38586 - Radana Finance

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Summary of Investment Information

Project Number

38586

Company Name

PT. RADANA BHASKARA FINANCE TBK

Date SPI Disclosed

Dec 13, 2016

Country

Indonesia

Region

East Asia and the Pacific

Projected Board Date

Jan 24, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Apr 23, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Feb 16, 2017
Signed : May 29, 2017
Invested : Aug 21, 2017

Sector

Finance Companies

Project Description

The project consists of providing, PT. Radana Bhaskara Finance Tbk (“Radana” or “Company”), a 5 year (1 year grace) secured senior loan of up to US$40 million (equivalent to around IDR 530 billion) in either Indonesian Rupiah (IDR) or US Dollars. The security is expected to be a pledge over specific eligible receivables providing 100% coverage. IFC shall participate with up to US$20 million while the balance is being mobilized through a parallel or B loan.

The loan will support Radana to diversify from motorcycle financing to multipurpose, working capital and investment financing for productive purposes to low and middle income clients, including micro, small and medium enterprises (“MSME”). The proceeds will finance i) micro, small and medium enterprises; ii) individuals utilizing the loans for productive purposes; iii) home renovations; iv) student-loans and (v) women borrowers.

Radana, established in 1972, is a listed multi-finance company in Indonesia. The major business currently is motorcycle financing. The Company has a view to grow in the multi-purpose, investment and working capital financing areas through both conventional and Islamic finance.

Associated Advisory Engagement

In addition to the proposed project, IFC is also discussing an advisory proposal with Radana to help it implement its strategy in Indonesia. The advice will likely center around risk management, customer segmentation, distribution channels and enhancements to Radana’s credit scoring process, particularly for multipurpose and MSME financing.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management	1.50
Guarantee
Loan	20.0
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

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

Development Impact

Deepening the Non-Banking Financial Institutions ("NBFI") Sector: Financing Radana will help strengthen the NBFI sector in Indonesia which is still heavily dominated by banks. NBFIs can better serve individuals and small ticket loans as well as provide healthy competition to banks. Increased Access to Finance: The Project will help support enterprises and the expansion of their activities, and play a modest, but meaningful role, in addressing the MSME market financing gap estimated at USD 25 billion. Access to finance enables firms to innovate and become more productive. The Company's diversification in its lending portfolio will increase average loan sizes and tenors and better serve the targeted sectors which comprise of low-to-middle income population in Indonesia including women borrowers. Job Creation and Private Sector Development: While the number of direct jobs the Project will support is limited, it will indirectly support job creation through the support of MSMEs which account for 97 percent of employment and 57 percent of value-added in the economy. Demonstration Effect: IFC's engagement with Radana at this stage, when the change in regulations has allowed multi finance companies to extend working capital and investment loan, is likely to encourage other multi finance companies to also enter into this space and therefore have a strong demonstration effect. Empowerment of Women: Supporting Radana to increase financing to women borrowers will help improve gender imbalance in access to finance in Indonesia, and therefore support economic empowerment. Evidence shows that achieving the World Bank Group twin goals of reduced poverty and shared prosperity is only possible if the private sector succeeds in efforts to include women in the economy and eliminate barriers to their full participation.

Provide Long term funding: IFC will provide Radana with long term funding which is limited in the market and which will help provide stability to NBFIs in difficult times. Currently the Company only has access to short to medium term funding from commercial banks and the capital markets. The longer term funding is required to provide stability in funding and to fund the growth of its longer tenor productive loans aimed at MSMEs and small to mid-scale entrepreneurs. Sector Knowledge/Expertise/Business Strategy: IFC will help the Company develop knowledge and expertise in lending for MSMEs, women borrowers and Islamic financing. IFC has local and global knowledge of such products and markets which will help the Company to develop new products and improve risk management. Diversify Funding Base and Mobilization: IFC will help mobilize long term funds for the Company and therefore help diversify funding sources to include multilateral lenders, who can offer mid-term funding especially in difficult times Stamp of Approval: IFC's participation will positively influence the market and public perception for Radana. This will help Radana raise additional funding in local and possibly international capital markets in the future.

E&S Category Rationale / Risks and Mitigation

This project involves a senior loan to support Radana to diversify from motorcycle financing to multipurpose, working capital and investment financing for productive purposes to low and middle income clients, MSME. The proceeds will finance i) micro, small and medium enterprises; ii) individuals utilizing the loans for productive purposes; iii) home renovations; iv) student-loans and (v) women borrowers. Currently Radana is mainly involved in motor cycle financing with strategy to significantly increase its multi-purpose financing and MSME exposure. Given types, sectors, size and tenor of planned lending activities the overall portfolio risk is considered to be low / medium. The project has therefore been categorized as FI-2 in accordance with IFC’s Environmental and Social Sustainability Policy. For this project the client will be required to screen its loans for business purposes against the IFC Exclusion List and the relevant Indonesian E&S laws and regulations.

The key risk is the ability of Radana to identify and manage the environmental and social (“E&S”) risks associated with its planned lending activities in the MSME sector. Additional E&S risks and impacts of the project derive from the capacity and systems in place to manage these risks. At present Radana doesn’t have an Environmental and Social Management System (“ESMS”) outlining the procedures for undertaking E&S risk management of its lending activities. No staff/department has been assigned responsibility for E&S due diligence and monitoring, and training needs to be provided to all staff involved in the ESMS implementation. Radana does not have a documented grievance mechanism for employees and a non-discrimination and equal opportunity policy as required under the IFC Performance Standard 2: Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

PT. Radana Bhaskara Finance Tbk
Mr. Dody Rachmat
Finance Director
+62 21 2952 7300
dody_rachmat@radanafinance.co.id
Blugreen Boutique office, 5th Floor, Jl. Lingkar Luar Barat Kav. 88,Jakarta 11610, Indonesia
www.radanafinance.co.id

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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.

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.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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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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