38166 - Akbank DPR 2

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Summary of Investment Information

Project Number

38166

Company Name

AKBANK TURK ANONIM SIRKETI

Date SPI Disclosed

Aug 25, 2016

Country

Turkiye

Region

Central Asia and Turkiye

Projected Board Date

Aug 19, 2016

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Nov 1, 2024

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Aug 4, 2016
Signed : Aug 17, 2016
Invested : Aug 19, 2016

Sector

Commercial Banking - General

Project Description

Akbank T.A.S. (“Akbank” or the “Bank”) is one of the leading banks in Turkey with approx. US$93 billion in consolidated assets as of June 30th, 2016. Incorporated in 1948, the Bank is 48.9 percent owned by H.Ö. Sabancı Holding, affiliated Institutions and Individuals, and has 51.1 percent free float as at June 2016. It provides financial solutions to its customers leveraging its capital base, diversified funding base, strong liquidity and asset quality, together with its non-banking subsidiaries: Ak Asset Management, Ak Investment and Ak Lease.

The Bank serves its consumer and corporate clients with a strong and extensive distribution network that utilizes both traditional and digital channels through:

~ 14,000 Employees
~ 900 Branches
Consumer and Corporate Internet Branches
The Telephone Banking Center
~ 4,200 ATMs
~ 420,000 POS Terminals

The proposed project will make available a financing of up to US$250 million for the purchase of new Diversified Payment Right (“DPR”) notes to be issued by A.R.T.S. Ltd., a public limited company incorporated under the laws of Jersey (the “IFC Investment”), the proceeds of which issuance will accrue to Akbank. The proposed IFC investment will allow Akbank, a long standing partner of IFC, to raise longer term funding to support its lending operations to micro, small and medium enterprises (“MSMEs”) in Turkey (the “Project”).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	440.0
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 Microfinance Borrowers
Straight Senior Loan	Loans to SME Borrowers

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

Development Impact

1) Financial Inclusion: Turkey has been identified as one of the 25 priority countries for achieving World Bank Group’s 2020 goal of Universal Access and this project is a strong contributor to achieving that goal. Turkey has an unbanked population of 24 million, which represents 0.9 percent of the world''s unbanked population. Despite high growth, only 38 percent of loans to businesses in Turkey were channeled to MSMEs. The proposed Project will leverage Akbank’s extensive branch, ATM and POS network, Call Center as well as its digital and mobile banking platform to reach underserved MSMEs.

2) Capital Market Development: IFC’s support of Akbank’s DPR issuance will help renew market confidence in DPRs given the challenging macro environment where access to medium-long term finance by financial institutions at commercially viable pricing is limited. IFC’s active participation in the Turkish capital market should help boost investor confidence.

3) Job Creation: IFC''s experience has shown that MSMEs can achieve higher job creation. MSMEs in Turkey have traditionally grown at more than twice the pace of its GDP and contributed more than 90 percent to employment creation in the country.

1) Long Term Financing: The Project provides long term funding to address Akbank''s maturity mismatch in the 5-10 year duration.

2) Support for the Banking Sector: Economic uncertainties arising from the recent developments and geopolitical risk have adversely effected investors risk appetite in Turkey. IFC''s investment of this magnitude to a strong tier I bank in Turkey will reinforce IFC commitment to the Turkish banking sector.

3) Capital Market Development: IFC''s investment in a DPR facility at such a critical and challenging time will send positive signals and improve market confidence in DPR financing as well as in the Turkish banking sector.

4) Strategic Partnership: The transaction will strengthen IFC''s long-term partnership with Akbank by supporting it in areas of strategic alignment such as the financing of MSMEs.

E&S Category Rationale / Risks and Mitigation

This project consists of an IFC investment of up to US$250 million in new issuances of Akbank’s Diversified Payment Right (“DPR”) to provide new finance for the Bank’s MSME operations. The highest exposure in the Bank''s SME portfolio is to food, construction and real estate, textile, and services, with potentially limited adverse environmental or social risks or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. The project has therefore been classified as FI-2 according to IFC Environmental and Social Review Procedure. For this particular project, IFC''s applicable requirements will be to ensure that all eligible projects are screened against the IFC Exclusion List and the applicable environmental and social national laws and regulations. In addition Akbank will comply with the requirements of IFC’s PS2 on Labor and Working conditions.

The key challenge in this investment will be for Akbank Bank to manage the E&S risks associated with the activities of its borrowers in line with IFC’s policy requirements, including compliance with the IFC’s Exclusion List and Host Country Laws and Regulations. The Bank will be required to establish an Environmental and Social Management System (ESMS) in line with IFC requirements and nominate staff members for its implementation. Akbank will also provide information to ensure compliance with IFC's PS2 on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

M. Altuğ Ülker
Akbank Head Office
Sabanci Center 34330 4. Levent,
Istanbul, Turkey
e-mail: mailto:diskaynaklar@akbank.com
Telephone: +90212 385 62 38
Fax: +90212 281 8188
http://www.akbank.com

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Task Title & Description	Anticipated Completion Date
Nominate officers	08/16/2016
Establish SEMS	08/16/2016
Formalize procedures	09/30/2016
Staff Training	02/15/2017
Implement ESMS (Phase 1)	02/15/2017
Implement ESMS (Phase 2)	05/15/2017
Complete the roll out of the ESMS across the MSME portfolio of the Bank	08/16/2017
Prepare staff training plan	08/16/2016

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