39943 - FirstRand SL

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Summary of Investment Information

Project Number

39943

Company Name

FIRSTRAND BANK LTD

Date SPI Disclosed

May 5, 2017

Country

South Africa

Region

Africa

Projected Board Date

Jun 9, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Dec 18, 2024

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Jun 28, 2017
Signed : Jun 29, 2017
Invested : Oct 20, 2017

Sector

Commercial Banking - SME Finance

Project Description

The proposed engagement with FirstRand Bank (the “Bank”), the operating banking subsidiary of FirstRand Limited, a listed holding company in the Republic of South Africa (“RSA”), is well aligned with IFC’s strategy for the African financial sector. The project consists of an unsecured 7-year senior loan of up to US$150 million to help the Bank grow its lending to Small and Medium Enterprises (“SMEs”) with a particular focus on underbanked SMEs to boost job creation in the country (the “Project”).

Associated Advisory Engagement

A potential advisory component targeting the Bank’s SME borrowers would complement IFC’s efforts to address funding and capacity constraints to SMEs growth in the country through optimizing access to finance. Based on initial assessment, the advisory package would include training programs to improve the financial literacy of the SMEs and supply chain finance.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	200.0
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 for SMEs: Access to finance for SMEs in the RSA remains low. The proposed financing will further accelerate the Bank's outreach to SMEs. ii) Financial Inclusion: RSA has a sizable number of SME which are either owned or operated by women. FirstRand has been specifically focusing on women-owned SMEs and therefore, the proposed investment is expected to increase flow of investment to women-owned SMEs. iii) Job Creation: Through this engagement, IFC expects to help boost job creation throughout the country.

i) Long term funding: IFC's investment will provide long term funding and will help support a diversified funding base for a systemically important bank in South Africa. ii) Long-term partnership: IFC's senior loan will encourage and deepen the relationship with FirstRand, allowing for new engagements in the future. IFC's expertise in the SME segment would be invaluable in light of the Government of RSA's demand that banks should be more engaged in economic and social development of the country. iii) Stamp of approval: IFC's investment will send a strong signal of its support and confidence in FirstRand and the South African banking sector, particularly in the context of the recent rating downgrades.

E&S Category Rationale / Risks and Mitigation

This project has been categorized as FI-2 in accordance with IFC's Policy on Environmental and Social Sustainability, based on the proposed use of proceeds. FirstRand provides financial services and products to clients in South Africa in wide range of sectors, including potentially high risk sectors such as mining and large-scale agriculture. However, this project will target SME clients; the project portfolio risk is thus considered medium. The environmental and social risks and impacts associated with the activities of SMEs are considered limited and can be readily addressed through mitigation measures. The identified applicable requirements for this project are the IFC Exclusion List and the applicable national environmental and social laws in South Africa.

The main E&S risks and impacts relate to the ability of the bank to identify and manage the E&S risks associated with its SME lending activities as required under Performance Standard 1, as well as the bank's labor standards as required under Performance Standard 2. FirstRand is an existing IFC client and the bank currently has a dedicated E&S team as well as an E&S risk management framework for managing the E&S risks and impacts associated with its lending activities, including SME lending. The implementation of this framework is considered adequate; no additional measures are required for this project. In relation to IFC Performance Standard 2, as an existing client, the bank's labor standards meet the requirements of this Performance Standard.

Contacts

For Inquiries About the Project, Contact

Firstrand Limited
Raymond Morrison
Senior Manager and Regional Head Banks and DFIs - Developed Markets
+27112824609
raymond.morrison@firstrand.co.za
P O Box 786273 Sandton 2146 South Africa
www.firstrand.co.za

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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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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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