33510 - TEB Kosovo Sh A Subordinated Loan

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Summary of Investment Information

Project Number

33510

Company Name

TEB SH.A.

Date SPI Disclosed

Apr 15, 2013

Country

Kosovo

Region

Europe

Projected Board Date

May 16, 2013

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : May 30, 2013
Signed : Jun 13, 2013
Invested : Jun 28, 2013

Sector

Commercial Banking - SME Finance

Project Description

IFC’s strategy for Kosovo in the financial sector is to build upon its ongoing activities to support small and medium enterprises’ (“SME”) access to finance. In this regard, IFC will actively support banks and non-bank financial institutions through providing medium-term funding to help them increase portfolio levels in a context of reduced available funding sources. In particular, providing capital support through direct equity or through Tier II capital provide much needed leverage for the banks and financial institutions to grow their lending activities.

In this context, the proposed investment, a subordinated loan of up to EUR3.5 million to be counted towards Tier II capital of TEB Sh. A (the “Bank”), is aimed at providing access to finance to the SMEs, through partnering with a leading bank in the country.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	5.88
Equity

Development Impact

IFC''s expected role in the Project is multifaceted. Its main role lies in supporting a south-south investment to an IDA country through providing a tier II capital loan to a well managed bank sponsored by a partner well known to IFC with a proven track record. In particular, through this Project, IFC would:
a) Strengthen the Bank with capital to expand its lending capacity and therefore support access to finance for SMEs;
b) Provide its support to a south-south FDI, provided by a long standing IFC client, in an IDA country which would have a demonstration impact to attract similar type of investments into Kosovo;
c) Further increase competition in the highly concentrated banking sector of Kosovo; and
d) Work together with the Bank to implement best industry practices in sustainable finance such as updating their social and environmental management system.

This investment''s direct impact would be to support lending operations of a well managed bank and thus would generate a range of social and economic benefits, including economic growth and employment creation, as well as financial deepening with services and products.

IFC''s additionality in this Project stems from the provision of medium to long term commercial funding not available in the local market for on-lending. While average loan maturity is around 800 days, deposit base is much shorter in nature hardly exceeding 180 days. Providing long term funds to the Bank would help to better manage maturity mismatch. Further, as this loan is to be counted towards Tier II capital of the Bank, it would provide a leverage to expand the lending portfolio and hence support access to finance to SMEs. IFC would, by leveraging its global expertise and experience, require the Bank to update its existing systems, policies and procedures to implement best practices in environmental and social management systems.

E&S Category Rationale / Risks and Mitigation

This project, which includes a subordinated loan to an existing IFC client, TEB Kosova to be used to support the Bank’s growing loan portfolio towards MSMEs, has been classified as a Category FI-2 project according to IFC’s Environmental and Social Review Procedure. The bank’s highest exposures are to retail banking/consumer loans, long term SME, long term project finance/large corporate finance and there are relatively small exposures to long term trade finance, short term SME, short term corporate finance, short term trade finance and micro finance. The existing portfolio and potential pipeline include loans with medium E&S risks in nature such as agriculture, construction, electricity, gas and water, gas, oil stations, manufacturing, mining, textile and wood and derivatives. According to its existing Social and Environmental Management System, TEB Kosova is not providing finance to borrowers with high E&S risks.

The key issue in this project is to ensure the Bank has adequate capacity to manage the E&S risks associated with the activities of its borrowers in line with IFC’s policy requirements, and to screen borrowers against the IFC Exclusion List, environmental and social national laws and regulations and, where applicable, IFC Performance Standards. Bank’s portfolio includes E&S risk and impacts such as management of fertilizers and pesticides in agriculture, occupational health and safety in construction, accidental release of chemicals in gas-oil stations.
TEB Kosova has an ESMS in place and has designated ESMS officers with overall responsibility for ESMS implementation. TEB Kosova''s human resources policies and practices are in line with the requirements of IFC’s PS2 on Labor and Working Conditions.

In order to ensure ESMS''s effective implementation, TEB Kosova will be required to develop a training plan and provide trainings to all relevant staff responsible for implementation of the ESMS.

Contacts

For Inquiries About the Project, Contact

Mr. Orkun Mungan
Managing Director
TEB Sh. A. Head Office
Agim Ramadani 15
10000 Pristina- Kosovo
Email: mailto:orkun.mungan@teb-kos.com
Website: http://www.teb-kos.com
Tel: +381 38 230 000
Fax: +381 38 224 945

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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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Type of Action	Timeline
Develop a staff training plan	Condition of Commitment
Provide training to staff	June, 30, 2013

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