37054 - AIB Equity

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Summary of Investment Information

Project Number

37054

Company Name

AFGHANISTAN INTERNATIONAL BANK

Date SPI Disclosed

Sep 30, 2015

Country

Afghanistan

Region

Middle East

Projected Board Date

Nov 2, 2015

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Oct 5, 2021

Department

Regional Industry FIG MCT

Industry

Financial Markets

Previous Events

Approved : Dec 22, 2015
Signed : Jun 28, 2016
Invested : Nov 15, 2017

Sector

Commercial Banking - General

Project Description

Afghanistan International Bank (“AIB” or “the Bank”) is a local Afghan private sector bank established in March 2004. It is headquartered in Kabul. As of December 2014, the Bank had 33 branches, 2 cash outlets, 59 Automated Teller Machines (“ATMs”), and 136 Point of Sale (“POS”) devices, across 10 provinces in Afghanistan. AIB’s banking services include corporate/commercial, small business and retail banking, as well as electronic and Islamic banking. With total assets of US$964.2 million, AIB has the largest market share in the Afghan banking sector of approximately 23%.

The proposed project entails IFC taking an equity stake of up to 15% in AIB in two tranches. The initial tranche is for an equity stake of 7.5%, purchased equally from AIB’s two main sponsor shareholders. The second tranche comprises of an IFC option to increase its equity stake by an additional 7.5% within two years of its initial investment in AIB by subscribing to new shares issued by AIB (fresh capital injection).

The proposed IFC investment together with the proposed IFC advisory services will help to further institutionalize AIB’s shareholding, strengthen the Bank in operational risk management and build its capacity for commercial lending in diversified sectors. IFC’s goal is to help the Bank, and by example the banking sector, improve financial inclusion in this Frontier and Conflict-affected State (“FCS”), where the per capita income of US$690 in 2014, was the lowest in Asia and among the 20 lowest in the World. According to the World Bank’s estimates, 96% of the Afghan population is unbanked, while the 2014 Enterprise Survey reports that only 5.1% of firms in Afghanistan have a line of credit and only 2% of firms are using banks for their funding needs.

Associated Advisory Engagement

IFC is proposing a comprehensive advisory services package to help strengthen the Bank and support its future growth. Potential areas of technical assistance may for example include operational risk management, IT audit, operations re-engineering, retail banking, commercial lending, corporate governance, digital finance, and in the development of Afghan “high flyer” staff to assume senior executive positions.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	10.0

Development Impact

1) Access to Finance, Job creation and Private Sector Development: The project will help in giving businesses greater access to finance, thus contributing to job creation and private sector development. Afghanistan has faced chronic unemployment and a burgeoning young population implies an estimated 400,000 new entrants into the job market.
2) Strengthen the Banking Sector: IFC's proposed equity and potential advisory package will provide support to AIB, strengthening the overall banking sector and improving competition by enhancing best practices.
3) Build Confidence in Afghanistan's Financial Sector: IFC's engagement with AIB at a time when Afghanistan and many other countries in the MENA region, are faced with economic, security and political challenges will send a positive signal to the market and enforce IFC's countercyclical role. This will support the Government of Afghanistan in its reform agenda.

IFC's proposed investment would allow AIB to benefit from IFC's major regional and global experience including in other FCS markets, through a potentially integrated capacity building advisory program, covering for example operational risk management and enhancing commercial lending capability. This will support both the Bank and the country by prudently increasing its loan portfolio thus enhancing financial inclusion in the country. IFC will also be able to offer independent advice through a nominee director on AIB's board. IFC's institutional support as a shareholder will further strengthen the Bank in maintaining its position as the leading bank in Afghanistan. IFC's proposed investment will send a strong positive signal to other potential investors in Afghanistan's financial market, aiding the Government of Afghanistan to implement its reform agenda.

E&S Category Rationale / Risks and Mitigation

This project is classified as Category FI-2 project according to IFC’s Environmental and Social Review Procedure. The project is an equity investment in AIB which mainly provides short term corporate/commercial and small business loans, and short term trade finance. The Bank’s corporate/commercial and small business portfolio is mainly focused on trading and has limited exposure to medium and high risk sectors like manufacturing and construction. The Bank’s 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, where applicable.

The main E&S risks of this investment relate to AIB’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.

AIB currently has a draft environmental policy that needs be enhanced to reflect IFC’s E&S requirements. AIB also currently screens loans against the IFC exclusion list. IFC’s E&S related requirements under this project are that AIB will be required to establish an E&S management system, designate staff members responsible for E&S issues and provide them with the necessary training.

Contacts

For Inquiries About the Project, Contact

Mr. Guy Mallet
Chief Executive Officer
Afghanistan International Bank
Shahr-e-Naw, Haji Yaqoob Square
Shahabudin Watt, Post Box 2074
Kabul, Afghanistan
Telephone: +93 (0) 20550255

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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.

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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
Nominate officers	11/09/2015
Establish SEMS	01/19/2016
Staff Training	03/19/2016
Develop Training plan	11/20/2015

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