37076 - ADIB - Egypt Sub. Debt

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Summary of Investment Information

Project Number

37076

Company Name

ABU DHABI ISLAMIC BANK-EGYPT SAE

Date SPI Disclosed

Nov 1, 2021

Country

Egypt, Arab Republic of

Region

Africa

Projected Board Date

Dec 13, 2021

Environmental Category

FI-1 - Significant

Status

Active

Last Updated Date

Jul 12, 2023

Department

CF3S4 - Regional Industry - FIG ME & Africa/FIG Africa Porf Wst/Cen/Sth

Industry

Financial Markets

Previous Events

Approved : May 4, 2022
Signed : Jun 22, 2023
Invested : Jul 7, 2023

Sector

Commercial Banking - General

Project Description

The project consists of a subordinated Murabaha financing to Abu Dhabi Islamic Bank Egypt (“ADIBE” or the “Bank”). This Tier 2 capital instrument is intended to add diversity to the Bank’s capital base and long-term growth prospects.

ADIBE is an Egypt based Islamic bank that started its operations after the acquisition of the National Bank for Development (NBD) in 2007 by a consortium between Abu Dhabi Islamic Bank and Emirates International Investment Company. ADIB offers a broad range of banking solutions that cater to the needs of corporate and retail customers through a network of 70 branches and a team of over 2000 employees and experts. In order to integrate further services, the Bank established an Investment Banking arm, ADIB Capital Egypt; a leasing company, ADIFinance; and an asset management arm, ADIB Invest.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
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
Quasi-Equity	Loans to MSME (mix of Micro and SME)
Quasi-Equity	Housing Finance
Quasi-Equity	Consumer Loans
Quasi-Equity	Loans to Corporates

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

Development Impact

The project shall support ADIBE in growing its operations in Egypt, including increasing access to financing for underserved MSMEs. IFC anticipates that the Project will foster increased inclusiveness in the Egyptian microfinance sector and enhance broader market participation of MSMEs via the competition, demonstration, and replication channels, by demonstrating the viability of Islamic MSME finance and creating competitive pressures on other players to replicate ADIBE's approach.

IFC's additionality under the proposed Project is expected to be both financial and non-financial. Financial additionality is in the form of financing structure (subordinated Murabaha financing of 5 year tenor) - the Project will provide Sharia compliant, longer term (5 year) Basel 2 Tier 2 (B2T2) funding, a combination which is not readily available in the local market. IFC's B2T2 will be structured in the form of an Islamic Sharia compliant Murabaha, thereby representing the first B2T2 funding provided by a DFI in the form of a Sharia compliant instrument. Non-financial additionality includes Environmental and Social ("E&S") standard setting. As per the latest assessment of the Bank, the Bank does not have an Environmental and Social Management System ("ESMS"). Considering the proposed instrument is a subordinated debt, the Bank will be obliged to establish and apply the IFC E&S requirements to the Bank's entire portfolio. The applicable requirements for this project will be the IFC exclusion list, host country E&S laws and regulations, and IFC performance standards.

E&S Category Rationale / Risks and Mitigation

The project is a Tier II subordinated financing to ADIBE to increase the capital at the bank level, with relatively high exposure to corporate financing and substantial exposure to business activities with potential adverse environmental and social risks, including oil and gas, petroleum and petrochemicals, pharmaceuticals, construction, real estate development, and building materials and metallurgical industries. The project is classified as Category FI-1 project, according to the IFC's Sustainability Policy. ADIBE portfolio does not include any coal-related activities. For this project, ADIBE will be required to screen financing against the IFC Exclusion List, host country Environmental and Social laws and regulations and the IFC Performance Standards. In addition, the Bank will be required to meet Life & Fire safety requirements and the requirements of IFC's Performance Standard 2 on Labor and Working conditions.

The key risks and impacts of the project derive from the Bank's capacity to maintain its management system to identify and manage the potential environmental and social risks of the Bank portfolio. These risks are typically associated with occupational health and safety issues, pollution prevention, waste and wastewater management, labor and working conditions issues, biodiversity, and community impacts, among others.

The Bank does not currently have an E&S Management System (ESMS). Therefore, to mitigate these risks, the Bank will be required to nominate an E&S Officer and develop and implement E&S policies and procedures, entailing reviewing the upcoming transactions against the relevant applicable requirements. The Bank will also be required to provide E&S training to staff responsible for the implementation of the ESMS. The Bank will also be required to abide by the IFC's Approach to Greening Equity Investments and will not support any coal related activities. The Bank's HR practices in general are in conformity with IFC's Performance Standards 2 on Labor and Working conditions, expect for the grievances and harassment policies. The Bank will be required to revise the grievance mechanism and develop a harassment policy in line with IFC's Performance Standards 2 requirements.

Contacts

For Inquiries About the Project, Contact

Abu Dhabi Islamic Bank Egypt
Mr. Sameh Khalil
Head of Investments, Private Banking and Investors Relations
00202 38 28 9300
ADIBEgypt@adib.eg
9A Rostom Street, Garden City, Cairo
www.adib.eg

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Fax: 202-974-4384

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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Task Title & Description	Anticipated Completion Date
Nominate officers	12/20/2021
Establish SEMS	12/31/2021
Staff Training	12/31/2021
Develop an external communications mechanism	12/31/2021
Deliver the E&S Training	06/29/2022
Develop grievance mechanism and harassment policy	06/29/2022

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