41076 - DBL Syndication

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Summary of Investment Information

Project Number

41076

Company Name

DHAKA BANK LTD.

Date SPI Disclosed

Mar 1, 2018

Country

Bangladesh

Region

South Asia

Projected Board Date

Apr 2, 2018

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 12, 2021

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 11, 2018
Signed : Jun 27, 2018
Invested : Oct 3, 2018

Sector

Commercial Banking - Trade

Project Description

The project consists of a short-term loan (Working Capital Solutions, WCS) for up to US$50 million, consists of a mobilization of US$30 -US$40 million through IFC led B-Loan investments and IFC own investment of up to US10 – US$20 million in Dhaka Bank Limited (the "Bank" or "Dhaka Bank") to support the expansion of the USD denominated trade business of the Bank through its Offshore Banking Unit. This will be the first syndication for a Financial Institution in Bangladesh with commercial banks as investors, hence creating a market for international commercial banks to invest in syndicated loans to Banks in Bangladesh and enhancing the Bank’s access to finance.

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 and promoting international trade, thereby leading to improved competitiveness, job retention and creation. It is also aligned with financial inclusion pillar under IFC’s country strategy for Bangladesh, as the mobilization component is expected to creating markets for private sector investors.

Dhaka Bank commenced operations on April 06, 1995 and publicly listed in Dhaka and Chittagong Stock Exchanges. The Bank has total assets of $2.8 billion as of September 30, 2017.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	10.0
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. Improved Access to Finance: The Project will increase access to finance for credit-constrained, export-oriented companies and SMEs to meet working capital requirements. It will also expand financial intermediation. ii. Job Creation: IFC's investment will further support business growth and spur job creation in the SME and export-oriented segments. iii. Boost Export Competitiveness: The project will help economic growth in Bangladesh by providing exporters with trade finance solutions to their working capital requirements and assist in payments for imports utilized. This, in turn, improves their working capital cycle, thereby providing a boost in exports.

i. Longer tenor financing: The syndicated WCS facility provided by IFC is annually renewable for upto three years, supporting access to finance for credit-constrained, export-oriented companies and SMEs to meet working capital requirements. ii. Mobilization: The project will be the first private sector mobilization from international banks to a Bangladeshi Bank thus expanding the debt market.

E&S Category Rationale / Risks and Mitigation

The project is to support an IFC's existing client, Dhaka Bank, for its trade finance and short-term lending operations through its Offshore Banking Unit (OBU). The on lending will primarily comprise providing working capital financing and equipment import financing through short-term loans to importers/exporters SMEs/corporates, operating from the Export Processing Zones (EPZs). The project presents medium E&S risks and impacts which are readily manageable. Hence, the overall E&S risk of the proposed investment is considered as medium and the project is categorized as FI-2. The applicable performance requirements will be i) the IFC- FI Exclusion List; ii) the restricted commodities list; and iii) applicable Bangladeshi E&S laws and regulations.

The main E&S risks and impacts of the project relate to occupation health and safety, labour and working conditions, and pollution aspects at the client's SME borrower's premises. Most of these can be managed through adequate implementation of national laws and good industry practices. The central bank of Bangladesh has provided guidelines to all banks and financial intermediaries to implement an Environmental Risk Management system. Accordingly, Dhaka Bank has developed an Environment Risk Management (ERM) policy and due-diligence procedures for screening against E&S laws of the country. The bank has further developed procedures for screening against IFC exclusion list and restricted country-commodity list and has appointed a senior officer as incharge of implementing the screening procedure. The HR policies are in line with IFC PS-2 on labour and working conditions.

Contacts

For Inquiries About the Project, Contact

Dhaka Bank Limited
S.M. Mahbubul Alam
Vice President, International Division
880258314419
mahbubul.alam@dhakabank.com.bd
71, PuranaPaltan Lane, Dhaka
www.dhakabankltd.com

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