33467 - Multibank Climate Smart and SME

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Summary of Investment Information

Project Number

33467

Company Name

Multibank Inc.

Date SPI Disclosed

Jan 23, 2014

Country

Panama

Region

Latin America and the Caribbean

Projected Board Date

Feb 26, 2014

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 2, 2014
Signed : May 29, 2014
Invested : Aug 26, 2014

Sector

Commercial Banking - Housing Finance

Project Description

Multibank Inc. is a Universal Bank that was established in 1990. Today, the Bank provides a broad range of commercial and retail banking services to its customers (65% commercial and 35% retail). Multibank Inc. has 7 local subsidiaries that provide factoring, leasing, insurance and brokerage services.

Multibank Inc., among other non-state banks with Panama capital occupies the third and ninth place by total assets and loans, respectively, with a market share of 3.3% in total assets and 4.1% in loans as of December 2012.

As of December 2012, Multibank Inc. employs 1,300 professionals, has 28 branches in Panamá, and also operates subsidiaries in Colombia, Costa Rica, Turk and Caicos, Cayman Island, Nevis Island and British Virgin Island, and representative offices in Peru and Colombia.

Multibank Inc. has outstanding bond issues and preferred shares, registered and publicly traded on the Panama Security Exchange.

Currently Multibank Inc.’s long term international risk rating by both Standard & Poor’s and Fitch Rating NY stands at BB+, with a stable perspective, only one notch from investment grade.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
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	Housing Finance

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

Development Impact

The Project is expected to have significant development impacts including:

(i) Enhanced access to finance for SMEs and private companies pursuing SEF investments (including renewable energy project developers): The Project will allow the Bank to provide its clients access to funding with longer maturities enabling them to undertake projects with more appropriate financing structures;

(ii) Positive climate change mitigation: Through the implementation of SEF solutions, Multibank''s activities have a direct impact on lowering greenhouse gas emissions and encouraging efficient management and reuse of scarce resources;

(iii) Financial market development: IFC''s loan will increase the capacity of the local banking sector to finance SEF investments and SMEs; and

(iv) Generate a demonstration effect: The Project is expected to create a demonstration effect for other banks to engage in climate smart / sustainability sector, and further enhance IFC''s development impact in Panama.

1) Long-term funding: IFC offers long-term funding and a partnership to support the development of SME and Sustainable Energy Finance ("SEF") lending activities. IFC''s support will enable Multibank to provide attractive financing for SMEs as well as cost-saving solutions for private companies to pursue climate smart investments and sustainability initiatives. Long-term funding to SMEs is not readily available in the Panamanian market. Accordingly, IFC''s ability to provide a longer tenor line will allow Multibank to provide sufficiently long tenors needed for some high capital expenditure technologies such as renewable energy, cogeneration, or plan efficiency upgrades. In addition, it will permit Multibank to increase its offerings of term credit to SMEs in Panama by helping it better manage the Bank''s maturity gap and diversify its funding base.
2) Market knowledge: IFC, through its work with SEF (A2F), Renewable Energy Finance (SBA), and SME Finance (A2F) in Advisory Services, as well as Financial Markets and Infrastructure in Investment Services, has detailed knowledge of the opportunities and key market players in the sustainable energy and SME space in Central America, as well as best practices applied regionally and globally. Through this relationship, IFC can bring this knowledge to Multibank.
3) Long-term partnership: This Project represents a building block in developing a long-term partnership with Multibank, an awarded IFC Trade Finance client since 2009 and a long-established player in the Panama banking industry.
4) IFC''s stamp of approval: Partnering with IFC to finance sustainability investments offers Multibank a high profile opportunity to attract additional long term funding from outside investors.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

58216425BCBE4CECB7C21E9ECDD1731E .par_58B9919D1961FF7985257B63005C1498_7 { font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } The proposed project is IFC's first financing program for sustainable energy in Panama. The project consists of a US$40 million senior loan to support the expansion of Multibank's SME's and small scale Climate Smart Investments. Eligible Climate Smart transactions include renewable energy and energy efficiency sub loans. Renewable energy sub loans are aimed at investing into fixed assets that are designed to produce electricity, heat, cooling, and any other form of energy that displaces fossil fuel use. Energy efficiency sub loans are aimed at investing in the reconstruction, renovation or refurbishment measures implemented within the premises of a corporate or SME entity that are designed to decrease energy consumption. A maximum of 75% of the loan will support commercial and service based SME's, sub loans will not include hydropower projects and may not be for a principle amount greater than $3 million dollars. Given that the project will support mostly SME's and small scale Climate Smart sub loans, the project has been categorized as FI-2 in accordance with IFC's Environmental and Social Review Procedure. The overall portfolio risk includes a limited number of business activities that have potential limited adverse environmental and social risks or impacts that are few in number, generally site specific, largely reversible and readily addressed through mitigation measures. For this project the client will be required to screen the sub-loans in the SME and Climate Smart asset class against the IFC Exclusion List and the host country laws.

8509B838FD6E455887D54E217C90DC0B .par_58B9919D1961FF7985257B63005C1498_8 { font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } The key environmental and social risks and impacts derive from Multibank's capacity to identify and manage the potential environmental and social risks associated with its lending activities; particularly, lending to clients pursuing sustainable energy finance investments in renewables. Examples of renewable energy sub loans may include ) solar, wind, geothermal, biomass, biogas and waste-to-energy, etc. Additional environmental and social risks and impacts of the project derive from the capacity and systems in place to manage these risks, and the Bank's practices with regards to labor and working conditions. 8509B838FD6E455887D54E217C90DC0B .par_58B9919D1961FF7985257B63005C1498_9 { text-align:full; line-height:2; font-family:sans-serif; color:black; font-size:10pt; font-weight:normal; text-decoration:none; } Multibank is an existing Global Trade Finance Program client. The bank is currently in the process of developing its environmental and social management capacity. As part of this project, the Bank will be required to implement the management system to ensure that sub loans in the SME and Climate Smart investments asset class are in compliance with the applicable environmental and social requirements and to continue its commitment to applying the labor standards. The Bank will be required to enhance its Human Resource Policies to be compliant with IFC's PS 2 Labor and Working Conditions standard.

Task Title & Description	Actual Due Date	Status	Comments	Completion Date
Nominate officers		Completed
Establish SEMS		Completed
Formalize procedures		Completed
Staff Training		Completed

Contacts

For Inquiries About the Project, Contact

Correspondent Banking and Financial Institutions
Attention: Cynthia Hernández/Florida Chong B.
Multibank Inc.
t. (507) 294-3500 ext. 1512/1345
email: mailto:correspondentbanking@multibank.com.pa
http://www.multibank.com.pa

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