34773 - BAFL Equity

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Summary of Investment Information

Project Number

34773

Company Name

BANK ALFALAH LIMITED

Date SPI Disclosed

Sep 19, 2014

Country

Pakistan

Region

Middle East

Projected Board Date

Sep 12, 2014

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 14, 2024

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Sep 12, 2014
Signed : Nov 20, 2014
Invested : Dec 18, 2014

Sector

Commercial Banking - General

Project Description

The proposed project consists of an equity investment for up to US$67.48 million in Bank Alfalah (“BAFL”, or “Bank”), a commercial bank organized under the laws of Pakistan, which will help the Bank pursue its growth plans. Through the investment, IFC will support the Bank in growing the Bank’s conventional and Islamic banking operations and increase penetration into priority areas like SME banking, access to finance and agri finance.

BAFL is the 5th largest bank in Pakistan, with a 5.8% market share in terms of total assets. As of March 2014, the Bank’s total assets stood at US$6.3bn, net loan of US$2.6bn, total equity of US$310mn, and net income of US$46mn in CY 13. The Bank operates a network of 577 branches (as of May-14) in 196 cities across Pakistan that includes 424 conventional banking branches, 10 overseas branches, 140 Islamic banking branches and 1 wholesale banking unit with operations in Pakistan, Bangladesh, Bahrain and Afghanistan.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	65.85

Development Impact

The project is expected to have strong developmental impact by: 1) enhancing access to finance for SMEs which will in turn increase job creation and private sector development overall as SMEs are a main contributor to job creation and private sector development in Pakistan. 2) Developing Islamic banking through supporting BAFL''s growth in Islamic banking, which will help develop this relatively new and important market segment in Pakistan which has strong market potential. 3) IFC''s equity will provide the required support to BAFL thereby improving the Bank''s competitiveness and in turn competition within the banking sector at large. 4) Sending a positive signal to the market through IFC''s engagement with BAFL at a time when MENA and Pakistan are faced with economic and political challenges.

IFC will use its global and regional expertise to help BAFL develop new products in SMEs, banking on women, agri business, sustainable energy and infrastructure finance. The incremental capital provided by IFC will provide long term risk capital.
Furthermore, IFC''s investment will institutionalize the Bank''s investor base and improve Corporate Governance practices. IFC can share knowledge and best practices. Implementing an environmental and social management system within the Bank will promote Environmental & Social best practices within the banking sector in Pakistan.

E&S Category Rationale / Risks and Mitigation

This project is classified as Category FI-2 project according to IFC’s Environmental and Social (“E&S”) Review Procedure. The project is an equity investment to BAFL which mainly provides short term corporate loans, but also project finance and long-term corporate loans. The bank has limited exposure to medium and high risk sectors including power generation and distribution, textile, fertilizers, metal & allied products, chemicals, real estate/construction, cement, pharmaceuticals, and leather and tanneries. The bank portfolio is largely comprised of business activities that have limited adverse environmental and social risks and impacts that are few in number, site specific, largely reversible and can be readily addressed through mitigation measures. For this project the client will be required to screen loans against the IFC Exclusion List, host country Environmental and Social laws and regulations and IFC Performance Standards.

Among IFC’s E&S related requirements under this project is that BAFL will be required to establish an E&S management system and designate staff members responsible for E&S issues in line with best practices. Considering that the Bank did not have an E&S management system previously in place as it was not required to do so by IFC in the past, the main E&S issues of this investment relate to BAFL’s capacity to manage environmental and social risks associated with its investments in line with the applicable requirements. The bank’s HR practices are in conformity with IFC's PS2 on Labor and Working conditions. BAFL has exposures to IFC's Exclusion List Activities and will be required to develop a phase out plan for certain exposures whereas a cap will be provided for the other exposures to XL activities.Among IFC’s E&S related requirements under this project is that BAFL will be required to establish an E&S management system and designate staff members responsible for E&S issues in line with best practices. Considering that the Bank did not have an E&S management system previously in place as it was not required to do so by IFC in the past, the main E&S issues of this investment relate to BAFL’s capacity to manage environmental and social risks associated with its investments in line with the applicable requirements. The bank’s HR practices are in conformity with IFC's PS2 on Labor and Working conditions. BAFL has exposures to IFC's Exclusion List Activities and will be required to develop a phase out plan for certain exposures whereas a cap will be provided for the other exposures to XL activities.

Contacts

For Inquiries About the Project, Contact

Mr. Aasim W. Jawad
Head of Strategy
Bank Alfalah Limited Head Office,
2nd Floor, B.A. Building,
I.I. Chundrigar Road, Karachi.
Direct Telephone: +92 2132461264
Email: mailto:aasim.jawad@bankalfalah.com

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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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Task Title & Description	Anticipated Completion Date	Status	Comments	Completion Date
Nominate officers		Completed	Completed	09/29/2014
Establish SEMS		Completed	Completed	10/30/2014
Develop guidelines		Completed	Completed	10/30/2014
Staff Training		Completed	Completed	12/04/2014
Provide a phase out plan for exposure to certain sectors in accordance with IFC's policies.		Completed	Completed	10/22/2014

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