37610 - Xac Syndication

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Summary of Investment Information

Project Number

37610

Company Name

XACBANK JOINT STOCK COMPANY

Date SPI Disclosed

Dec 4, 2015

Country

Mongolia

Region

East Asia and the Pacific

Projected Board Date

Jan 5, 2016

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 30, 2016

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Mar 1, 2016
Signed : May 4, 2016
Invested : Jul 7, 2016

Sector

Commercial Banking - SME Finance

Project Description

The proposed investment entails a syndicated senior loan facility to XacBank, including an IFC A loan of up to US$15 million and IFC B loans or parallel loans of up to US$90 million, in order to promote access to finance in Mongolia and strengthen XacBank’s funding position.

XacBank originated in 1998 as a microfinance project sponsored by the United Nations Development Program and the United States Agency for International Development, transformed into a bank in 2001, and is currently the fourth largest bank in Mongolia in terms of outstanding loans. By June 2015, the Bank had 90 branches and 1,477 staff, served over 460,000 active depositors and over 100,000 active borrowers, and had total assets of MNT1,884 billion (US$950 million equivalent) and gross outstanding loans of MNT1,289 billion (US$650 million equivalent). IFC started partnership with XacBank in 1999 by providing advisory services to assist its transformation into a bank, and provided it a few senior loans and subordinated debts in the past ten years to support its business growth.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
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 SME Borrowers
Straight Senior Loan	Loans to SME Borrowers

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

Development Impact

1. Access to finance: the project will expand the access to finance for the MSME sector. Given the Company''s strategic plan and its focus in MSME sector, the syndicated facility is expected to support 9,000~11,000 MSME loans per year
2. Improve funding structure: the investment will provide mid to long term funding to an important IFC client, thereby improving its liability structure and strengthening its resilience to adverse liquidity events
3. Access to international markets: the project represents IFC''s continuous efforts to introduce leading Mongolian bank to global capital market and it will create a demonstration effect for other Mongolian entities to attract and use international capital.

1. Long term partnership: after over 15 years'' partnership with XacBank and TFG, IFC''s additional funding support for the Bank will strengthen its relationship with the Bank, the Group and the key shareholders of the Group.
2. Stamp of approval: in a challenging economic environment, the investment will demonstrate IFC''s confidence in Mongolia, the country''s banking sector and the Bank, and thus enhance the Bank''s market image, improve its access to international funding and also help it attract more depositors and borrowers.
3. Mobilization: IFC''s insight in the Bank, strong knowledge of Mongolian banking sector and global network will play key role in mobilizing a quality investors base.

Indicator	Metrics	Comments	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
CORE - E and S Management Systems (Y/N)	Compliance/Enhancement		Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

This transaction involves an IFC syndicated loan to XacBank that provides finance predominantly to local micro, small and medium enterprises and households in Mongolia. The key sectors supported by the bank include trade and service, manufacturing, small scale construction, government service, and transportation. The average loan size is less than US$10,000 and the overall portfolio E&S risk of the bank is considered moderate. The project has therefore been categorized as FI-2 in accordance with IFC’s Sustainability Policy. The bank is required to ensure that its lending activities meet the requirements of IFC Exclusion List and the applicable Mongolian E&S laws and regulations. The bank is also required to apply IFC PS 1: Assessment and Management of Environmental and Social Risks and Impacts and PS 2: Labor and Working Conditions to its small but gradually growing exposures to non-project specific corporate lending.

Contacts

For Inquiries About the Project, Contact

Mr. Bold Magvan

Address:
XacBank LLC
International Commercial Center, Jamiyan Gun st-9,
Post Branch No.20A, P.O.Box-72
Ulaanbaatar-14210 Mongolia

Email: mailto:erdenebayar.g@xacbank.mn; mailto:bold.m@tengerfg.mn
Telephone: +976 99115048
Website: http://www.xacbank.mn
Telephone: +976 99115048

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Local Access of Project Documentation

XacBank LLC
International Commercial Center, Jamiyan Gun st-9,
Post Branch No.20A, P.O.Box-72
Ulaanbaatar-14210 Mongolia

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