental and Social Review Procedures. For this project IFC will be providing support in form of a Risk Sharing Facility for SME loans originated by BFL. The portfolio supported will include a variety of sectors including transportation, trading, hotels, construction, education, retail and automobile. The operations of SMEs focus mostly on medium risk sectors considered to have limited E&S risks and impacts which can be readily addressed through mitigation measures. The Applicable Requirements are the Exclusion List and the National E&S Laws of the PDR of Lao.

Given the potential sectors of lending supported, the key E&S risks might entail occupational health and safety (OHS), community health and safety, freedom of association and collective bargaining, minority rights, and forced child labor. The key issue in this project is therefore the ability of the bank to identify and manage the E&S risks associated with the activities of the portfolio companies supported in line with IFC’s policy requirements. BFL does not yet have a specific E&S policy or procedure in place to evaluate and address E&S risks which are therefore not part of the loan review and no E&S due diligence is undertaken. The client does not have a designated department or staff responsible for E&S Risk Management. The bank will be required to develop an ESMS and designate E&S staff prior to the effectiveness of the RSF to ensure adequate screening and management of E&S issues. The bank was found to be largely in compliance with the PS2 requirements.

Action Required	Completion Date
Nominate an ESMS officer	On or prior to the RSF effectiveness date
Development of ESMS	On or prior to the RSF effectiveness date
Preparation of E&S Training Plan and Budget	On or prior to the RSF effectiveness date
Implementation of ESMS and Delivery of ESMS Implementation Report	Within 3 months after the RSF effectiveness date
Development and formalization of internal grievance mechanism in line with PS2	On or prior to the RSF effectiveness date

Contacts

For Inquiries About the Project, Contact

Bounmy Sengphachan, Deputy Managing Director,
Banque Fraco-Lao Ltd., P.O.Box 5720,
Lang Xang Avenue, Hatsady Village,
Chanthabouly District, Vientiane, Lao PDR,
Phone: +856-21-285-111, Fax: +856-21-285-222
Email: mailto:bounmy.sengphachan@bfl.la

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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.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

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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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