39537 - NTB Senior Loan

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Summary of Investment Information

Project Number

39537

Company Name

NATIONS TRUST BANK PLC

Date SPI Disclosed

May 9, 2017

Country

Sri Lanka

Region

South Asia

Projected Board Date

Jun 12, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Oct 13, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 8, 2017
Signed : Jun 22, 2017
Invested : Jul 5, 2017

Sector

Commercial Banking - General

Project Description

The project comprises of a 5-year senior loan of US$50 million to Nations Trust Bank PLC (‘NTB’, the Bank), a mid-sized private commercial bank in Sri Lanka and an existing IFC client. The funds will be utilized by the Bank to fund its expansion in the SME lending space. The financing provided is a fit with the World Bank and IFC strategy of promoting economic growth by providing access to finance to underserved market segments, thereby leading to job creation.

NTB was established in 1999 and IFC was a founding shareholder, with a 15% stake but divested in 2004. IFC has also engaged with NTB during the early years to help it develop its SME banking strategy and risk management framework. NTB has also been a trade finance client since 2007.

Associated Advisory Engagement

Not Applicable

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
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

(i) Access to finance: An estimated 56,000 MSMEs lack access to adequate finance in Sri Lanka and through this project IFC will indirectly fund around 7,000 SMEs. (ii) Job creation: According to IFC Jobs Study, Sri Lanka (2012), an estimated 10-31 new jobs were created for every $100,000 of lending. Based on this, 5,000-15,500 new direct jobs will be created by this project.

(i) Longer-term funding: The project provides long-term, US dollar debt funding, not readily available from local or global investors at this time. (ii) SME advisory: The proposed project may involve advisory support to further develop NTB's SME lending program; IFC is uniquely placed to share international best practices and knowledge in this regard. (iii) Environmental and Social (E&S) Risk Management: With this project, IFC would further strengthen the Bank's E&S risk management, in the Bank itself and across its sub-projects.

E&S Category Rationale / Risks and Mitigation

The client is involved in lending long and medium term products for corporates and SME, such as working capital, term loans, project and corporate finance and several short term products. IFC's loan will be utilized for on-lending to SME businesses. The existing lending exposure primarily comprises medium risk sectors such as agriculture and fishing (including rice mills, tea plantations), construction (mainly contractors for residential and commercial properties), general manufacturing and trading business. These sectors have a potential of generating adverse environmental or social risks or impacts which are mostly site specific and readily manageable. Hence, the E&S risk of the proposed investment is medium and the project is categorized as FI-2. The applicable Performance requirements will be i) the IFC- FI Exclusion List; ii) The host country E&S laws and regulations; and iii) the IFC Performance Standards in case of large ticket long and term lending to SMEs.

The key risks are related to the ability of the bank to identify and manage environmental and social risks associated with its lending activities, in particular lending to corporate clients. Additional E&S risks and impacts of the bank derive from the capacity and systems in place to manage these risks. The bank is an existing IFC client and thus the bank has appointed an E&S manager and is implementing an adequate E&S risk management system (ESMS) including an external communications mechanism. The bank has ESMS tools and guidance to identify high risk sub-borrowers and will apply the same to meet the requirements of this project. The client's HR policies and practices are in line with IFC PS-2 requirements.

Task Title & Description	Status	Comments	Completion Date
Nominate officers	Completed	Letter notification	06/28/2017
Develop guidelines	Completed	Document received. The document was approved on 22-02-2018	11/30/2017
Staff Training	Completed	Training certificates submitted. This is an ongoing exercise and will continue in future too.	09/19/2018
Other1 ECM	Completed	Email confirmation. Subsequently included in the ESMS submitted in November 2017	10/12/2017

Contacts

For Inquiries About the Project, Contact

Nations Trust Bank
Ajith Akmeemana
Chief Financial Officer
+94 (0) 11 4 313 106
Ajith.Akmeemana@nationstrust.com
No. 242, Union Place, Colombo 00200
http://www.nationstrust.com/

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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.

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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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