37919 - Lionbridge Loan

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Summary of Investment Information

Project Number

37919

Company Name

LIONBRIDGE FINANCING LEASING (CHINA) CO LTD

Date SPI Disclosed

Feb 24, 2016

Country

China

Region

East Asia and the Pacific

Projected Board Date

Mar 28, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : May 16, 2016
Signed : May 20, 2016
Invested : Aug 4, 2016

Sector

Leasing Services

Project Description

The proposed project is to provide a three year up to US$20 million USD loan to Lionbridge Financial Leasing (China) Co., Ltd. (the “Company”, “Lionbridge”), a MOFCOM licensed financial leasing company, to support its long term funding to extend affordable financial services to the underserved MSMEs in China.

Established in 2012, Lionbridge is led by a group of leasing experts with extensive industry experience, and provides direct leasing, sale-lease-back, and extended operational services to SMEs, micro-enterprises and individuals in four major sectors including truck leasing, medical devices, agriculture equipment, and manufacturing equipment. By the end of 2015, the outstanding leasing receivables of Lionbridge reached RMB5.5 billion (US$840 million equivalent), among which 38% was truck/logistic leasing, and 34% was medical device leasing.

According to the management account of the financial statement as of end 2015, the total asset of Lionbridge was RMB6.15 billion, and the total equity was RMB1.59 million. In 2015, the Company generated RMB88.6 net profit, translating to ROAA and ROAE of 1.8% and 6.5% respectively.

Associated Advisory Engagement

The proposed investment may be complemented by IFC advisory service in Risk Management with focus on MSME sectors.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	19.89
Equity

Development Impact

1. Promoting financial inclusion: Despite MSMEs being the primary source of growth and employment, MSMEs typically cannot get sufficient affordable financing because of subscale operation and lack of real property (e.g. land, plant), which commercial banks require as collaterals. Leasing has become the most important funding source for MSMEs as it is based on moveable assets, e.g. trucks, machines, equipment, in Lionbridge''s case. In the past, MSMEs could only rely on guarantee companies to get access to short term bank loans, which exposed them to volatility of funding, risk of sustainable operation given the mismatch in the tenure of funding and the life of operation machine/ equipment, as well as a bottleneck in expansion. The proposed project will effectively help Lionbridge Leasing diversify funding sources, improve funding stability and utilization, reach out to more MSMEs and expand credit to them. It is expected that Lionbridge will reach additional 20,000 MSMEs by 2020.
2. Promoting healthy development of the financial leasing sector: the financial leasing industry in China is nascent and for a number of financial leasing companies, the transactions are related to shadow banking. On the contrary, Lionbridge was able to serve the underserved segment with a true leasing model, where the leases are repaid by the cash flow generated by the leasing asset. The success of Lionbridge will set a good example for the whole industry and help establish the right culture and mindset for the industry players, MSME clients, regulatory parties and investors, thus promote the long-run development of leasing sector in China.
3. Job creation: the integrated logistics service will enable Lionbridge to recruit truck drivers to deliver the transportation services with Lionbridge''s trucks under financial lease model. Lionbridge has over 1,000 trucks now and targets to expand to 30,000 trucks in 3-5 years, which will create at least 30,000 jobs in the future.
4. Promoting healthcare services in frontier regions: traditionally, HD services is not sufficient especially in the frontier region, where basic medical service has not fully covered yet. Lionbridge''s HD center model will largely make HD services available at an affordable price to the rural population, improving the patients'' life quality.

1. Diversifying funding sources: as one of the foreign MOFCOM licensed financial leasing companies, Lionbridge does not have financial institutions as sponsors thus have limited access to affordable credit loans in China. Most of its current funding requires its receivables as collaterals. IFC''s term lending will effectively diversify Lionbridge''s funding to support business growth; and the potential conversion to equity stake will improve Lionbridge''s capital position in the mid-term.
2. Promoting SME leasing sector: while China''s leasing sector is large, there are very few companies that target SMEs and the majority of leasing companies are focusing on big ticket lease market (aircraft, ships, etc.). IFC''s support to Lionbridge will build up capability to serve the MSMEs, leveraging IFC''s MSME industry knowledge and experience working with them across sectors.
3. Enhancing environmental and social ("E&S") standards: IFC''s will support the Company to establish E&S management system in the leasing industry.

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 a senior loan to a financial leasing company and the overall portfolio risk is considered to be moderate to limited by the nature of its business. The project has therefore been categorized as FI-2 in accordance with IFC’s Sustainability Policy. Lionbridge provides equipment financial leasing services in sectors such as transport and logistics, medical service, manufacturing and agriculture. By leasing assets, they are predominantly trucks and medical devices. Most of its lease clients are truck drivers, smaller hospitals, farmers and other MSMEs, with the average lease amount per transaction being less than US$50K. For this project Lionbridge will be required to screen its clients to avoid supporting activities with any unresolved reputational or E&S concerns. It is also required to ensure its leasing activities will meet the requirements of the IFC Exclusion List and the applicable Chinese E&S laws and regulations.

The main E&S risks and impacts of the project derive from the E&S risks of the company’s leasing activities and its capacity and systems in place to manage such risks, as well as the company’s own practice with regard to labor and working conditions. The company has committed to develop and implement an E&S management system (ESMS) commensurate with its leasing activities to achievement compliance with the above requirements. It will also appoint an E&S officer to oversee the ESMS implementation, including providing ongoing training to its staffs as its business expands. Apart from the needs to develop a grievance mechanism and conduct regular life and fire safety training for its employees, the company’s labor practice was found to be broadly consistent with the requirements of IFC Performance Standard 2 on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

Mr. Jun Wan
Chief Executive Officer
Lionbridge Financing Leasing (China) Co., Ltd
Floor12/D, Beijing International Building, No.18, Zhongguancunnan, Haidian District, Beijing.100081
Tel: +86-10-56700777
Email: mailto:wanjun@lionbridgecapital.cn

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Washington DC 20433
Telephone: 202-473-3800
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Local Access of Project Documentation

As above.

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.

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.

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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.

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Task Title & Description	Anticipated Completion Date
Nominate officers	03/31/2016
Establish SEMS	03/31/2016
Develop a grievance mechanism and a fire safety training plan for its employees	06/30/2016

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