35149 - Faten II

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Summary of Investment Information

Project Number

35149

Company Name

PALESTINE FOR CREDIT AND DEVELOPMENT

Date SPI Disclosed

Apr 21, 2016

Country

West Bank and Gaza

Region

Middle East

Projected Board Date

May 31, 2016

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Oct 6, 2021

Department

Regional Industry FIG MCT

Industry

Financial Markets

Previous Events

Approved : Aug 23, 2016
Signed : Dec 1, 2016
Invested : Mar 2, 2017

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

Faten started as a program under Save the Children in 1995 and was spun-off in 1999 into a not-for-profit Company with a mission to serve the financial needs of low and middle income Palestinian entrepreneurs and individuals. Currently, Faten is the largest Micro Finance Institution (“MFI”) in West Bank & Gaza (“WB&G”) and serves its clients through an established network of 35 branches and staff of 219 people.

IFC is considering a potential investment in the form of a senior loan of up to US$ 5 million to support Faten’s micro and small and medium size enterprises (“MSME”) portfolio growth and the expansion of its reach to low and middle income Palestinian. The proposed project builds on IFC’s previous engagement with Faten, where IFC extended a US$ 3 million senior loan (project #30178), which has since been fully repaid.

Associated Advisory Engagement

IFC has provided Faten advisory services in the past to help the MFI build its risk management capacity and develop a formal strategic business plan under project #597227

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	5.0
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 Microfinance Borrowers

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

Development Impact

(i)Access to finance: Availability of financing in the aftermath of the war in Gaza and the consequent economic slowdown in the West Bank is critical for the revival of the Palestinian economy, especially for the MSME sector. The proposed Project would support Faten, the largest and well managed MFI, to leverage its well established network to expand outreach and to serve a larger number of micro and small entrepreneurs in the WB&G where microfinance penetration is low.
(ii)Job creation: MSMEs are key contributors to job creation in WB&G and are estimated to account for 80% of total employment. Developing the MSME sector, with reliable access to finance, can play a significant role in private sector led economic growth, generating employment and providing opportunities to the MSME sector.
(iii)Funding: IFC will provide long-term funding to enable the Company further grow its client base.
(iv)Demonstration effect: Through this project, IFC is expected to act as a catalyst by encouraging local banks to further expand their funding to the microfinance sector with longer term tenors and help to bridge the financing gap facing this sector in conflict countries like WB&G.

IFC''s additionality would be in supporting a financial institution in WB&G, which is a FCS territory in MENA, to further improve access to finance to the targeted MSME segment of the market that will result in a high development impact. Building on IFC''s longstanding experience in microfinance, IFC will be able to support Faten to further penetrate the Palestinian microfinance market by providing needed long term funding and help the company diversify its funding mix. The loan will also assist Faten in leveraging its balance sheet, secure stable source of funding, facilitate better liquidity management and enhance the Company''s ability to reach out to the targeted underserved segments.
IFC''s role lies in: (i) supporting a relatively new phenomena in the microfinance market in WB&G; (ii) supporting the regulators strategy to expand the outreach of MFIs in WB&G especially to underserved and unserved communities; (iii) providing comfort to other investors, specially local banks, to extend long term funding given IFC experience in financing MFIs in such markets.

E&S Category Rationale / Risks and Mitigation

The proposed project has been classified as category FI-3 according to the IFC’s Sustainability Policy. The proposed project is a senior loan to Faten, the largest microfinance institution in West Bank & Gaza. Faten’s current portfolio entails low environmental and social risk sectors including small scale cattle and sheep breeding, and retail trade and services. The overall portfolio risk is considered to be low and to carry no adverse environmental and social impacts. For this project, Faten will be required to screen financing activities against the IFC Exclusion List and relevant environmental and social laws and regulations. Faten will be required to: i) implement the ESMS to ensure that lending provided complies with relevant E&S laws in addition to the IFC Exclusion List, ii) ensure an ESMS Officer has been designated at all times, iii) revise its HR policies and procedures to comply with the requirements of the Performance Standard 2 - Labor and Working Conditions, in particular develop a grievance mechanism for employee (iv) enhance Life & Fire safety practices and procedures in Faten’s premises.

Contacts

For Inquiries About the Project, Contact

Mr. Anwar Jayyusi – Managing Director
Palestine for Credit & Development - Faten
P.O.Box 2446, Ramallah
West Bank and Gaza
Tel: +970-2-2961470/1
Fax: +970-2-2961472
mailto:ajoyyosi@faten.org
http://www.faten.org

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