33492 - TFG Equity 2013

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Summary of Investment Information

Project Number

33492

Company Name

XACBANK JOINT STOCK COMPANY

Date SPI Disclosed

Apr 9, 2013

Country

Mongolia

Region

East Asia and the Pacific

Projected Board Date

May 15, 2013

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jun 11, 2022

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : May 13, 2013
Signed : May 22, 2013
Invested : Oct 25, 2013

Sector

Commercial Banking - Microfinance

Project Description

The proposed project will consist of IFC’s equity investment of up to MNT10.4 billion (US$7.5 million equivalent) in Tenger Financial Group (“TFG” or the “Company”), an existing equity investee company of IFC, by purchasing from the existing shareholders.

TFG, established in 2001 on the base of its major subsidiary XacBank, is a Mongolian financial group offering a full range of financial services. Its major subsidiaries include XacBank (comprising nearly 96% of its total assets), XacLeasing, Tenger Insurance, TenGer Capital (brokerage and investment advisory services), XacSecurity (premium quality security services), Tenger Solutions (mobile banking solutions in house developer) and Xinjiang Tianrong Micro Credit Company (“Xinjiang MCC”, a company based in western China). IFC started its long term partnership with TFG in 1999, with an advisory program to X.A.C. LLC, one of the predecessors of XacBank, and became a shareholder of the Company in 2008.

IFC’s further increasing stake in TFG through the proposed investment, will demonstrate confidence in both the Company and the Mongolian financial market, will provide comfort to the new strategic international investor, and will help the Company to achieve a more balanced shareholding structure and a more transparent corporate governance, which will constitute strong basis for the Company’s future development.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	7.35

Development Impact

i) To support the development of Mongolian financial sector: through the proposed investment, IFC will help a systemically important financial institution of Mongolia to introduce a strategic international investor and to achieve a more balanced and transparent shareholding structure, which will become a strong basis for the Company''s further development and will also benefit the further development of the Mongolian financial sector; and
ii) To promote better corporate governance among Mongolian corporations: after the completion of the transaction, Tenger Financial Group will achieve a more transparent corporate governance, which will have strong demonstration effect to other Mongolian corporations and will promote the improvement of their corporate governance.

i) Long term partnership: after over 10 years'' engagement since 1999, IFC further increases the equity stake in TFG will strengthen the long term partnership with the Company;
ii) Stamp of approval: IFC''s further increase of stake in TFG will demonstrate to the market IFC''s confidence in both the Company and the Mongolian financial market, and will provide comfort to the new strategic international investor;
iii) Honest broker: IFC''s participation in the transaction will provide comfort to the new strategic international investor, and will enable IFC to more effectively act as an honest broker between the local sponsors and the international investor;
iv) Corporate governance: through the proposed investment, IFC will help the Company to achieve a more balanced shareholding structure and a more transparent corporate governance.

E&S Category Rationale / Risks and Mitigation

The proposed investment entails IFC’s additional equity injection in an existing client and has been classified as a Category FI-2 project according to IFC Environmental and Social Review Procedure. XacBank, the largest subsidiary representing 96% of the total assets of TFG and an IFC direct investee client, is a microfinance bank that provides finance predominantly to local micro and small business entities and households in Mongolia. XacLeasing and Xinjiang Tianrong Micro Credit Co., Ltd, two other operational subsidiaries of TFG, have very small portfolio and are mainly involved in vehicle leasing and micro lending to MSEs in Mongolia and China respectively. The overall portfolio E&S risk of TFG and its operational subsidiaries is considered to be limited. Applicable E&S Performance Requirements for this project include IFC Microfinance Exclusion List and the applicable host country E&S laws and regulations.

The main E&S risks and impacts of the project derive from the financing activities of TFG’s subsidiaries and their capacity and systems to manage such E&S risks. As existing IFC clients, these TFG subsidiaries have all implemented an Environmental and Social Management System (ESMS) that include procedures, responsibilities and tools for undertaking E&S risk management for their lending/leasing activities. Their in-house labor policy was also found to be broadly consistent with the requirements of IFC Performance Standard 2 on Labor and Working Conditions except for the following suggested improvement areas.

Task Description:	Anticipated Completion Date
TFG to cause XacBank to: (1) confirm that the bank has developed a sexual harassment policy; (2) satisfactorily explain the status and outcome of the labor related fines and court cases;	On or prior to IFC disbursement
TFG to cause XacLeasing to: (1) satisfactorily explain the status and outcome of the labor related fines;	On or prior to IFC disbursement
TFG to cause Xinjiang Tianrong Micro Credit Co., Ltd to: (1) confirm that the company has an occupational health and safety and emergency preparedness plan; (2) develop an sexual harassment policy and a grievance mechanism	On or prior to IFC disbursement

Contacts

For Inquiries About the Project, Contact

Tenger Financial Group
Suite 508, 5/F
Central Tower
Sukhbaatar Square 2
Sukhbaatar District, SBD-8
Ulaanbaatar 14200, Mongolia

Tel: (976) 11 320341
Fax: (976) 11 318701
Cell: (976) 99107764

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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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