37112 - Finansbank DPR 2

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Summary of Investment Information

Project Number

37112

Company Name

QNB Bank AS

Date SPI Disclosed

Jul 6, 2015

Country

Turkiye

Region

Central Asia and Turkiye

Projected Board Date

Aug 7, 2015

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry FIG MCT

Industry

Financial Markets

Previous Events

Approved : Aug 7, 2015
Signed : Sep 16, 2015
Invested : Sep 18, 2015

Sector

Commercial Banking - General

Project Description

Finansbank A.S. (“Finansbank” or the “Bank”) is the 5th largest private bank in Turkey and one of the fastest growing private banks in the country with a comprehensive network of branches, and a market share of 4.2% based on net loans as of December 2014. The bank is owned 99.8% by the National Bank of Greece (“NBG”) group. The balance is listed on the stock exchange.

The proposed Project is for IFC to make a second round of investment of up to US$100 million in Finansbank’s new notes issuances of up to US$280 million from its existing Diversified Payments Rights (“DPR”) securitization facility.

IFC’s proposed investment is targeted at increasing lending to MSMEs in Turkey, consistent with IFC’s strategic priorities for the country. Although the MSMEs represent almost 80% of total employment in Turkey, loans made to MSMEs represent only about 38% of the total loans. Access to finance is perceived as the single most severe obstacle to growth by MSMEs, according to the 2008 enterprise survey conducted by the World Bank. The proposed Project would deepen IFC’s relationship with Finansbank and help expand its footprint in financing MSMEs by supporting the development of its product and service offerings tailored to the specific needs of this underserved segment.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

Development Impact

1) Financial Inclusion of Underserved Segments: Turkey has an unbanked population of 23 million which represents 0.9% of
the world''s unbanked population. Despite high growth, only 38% of loans to businesses in Turkey were channeled to
MSMEs. The proposed project will increase access to finance for MSMEs, as eligibility criteria on the use of IFC''s proceeds
will focus on this segment.
2) Capital Market Development: By supporting the second DPR issuance by Finansbank, IFC will help mobilize additional
investment from other investors. This will help further develop the capital markets in Turkey where access to medium-long
term finance by financial institutions at commercially viable pricing is still very limited.
3) Job Creation: IFC''s experience has shown that MSMEs can achieve higher job creation. MSMEs in Turkey grew faster
than the Turkish economy at the rate of 20% compare to economic growth of 8.5%, supporting economic growth and
employment creation.

1. Long-Term Funding: provide scarce medium-long-term funding to address maturity mismatch in the banking sector.
2. Capital Market Development: Another investment in a DPR facility will (1) send positive signals and improve market confidence in DPR financing and (2) reinforce IFC commitment to the Turkish banking sector, and (3) support the relevance of long-term strong tier 2 banks in the market.
3. Strategic Partnership: IFC will be strengthening its long term relationship with Finansbank by supporting it in areas of strategic alignment in terms of financing MSMEs. This will be more relevant, as part of active equity management, if IFC proceeds with its approved new equity investment in the Bank.

E&S Category Rationale / Risks and Mitigation

This Project consists of a second round of investment of up to US$100 million in Finansbank’s new notes issuances of up to US$280 million from its existing Diversified Payments Rights (“DPR”) securitization facility, targeting MSME financing of the Bank in Turkey. Finansbank’s portfolio include retail banking, long term SMEs, long term corporate finance, short term corporate finance and microfinance where the highest exposure in the bank''s SME portfolio is to consumer goods, construction and real estate, and textiles which entail business activities that have potential limited adverse environmental or social risks or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. This Project has therefore been classified as FI-2 according to IFC’s Environmental and Social Review Procedure. For this particular project, IFC''s applicable requirements will be to ensure that all projects in the asset class are screened against the IFC Exclusion List and the applicable environmental and social national laws and regulations. In addition Finansbank will comply with the requirements of IFC’s PS2 on Labor and Working conditions.

The main E&S risks and impacts of this investment relate to Finansbank, having adequate systems and capacity in place to manage the operations being financed in accordance with applicable requirements, including compliance with the IFC’s Exclusion List and Host Country Laws and Regulations. Finansbank has an Environmental and Social Management System (“ESMS”) in place and has designated staff members with overall responsibility for implementation of the ESMS. The bank's human resources policies and practices are in line with the requirements of IFC’s PS2 on Labor and Working Conditions. Currently, Finansbank’s Environmental and Social performance is considered to be satisfactory. The Environmental and Social Management Systems will need to be enhanced to reflect the requirements for this new project. The bank’s and Finans Leasing’s HR Practices are in conformity with IFC's PS2 on Labor and Working conditions.

Task Title & Description	Anticipated Completion Date
Develop guidelines	08/03/2015
Staff Training	08/03/2015
1.Implement ESMS and provide IFC with an ESMS implementation report : The Bank will implement the ESMS and provide IFC with an ESMS Implementation Report including examples of E&S due diligence undertaken for different medium and high risk investments, both from project finance and SME credir lines Prepare Staff training Plan 2. Conduct the training sessions as per the Training Plan to ensure effective implementation of the Environmental and Social Management System.	11/01/2015

Contacts

For Inquiries About the Project, Contact

Fatma Gamze GUC
Banking Relations and Structured Funding
Credit Markets Department Manager
Address: Finansbank Kristal Kule
Buyukdere Cad. no:215
34394 4.Levent/Istanbul
Tel: 00 90 212 318 51 67
mailto:gamze.guc@finansbank.com.tr

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