35866 - WCSS UCBL

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Summary of Investment Information

Project Number

35866

Company Name

UNITED COMMERCIAL BANK PLC.

Date SPI Disclosed

Apr 10, 2015

Country

Bangladesh

Region

South Asia

Projected Board Date

May 25, 2015

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Dec 12, 2014
Signed : Aug 31, 2015
Invested : Sep 18, 2015

Sector

Commercial Banking - Trade and Supply Chain

Project Description

The project consists of providing a Short-Term Loan (WCSS) for the amount of up to US$15 million (for 12 months, renewable two times at IFC’s option for an additional 24 months, for a maximum aggregate period of up to 36 months) and US$ 50 million Guarantee under GTFP to United Commercial Bank Limited (the “Bank” or “UCBL”) to support the foreign currency needs of SMEs in Bangladesh. The financing provided is a fit with the World Bank and IFC strategy of promoting economic growth by providing access to finance to underserved market segments and promoting international trade, thereby leading to improved competitiveness, job retention and creation.

The Bank commenced operations from 26 June1983 and had total assets of US$3.26 billion as of September 30, 2014.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

Development Impact

i) Financial Market Deepening: IFC by facilitating increased local bank access to the commercial loan market will deepen the financial sector. In addition, IFC is also establishing a level playing field between local banks and foreign banks that have an advantage due to funding support from international parent banks.

(ii) Demonstration Effect: IFC funding will encourage International banks to finance the local banking sector in Bangladesh and increase the range and availability of funding options in the market.

(iii) Job Creation: Bangladesh, an IDA country, still has nearly a third of its population below the poverty line in spite of improving macroeconomic fundamentals. IFC investment will further support business growth and spur indirect job creation in the SME and Export oriented segments.

(iv) Boost Export Competitiveness: The Facility will help accelerate economic growth in Bangladesh by providing SMEs and exporters with trade finance solutions to their working capital requirements and assist in payments for imports utilized in the value chain.

Catalytic Role in Addressing Financing Gap through a Comprehensive Package: IFC by bringing more local banks under the WCSS facility (STF and GTFP) will allow for an alleviation of a system wide FX liquidity constraint and provide for increased facilitation of access to the commercial loan market.

Value Added Service (SME Support): IFC can continue to play a leading role in implementing a comprehensive SME trade support program to promote sustainable economic growth. Complementing IFC''s efforts through GTFP, IFC will further enhance its support for SME trade in Bangladesh through BSLF, providing supplementary and much-needed trade working capital to SMEs. On the macro level, this will help sustain both import flows of goods required by Bangladesh. On the micro level, it will provide assistance to SMEs to better manage cash flows and assist them in being competitive in regional and global markets, supporting domestic job creation and diversifying the country''s economic base.

Acceptance of Standards: Adding new local banks to the WCSS program will assist in bringing greater acceptance of IFC standards across the market.

E&S Category Rationale / Risks and Mitigation

The project is to support UCBL for its trade finance and short-term lending operations through its Offshore Banking Unit (OBU). The on lending will primarily comprise providing working capital financing and equipment financing through short-term loans to importers/exporters SMEs/corporates, operating from the Export Processing Zones (EPZs). The project presents medium E&S risks and impacts which are readily manageable. Hence, the project is categorized as Category FI-2. The E&S requirements will include IFC Exclusion List, additional list of restricted commodities and national E&S laws and regulations.

The main E&S risks and impacts of the project relate to occupation health and safety, labour and working conditions, and pollution aspects at the client's SME borrower's premises. Most of these can be managed through adequate implementation of national laws and good industry practices. The central bank of Bangladesh has provided guidelines to all banks and financial intermediaries to implement an Environmental Risk Management system. Accordingly, the bank has developed an Environment Risk Management (ERM) policy and due-diligence procedures for screening against E&S laws of the country. The bank will further develop procedures for screening against IFC exclusion list and restricted country-commodity list and appoint a senior officer as incharge of implementing the screening procedure. The bank also needs to upgrade its HR policy to ensure compliance with IFC PS-2 on labour and working conditions.

Task Title & Description	Actual Due Date	Status	Comments	Completion Date
Nominate officers		Completed	AEPR Report	01/01/2017
Establish SEMS	12/03/2017	Completed	AEPR Report	12/03/2017
Other1 HR Policy		Completed

Contacts

For Inquiries About the Project, Contact

Md. Sohrab Mustafa
Head - FI & OBU
United Commercial Bank Limited
Bulus CenterPlot - CWS- (A)-1, Road No - 34Gulshan Avenue, Dhaka-1212
PH: +8802 8852500, Ext-3201
Email: mailto:sohrab.mustafa@ucbl.com

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