35433 - Chase Bank BoW

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Summary of Investment Information

Project Number

35433

Company Name

CHASE BANK KENYA LIMITED

Date SPI Disclosed

Sep 3, 2014

Country

Kenya

Region

Africa

Projected Board Date

Oct 6, 2014

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 30, 2016

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Dec 11, 2014
Signed : Dec 19, 2014
Invested : Jan 13, 2015

Sector

Commercial Banking - SME Finance

Additional Project Attributes

Blended Finance

Project Description

Chase Bank (Kenya) Limited (“Chase”, or the “Bank”) is a Tier II bank in Kenya with primary operations in banking. The Bank has two wholly owned subsidiaries: Rafiki Microfinance Bank Limited, a deposit taking microfinance institution established in 2011; and Chase Insurance Agencies Limited, an insurance broker established in 2010. The Bank commenced operations in 1996 and has since undergone a transformation to become a leading second tier bank with 34 branches, a strong niche in the SME segment and a noticeable market share of 2.8% by total assets and 2.7% by total deposits as of YE2013 in a very competitive market. The Bank also offers a range of Islamic Banking services through Chase Iman. In addition, Chase has an associate company in the stock brokerage business known as Genghis Capital.

The proposed project consists of a US$25 million senior loan to Chase to provide financing to women-owned small and medium enterprises (“WSMEs”) and SMEs. The financing package will be complemented with Advisory Services targeted at improving the Bank’s internal SME banking capacity and in particular its women markets franchise.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	25.29
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) Financial Inclusion: The proposed project will increase access to finance to underserved segments by on-lending to SMEs, women-owned businesses and Islamic population in Kenya.
2) Job Creation: Create more jobs and reduce poverty by providing financing to Kenyan SMEs and women businesses that are key drivers to private sector development.
3) Competition: Foster competitive environment in the Kenyan banking sector by supporting an indigenous Tier II SME bank.

1) Long Term Financing: As opposed to other investors, IFC is in capacity to provide suitable tenors for financial institutions located in countries where long term funding is scarce. Thus, IFC will provide the much needed medium-long term funding required to support the Bank''s growth in WSMEs.
2) Capacity Building: IFC would provide Advisory Services as a complement to the Banking on Women program which is expected to strengthen the Bank''s strategy and product offering in this segment, enabling it to provide a better service to WSMEs in Kenya.
3) IFC''s Stamp of Approval: The Project is expected to send a positive signal to potential investors, the private sector and local authorities regarding the Banking on Women program. IFC''s stamp of approval is expected to favor the Bank in raising additional resources for the development of the gender program.

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

This transaction involves providing an investment package totaling a senior loan of US$25 million to provide long-term financing to small and medium enterprises (“SMEs”), including women-owned enterprises. The loan will be structured with a 5-year loan tenor and 2-year grace period. The overall portfolio risk is considered to be medium. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Review Procedure. Chase’s corporate lending accounts for approximately 22.5% of the total portfolio and part of this is project finance. Lending to the agricultural sector constitutes 3% of the bank’s sectoral focus. The bank has developed a strategy to grow its offering to the agricultural sector through small and large scale financing, as well as agricultural value chain financing.

The key risk is the ability of Chase Bank to identify and manage the environmental and social risks associated with its lending activities particularly to the SME sector. Chase Bank received a TA from DEG to establish and implement an ESMS. The ESMS, which includes a Policy was recently developed but not yet implemented. The client will be required to enhance its ESMS, including additional IFC clauses to the exclusion list, compliance with National Laws of Kenya, and amending the scope of the application of its ESMS to all corporate lending. Given the expected growth of its lending in the agricultural sector, the Bank’s ESMS should include specific tools and guidance to manage related E&S risks. The client will be required to provide a timeline for implementing the E&S risk framework into existing credit risk management and compliance process.

Task Description	Anticipated Completion Date
Nominate E&S Officers/Department	On or prior to Commitment
Establish an ESMS including guidelines for its implementation	On or prior to Investment/ Disbursement*
Prepare Staff Training Plan	Within 1 month of Subscription/ commitment*
Implement Staff Training	On or prior to Investment/ Disbursement*
Provide ESMS Implementation Report	On or prior to Investment/ Disbursement*
Amend Grievance Mechanism	On or prior to Commitment

Contacts

For Inquiries About the Project, Contact

Paul Njaga
Deputy CEO
Chase Bank (Kenya) Ltd.
Head Office, Riverside Mews
P.O.Box 66049 00800 Nairobi
Telephone:+254202774000
Fax: +254204454166

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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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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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