34749 - Fullerton NCD

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Summary of Investment Information

Project Number

34749

Company Name

SMFG INDIA CREDIT COMPANY LIMITED

Date SPI Disclosed

Oct 21, 2014

Country

India

Region

South Asia

Projected Board Date

Nov 22, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 25, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Sep 30, 2015
Signed : Apr 17, 2015
Invested : May 18, 2015

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

Fullerton India Credit Company Ltd. (“FICCL”) is a fully owned subsidiary of Temasek, through its holding company Fullerton Financial Holdings (“FFH’). FICCL has a strong focus on rural and urban micro lending and also caters to mid sized SMEs. As of March 31, 2014, FICCL has total assets under management of around US$ 1 billion and has reached out to more than 1.1 million customers. IFC’s investment in FICCL would demonstrate its support to an NBFC focused on providing financing to the base of the pyramid and increase FICCL’s reach in rural and SME lending space.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.88
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 Microfinance Borrowers
Straight Senior Loan	Loans to Microfinance Borrowers
Straight Senior Loan	Loans to Microfinance Borrowers

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

Development Impact

1. Demonstration effect: In the current market environment, the proposed investment would encourage other institutional investors to consider investment in the Indian Financial or NBFI sector.

2. Addressing a range of microfinance needs: FICCL is one of the few players who have the capability to reach out to large number of unbanked customers and create impact by offering a variety of products to the whole spectrum of MSME -viz. microfinance through group model, individual loans to micro enterprises/ "missing middle" as well as comparatively larger and formalized SMEs.

3. Additional Reach: The investment is expected to reach an additional 1.4mn micro lending customers and 11000 SME lending customers between FY14-19, over to an existing customer base of 1.1mn. Moreover, the company is expected to provide over 5mn loans and distribute insurance products to additional 0.5mn customers, during FY14-19.

1. Long term partner: Fullerton is an existing strategic relationship for IFC globally. In India providing long term debt to FICCL will help in leveraging this capital to reach customers at the base of the pyramid, who do not have access to formal financing.

2. Funding diversification: Most NBFCs, including FICCL are reliant to a large extent on Bank borrowings. IFC''s investment would allow FICCL to diversify its funding and meet its long term funding requirements

3. Reducing ALM risk: Till 2010-11, FICCL was mainly engaged in providing urban micro lending products with smaller tenors. Going forward, FICCL is rebalancing its loan book to include longer tenor products such as SMEs and mortgages. IFC''s long term funding to FICCL will help it reduce its ALM risk.

Indicator	Metrics	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
Access to Finance: Outstanding Microfinance Portfolio (#)	Outstanding Portfolio (#)	Not Available	Not Available	Not Available
Access to Finance: Outstanding Microfinance Portfolio ($)	Outstanding Portfolio ($)	Not Available	Not Available	Not Available
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement	Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

?The lending profile of Fullerton is a mix of urban microfinance (48%), rural microfinance (16%), mortgages (21%), SMEs and emerging corporate lending (10%) and MSMEs through vehicle finance (5%). The lending products for SMEs include working capital loans as well as capital expenditure loans in the long term segment. The industry sectors of exposure primarily present medium E&S risks, although some could be of higher risk sectors e.g., metals, machinery, transport, construction and apparel. Going forward the focus on SME/Corporate lending will increase and will constitute a bigger part of the overall portfolio. The existing lending portfolio present potentially limited adverse environmental or social risks or impacts. In rare circumstances, it may also include a very limited number of business activities with potential significant adverse environmental or social risks or impacts. Hence, the overall E&S risk of the proposed investment is considered as medium and the project is categorized as FI-2. The applicable Performance requirements will be i) the IFC- FI Exclusion List; and ii) The relevant host country E&S laws and regulations. The application of IFC Performance Standards is not an immediate requirement, as the current combination of the size, tenor, type of financial instruments offered and supported sectors is of medium-low risk. However, the client will apply Performance Standards in case of project and long-term corporate finance.?

?Main E&S risk and impacts of the project emanates from the SME and emerging corporate finance. These includes potential impacts like occupational health & safety, labor and working conditions, fire and life safety, waste and pollution management and possibly land and biodiversity impacts depending on the nature and location of the company. The company has an environment and social safeguard policy and framework, which will be further upgraded to an E&S risk management system (SEMS). The upgraded framework /SEMS will provide guidance on E&S risk management in line with applicable National E&S laws and regulations. The company will also nominate an E&S officer responsible for ensuring that the SEMS is implemented. The company was found to be in gross compliance with IFC's requirements of PS-2 on Labor and Working Conditions.

Task Title & Description	Status	Comments	Completion Date
Nominate officers	Completed	email confirmation and letter	04/28/2015
Establish SEMS	Completed	email confirmation of final version of SEMS came on Feb 24, 2016, though as per company the SEMS was laready operationall much before	02/24/2016
Staff Training	Completed	Evidence submitted to IFC	10/31/2017

Contacts

For Inquiries About the Project, Contact

Fullerton India Credit Company Ltd.
Floor 6, B Wing, Supreme IT Park,
Powai,
Mumbai-400076,
India

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