34286 - NDB Debt Syndication

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Summary of Investment Information

Project Number

34286

Company Name

NATIONAL DEVELOPMENT BANK PLC

Date SPI Disclosed

Jan 22, 2014

Country

Sri Lanka

Region

South Asia

Projected Board Date

Feb 25, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Feb 17, 2022

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Mar 26, 2014
Signed : Mar 31, 2014
Invested : Apr 16, 2014

Sector

Commercial Banking - General

Project Description

National Development Bank PLC (“NDB” or “Bank”) is a mid-sized private bank in Sri Lanka. The proposed IFC project consists of: (a) an up to 7-year Senior A Loan of up to US$ 20 million for IFC’s own account to support the Bank’s lending program to Small and Medium Enterprises (“SMEs”) in Sri Lanka as well as a debt syndication of (b) parallel loans for the amount of up to US$ 60 million and (c) B loans for the amount of up to US$ 75 million.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
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

1. Expanding Access to Finance in a Post-Conflict Frontier Country: Political uncertainty over the last 3 decades had limited the Sri Lankan government''s capacity to support the MSME sector and thereby to allocate crucial resources to boost lagging incomes. The proposed project will help in addressing this constraint by funding the Bank''s operations/expansion and promoting financial inclusion by means of financing of MSMEs.

2. Private Sector Development: The proposed Project would facilitate private sector development via access to credit for growing SMEs in Sri Lanka. Given the importance of SMEs in Sri Lanka, the cascading effect of this finance would go a long way in creating employment, reducing poverty and stimulating the economy.

1. IFC has had a long standing relationship with NDB (since 1999) borne of previous advisory as well as investment engagements. The proposed project would affirm IFC''s commitment to NDB as a strategic partner. It will also affirm IFC''s recent work with banks in Sri Lanka and accordingly, continue to send IFC''s signal of confidence in the financial markets in Sri Lanka.
2. This project will provide long term financing not readily available in the market to a targeted financial institution in Sri Lanka. This long term financing would allow the Bank to expand its SME operations.

E&S Category Rationale / Risks and Mitigation

The lending business of the Bank comprises corporate banking, SME banking and retail banking. Overall, the existing and proposed lending portfolio present potentially limited adverse environmental or social risks or impacts that will be few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. In rare circumstances, it may also include a very limited number of business activities with potential significant adverse environmental or social risks or impacts that are diverse, irreversible, or unprecedented. Hence, the E&S risk of the proposed investment is medium and the project is categorised as FI-2. The applicable performance requirements will be i) the IFC- FI Exclusion List; ii) The host country E&S laws and regulations; and iii) the IFC Performance Standards.

Main E&S risk and impacts of the project emanates from the project finance, commercial banking and SME finance. These include impacts like occupational health & safety concerns, labour issues, life and fire safety, solid waste and pollution management and possibly land and biodiversity impacts depending on the nature and location of the project. The bank has an E&S management system in place and it has committed to upgrading it under project # 32392 to comply with applicable performance requirements. The bank was found to be in gross compliance with IFC''s requirements of PS-2 on Labour and Working Conditions.

Task Description	Anticipated Completion Date
Upgrade the existing SEMS and include guidelines for its implementation	Within 30 days of commitment
NDB shall review information available in the public domain and avoid investments in Subprojects that have substantial unresolved social and environmental issues.	At all times
NDB shall ensure that all staff responsible for implementation of the S&E Management System is trained to be able to ensure its effective implementation.	Within 6 months from date of legal agreement
IFC and NDB will jointly review the implementation of upgraded SEMS.	6 months from date of legal agreement

Contacts

For Inquiries About the Project, Contact

Dhanan SenathirajahVice President- Finance & PlanningNational Development Bank PLCTelephone:+94 11 2448448+94 11 2347917 (Dir)+94 77 2910678 (Mobile)Fax: + 94 11 2342047E-mail: mailto:dhanan.senathirajah@ndbbank.com

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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.

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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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