34605 - Garanti MSME

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Summary of Investment Information

Project Number

34605

Company Name

GARANTI BANK SA

Date SPI Disclosed

Feb 24, 2014

Country

Romania

Region

Europe

Projected Board Date

Mar 27, 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 : Apr 24, 2014
Signed : Jul 22, 2014
Invested : Nov 17, 2014

Sector

Commercial Banking - SME Finance

Project Description

The proposed IFC investment is a senior loan of up to EUR35 million to an existing IFC client – Garanti Bank S.A. Romania for the purpose of on-lending to micro small and medium enterprises, of which EUR20 million for on-lending to Women-Controlled MSMEs. The proposed Project supports IFC’s financial markets strategy in CSE and Romania as it makes a positive contribution by funding a priority sector, SMEs, with most part of the funds being earmarked for gender finance.

Garanti Bank is a universal bank, with a market share as at Sep 2013 of 1.95% in terms of total assets (up from 0.45% market share in 2007), ranking 13th out of the 41 banks operating in Romania. In 2007, Garanti Bank Turkey and GE, shareholders of Garanti NV, decided to increase their presence in Romania through a direct subsidiary instead of a branch and positioned it to become a full-fledged bank focusing on retail and SME markets. The new bank license was authorized by the National Bank of Romania in 2009 and the Bank became operational at the end of May 2010.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	48.29
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. Contribution to economic growth through improved access to finance by SMEs. The level of financial intermediation in Romania has yet to recover from the impact of the crisis. Expanded financial intermediation is needed to support the flow of credit to small businesses and individuals which make up the most important part of these countries'' economies.
2. Creates more job opportunities: Employment would widen by aiding SMEs;
3. Increasing financial inclusion in Romania: Access to credit and increasing the economic power of women would translate into improved livelihoods for a wide cross-section of society.

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

The project consists of a senior loan of up to EUR35 million to Garanti Bank S.A. Romania for the purpose of on-lending to micro small and medium enterprises, of which EUR20 million for on-lending to Women-Controlled MSMEs. Garanti Romania’s portfolio includes retail banking, long term SMEs, long term corporate finance and, short term corporate finance where the highest exposure in the bank’s SME portfolio is to; wholesale and retail trade, repair or motor vehicles and motorcycles; construction and; manufacturing. The project has been classified as FI-2 according to IFC Environmental and Social Review Procedure. For this particular project, IFC''s applicable requirements will be to ensure that all loans in the asset class are screened against the IFC Exclusion List and the applicable environmental and social national laws and regulations. In addition Garanti Romania will comply with the requirements of IFC’s PS2 on Labor and Working conditions.

The main E&S risks and impacts of this investment relate to Garanti Romania having adequate systems and capacity in place to manage the operations being financed in accordance with applicable requirements, including compliance with the IFC’s Exclusion List and Host Country Laws and Regulations.

Garanti Romania has an Environmental and Social Management System (“ESMS”) in place which is applicable for IFC Credit Line and has designated staff members with overall responsibility for implementation of the ESMS. ESMS will need to be enhanced to be in line with the requirements of this project. Garanti Romania’s HR Practices are in general in conformity with IFC''s PS2 on Labor and Working conditions.

Key Mitigation measures

Type of Action
Timeline
Enhance and revise ESMS
Prior to Commitment
Implement ESMS and provide IFC with an ESMS implementation records
No Later than April 30, 2014
Prepare Staff training Plan
Prior to Commitment
Implement Staff training
Within 3 months after disbursement
Enhance HR practices in line with IFC Performance Standard 2: Labor and Working Conditions
Prior to commitment

Type of Action	Suggested action	Timeline
Enhance and revise ESMS	The revised ESMS should include; - Increased scope to be applicable to the entire asset class - The bank’s external grievance mechanism - The bank’s Emergency Preparedness and Response Plan	Prior to Commitment
Implement ESMS and provide IFC 3 ESDD records including the action plans and 3 monitoring reports	Submit 3 ESDD records including the action plans and 3 monitoring reports from the following medium/high risk sectors; construction, manufacturing and agriculture in English.	With the upcoming AEPR
Prepare Staff training Plan	The bank shall develop an ESMS Implementation and Training plan based on the revisions made on the ESMS and specifying the proposed schedule for rolling out the ESMS across the various business units	Prior to Commitment
Implement Staff training	Conduct the training sessions as per the Training Plan to ensure effective implementation of the Environmental and Social Management System	Within 3 months after disbursement
Enhance HR practices in line with IFC Performance Standard 2: Labor and Working Conditions	Provide IFC - Internal and External Grievance Mechanisms - Emergency Preparedness and Response Plan	Prior to commitment

Contacts

For Inquiries About the Project, Contact

Adnan Ayman
Head of Financial Institutions
Garanti Bank Romania
5 Fabrica de Glucoza Street
Novo Park 3 Business Center
F Building, 5th Floor, Bucharest
District 2, Romania
Phone : (40 21) 208 9281
e-mail : mailto:romaniafinancialinstiutions@garantibank.ro

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