39541 - Indosurya Finance

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Summary of Investment Information

Project Number

39541

Company Name

PT INDOSURYA INTI FINANCE

Date SPI Disclosed

Apr 12, 2017

Country

Indonesia

Region

East Asia and the Pacific

Projected Board Date

May 15, 2017

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jan 21, 2018

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 8, 2017
Signed : Jun 20, 2017
Invested : Jan 19, 2018

Sector

Finance Companies

Project Description

The proposed project comprises of providing, PT Indosurya Inti Finance (“Indosurya” or “Company”), a multi finance company based in Indonesia, a secured senior loan of up to US$80 million. IFC shall participate with up to US$35 million while the balance will be mobilized through a parallel or B loan on a best effort basis. The security is expected to include a pledge over specific eligible receivables. The funding shall be used to support the growth of the Company’s small and medium enterprises (“SME”) portfolio. Indosurya started operations in 2011 and now operates with an asset base of US$230 million as of December 31, 2016 serving close to 2,000 clients.

Associated Advisory Engagement

The Company has signed an IFC Advisory Services Diagnostic Engagement to enhance its risk management and governance framework. IFC will conduct a review of the current status of the risk management practices, processes and systems in the Company and provide recommendations specific to the Company’s needs benchmarked to international best practice.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
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

- Promoting financial inclusion and deepening the Non-Banking Financial Institution ("NBFI") Sector in Indonesia: Financing Indosurya will help increase access to financial services in Indonesia and strengthen the NBFI and finance sector, which is still heavily dominated by banks. - Increasing Access to SME Finance, by increasing outreach to small and medium scale entrepreneurs: The Project will support the Company to grow its lending to SMEs, which will in turn stimulate economic growth, create jobs, help reduce poverty. It will also expand opportunities for the underserved low to middle income groups, as Indosurya will be able to increase its outreach by inclusion of local entrepreneurs into the formal financial sector. - Creating a Demonstration Effect: IFC's engagement with Indosurya is likely to encourage other industry peers to enter into the SME segment, especially since The Financial Services Regulator, Otoritas Jasa Keuangan, has recently allowed multifinance companies to enter the multipurpose financing space.

- Long Term Financing: IFC will address the Company's long term financing and asset-liability matching needs, given the limited access to longer tenor financing for multi finance companies in Indonesia; - Sources of Funding: IFC will diversify Indosurya's sources of funding by introducing it to other financial institutions, banks and investors, and be a catalyst in mobilizing additional resources and helping enhance the Company's image and credibility across the financial landscape; and - Knowledge Sharing and Technical Expertise: IFC will bring in global knowledge as well as share technical and industry knowledge which can help the Company enhance its business strategy and operations. IFC may also provide advisory services to Indosurya in the areas of risk management and credit scoring to help it benchmark against international best practice.

E&S Category Rationale / Risks and Mitigation

This project entails a senior loan to PT Indosurya Finance, a local mid-sized SME financing company, and has been classified as a Category FI-2 project according to IFC Environmental and Social Sustainability Policy. The company lends to small and medium enterprises in trading, hotel, restaurant, industrial, construction, freight, warehousing, communication, business services and consumer financing areas. The overall E&S risks of its portfolio activities is considered moderate. For this project the company will be required to implement an environmental and social management system to ensure its financing activities meet the requirements of the IFC Exclusion List and the applicable national 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 financing 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 lending activities to achieve compliance with the above requirements. It will also appoint an E&S officer to oversee the ESMS implementation. 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 generally consistent with the requirements of IFC Performance Standard 2 on Labor and Working conditions.

Task Title & Description	Actual Due Date	Status
Nominate officers		Completed
Establish SEMS		Completed
Staff Training	08/31/2017	Completed
Other1 Develop an employee grievance mechanism		Completed
Other2 Implement a fire safety training plan	08/31/2017	Completed

Contacts

For Inquiries About the Project, Contact

PT Indosurya Int Finance
Junus Octora
CFO
+62 21 38 909068
junus.octora@indosuryafinance.com

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Telephone: 202-473-3800
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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