40660 - SDB Senior Loan

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Summary of Investment Information

Project Number

40660

Company Name

SANASA DEVELOPMENT BANK LIMITED

Date SPI Disclosed

Feb 12, 2018

Country

Sri Lanka

Region

South Asia

Projected Board Date

Mar 15, 2018

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 1, 2023

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Mar 26, 2018
Signed : Mar 28, 2018
Invested : Apr 11, 2018

Sector

Commercial Banking - General

Project Description

The proposed project is a secured, 5-year senior loan of up to US$15mn to Sanasa Development Bank PLC (‘SDB’), a licensed specialized bank (‘LSB’) in Sri Lanka and an IFC client since 2010. This will be one of IFC’s first local currency debt funding in Sri Lanka, and will support the expansion of SDB’s SME portfolio, with 25% earmarked for women-owned SMEs.

SDB was established in 1997, funded by 4,500+ cooperative societies. It was initially a microfinance/retail bank, but has been transforming itself into a SME/retail bank since 2015. IFC supported this initiative by increasing its equity stake to 8.86% (May, 2017) from 2.34%, previously.

Associated Advisory Engagement

The Bank has been receiving technical/ implementation support from IFC Advisory Services for the aforesaid transformation into a SME/retail centric bank since 2015.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
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 Woman-Owned SMEs

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

Development Impact

Expanding access to finance: Through this project, IFC will provide funding to approximately 5,000 SMEs over the next 5 years. Job creation: Based on IFC Jobs Study, Sri Lanka (2012), an estimated 1,500-4,650 new direct jobs will be created by this project. In addition, there will be indirect job creation. Reducing the gender gap: In Sri Lanka, most women-owned enterprises are in the micro space, with women-owned SMEs representing only 24% of all SMEs. SDB as a bank which originated in the micro space and now looking to upscale into the SME space, is better suited to aid in their growth. Accordingly, the Project is expected to fund approximately 1,300 women-owned SMEs.

Long-term funding: IFC will provide long-term, LCY, fixed-rate funding, not readily available from investors at this time. This will improve SDB's asset-liability mismatches, which has been a major constraint to its growth, and increase its financial sustainability, while reducing earnings volatility. Market development: As one of IFC's first local currency financing in Sri Lanka, it could catalyse funding from international investors, increasing the Sri Lankan financial sector's access to such funding. Stamp of approval: The project would affirm IFC's support for the Bank's transition into a SME & retail focused bank and its next phase of growth.

E&S Category Rationale / Risks and Mitigation

The project consists of a senior loan for up to $15 million to SANASA Development Bank PLC (SDB), an existing IFC client, to support the expansion of small and medium enterprises (SMEs) portfolio in Sri Lanka. The on lending to SMEs will primarily comprise providing financing to SMEs mainly in the agribusiness and services sectors. The project presents medium E&S risks and impacts which are readily manageable. Hence, the project is categorized as Category FI-2. The E&S requirements will include IFC Exclusion List and applicable national E&S laws and regulations.

The main E&S risks and impacts of the project are related to occupational health and safety, labour and working conditions, and pollution aspects at the client's SME borrower's premises. Since the bank is an existing IFC client it has developed an E&S risk management system and assigned E&S roles and responsibilities for the E&S risk management system implementation. Currently the E&S risk management system incorporates screening against IFC exclusion list and includes due diligence procedures for assessment of compliance with relevant national E&S laws and regulations which is more suitable for microfinance lending and will have to be enhanced for SME financing. The client is in compliance with IFC Performance Standard 2 on labour and working conditions.

Contacts

For Inquiries About the Project, Contact

SANASA Development Bank PLC
Mr. Terrance Kumara
Head of Finance

terrance.k@SDB.lk
SANASA Development Bank PLC, No. 12. Edmonton Road, Kirulapone, Colombo 06, Sri Lanka
http://www.sdb.lk/

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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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Task Title & Description	Anticipated Completion Date
Staff Training	06/29/2018
Update ESMS	06/29/2018

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