35747 - KMF-FY16

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Summary of Investment Information

Project Number

35747

Company Name

KMF Bank JSC

Date SPI Disclosed

Dec 7, 2015

Country

Kazakhstan

Region

Central Asia and Turkiye

Projected Board Date

Jan 29, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Mar 8, 2016
Signed : Dec 14, 2016
Invested : Mar 16, 2017

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

The proposed project consists of a senior syndicated loan of up to US$25 million denominated in Kazakh Tenge (KZT) to Microfinance Organization “KMF” LLC, formerly Microcredit Organization KazMicroFinance LLC (“KMF” or the “Company”), IFC’s existing portfolio client and the leading microfinance institution in Kazakhstan, as follows: (i) an A loan of up to US$5 million denominated in KZT for IFC’s own account; and (ii) a B loan/Parallel loan of up to US$20 million or its equivalent in KZT for the account of participants. The funding will support KMF’s loan portfolio growth through increasing new product offerings to its target micro and small businesses clientele, including women entrepreneurs in rural and urban areas, reduce its foreign currency exposure and improve its risk profile.

As of September 30, 2015, KMF’s gross loan portfolio was US$122 million issued to 144,730 active micro-borrowers through its network of 18 branches and 80 outlets and sub-offices allowing deep outreach in rural areas.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	44.0
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

The Project is expected to have a high development impact as it will:
(i) improve access to finance for the underserved segments of the society in remote areas of Kazakhstan through supporting lending activities of KMF;
(ii) contribute to job creation and improvement of life at the base of the pyramid through strengthening of the microfinance sector in the frontier regions of Kazakhstan; and
(iii) have a demonstration effect for Kazakhstan''s microfinance industry to follow a best practice suite by helping KMF to upgrade its risk management practices.

- The Project will support KMF with longer-term resources in local currency at affordable commercial terms for on-lending to microfinance clients.
- Play catalytic role in attracting international investors to the Kazakh microfinance sector. IFC has already extended its financing to KMF and to the Kazakh microfinance sector, which provides comfort to international investors in the sustainability of operations in Kazakhstan.
- The Project will help KMF to reduce its foreign currency exposure and improve its risk profile during the challenging economic situation. The Project would also be influential in promoting and sustaining best practices in the Kazakh microfinance sector.

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 proposed project has been categorized as FI 2 according to IFC’s Environmental and Social (E&S) Review Procedure. The rational for categorization is based on assessment of KMF’s current portfolio and business strategy. KMF provides micro-loans to groups and individuals predominantly in sectors of consumer goods, animal production, crop production, and to a much lesser extent in sectors of common carriers, food and beverage, transport services, finishing, apparel and some other. KMF has a few small business loans in its portfolio and plans to further develop this segment. Both, the current portfolio and the proposed lending include activities that have potential limited adverse E&S risks or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures.

According to the nature of activities supported with this loan, the client will be required to operate the Environmental and Social Management System (ESMS) to demonstrate ongoing compliance with IFC’s Exclusion List, national E&S laws of Kazakhstan, as well as ensure ongoing compliance of its employment practices with IFC Performance Standard 2: Labor and Working Conditions and regular reporting of its E&S performance to IFC in accordance with the format to be provided.

The key risks and impacts of the project are associated with KMF’s agenda to grow its small business portfolio as well as with staff capacity to handle the risks associated with that portfolio. The E&S appraisal carried out by IFC indicates that KMF has developed and maintained satisfactory ESMS in line with IFC’s requirements, appointed sufficient E&S personnel, and provided sufficient E&S training. The ESMS is implemented in practice accordingly and the E&S due diligence is overall satisfactory. Growing its operations in small business sector, it will be crucial for the company to continuously review and accordingly adjust the ESMS procedures to the corresponding portfolio changes to be able to effectively evaluate and manage the E&S risks associated with this sector, which is new for the company, and to make sure that all personnel receives appropriate training. The close monitoring from the bank’s management will be crucial.

Contacts

For Inquiries About the Project, Contact

KMF Treasury
39, Beregovaya Street 050051 Almaty, Kazakhstan
Telephone: +7 (727) 250-68-78
Fax: +7 (727) 250-68-76

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Telephone: 202-473-3800
Fax: 202-974-4384
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Local Access of Project Documentation

N/A

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.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

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Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

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.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

Task Title & Description	Anticipated Completion Date
Develop guidelines	02/27/2016
Staff Training	02/27/2016
Submit full ESDD examples. Submit internal E&S reporting procedure and examples.	03/31/2016

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