41199 - KIF Loan 2020

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Summary of Investment Information

Project Number

41199

Company Name

KAEBAUK INVESTIMENTU NO FINANSA

Date SPI Disclosed

Apr 21, 2020

Country

Timor-Leste

Region

East Asia and the Pacific

Projected Board Date

May 25, 2020

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Oct 25, 2025

Department

CF4S4 - Regional Industry - FIG Asia & Pac/FIG Inv Ops East Asia & Pacific

Industry

Financial Markets

Previous Events

Invested : Sep 24, 2020

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

International Finance Corporation (“IFC”) is proposing to extend an up to US$5 million senior loan facility with revolving feature, comprising of a loan of up to $2.5 million from IFC’s own account (the “A Loan”) and a loan of up to $2.5 million from IFC in its capacity as the Implementing Entity of the IDA-PSW BFF (the “IDA-PSW BFF Loan”), for a total tenor of up to four years to Kaebauk Investimentu no Finansas, SA (“KIF” or the “Company”). KIF is the largest micro finance institution (“MFI”) in Timor-Leste. The project exhibits strong fit with IFC's and World Bank Group (“WBG”) strategic priority in Timor-Leste to accelerate private-sector led growth in the non-oil economy to drive job creation and inclusion through improved productivity in agribusiness and deepening inclusion. The proceeds will be used by the Company to develop its agri-financing business targeting farmers and supply chain participants in the agri-sector with prioritization to women borrowers.

KIF is a valued client of IFC since 2013 and was formerly known as Tuba Rai Metin (“TRM”), a leading non-governmental organization (“NGO”) MFI. The Company went through a transformation to become a regulated MFI during 2013-2016 and after obtaining Other Deposit Taking Institution (“ODTI”) license in Mar-16, KIF was instituted as TRM’s subsidiary and the microfinance operations of TRM were transferred to KIF. IFC had been contributing an instrumental role during the transformation process. The Company provides inclusive financial services primarily to poor rural Timorese women and small businesses, supported by nationwide presence across all TL’s 13 districts and more than 300 employees serving more than 14,000 clients as of December 2019 with a strong gender focus with more than 70 % of the clients being women.

Associated Advisory Engagement

As a natural continuation of previous successful Transformation Advisory (Project #590227) to strengthen the institutional capacity of the Company to meet ODTI transformation requirements (including the area of reporting, risk management and corporate governance), IFC has been supporting KIF with Financial Inclusion Advisory (Project #602604) since 2018; covering the area of: (i) digital financial services, (ii) agrifinance services, (iii) women’s access to finance and gender equality in the workplace, and (iv) risk management.

Sponsor / Cost / Location

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	Agri Finance (Corp./Farmers/Climate)
Straight Senior Loan	Agri Finance (Corp./Farmers/Climate)

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

Development Impact

The expected development impacts of the Project are as follows: (1) Market creation and demonstration effect: The proceeds from the facility will be used by KIF to grow its agri-financing business, a product that is at a nascent stage in Timor-Leste despite the importance of the sector to the country's non-oil economy and large gap. IFC anticipates that the Project, along with a holistic approach between IFC's investment and advisory services cutting across sectors to complement this Project, will enable the development of systemic changes to existing markets that deliver sustainable development impact by creating "Farming-to-Financing" model with the ultimate objective to promote the livelihood of the agri-sector participants from subsistence economy to market economy. Based on KIF's reputation as the leading and trusted MFI in the country, the Project is also expected to have a demonstration effect and encourage the replication of "Farming-to-Financing" model by other financial institutions; (2) Deepening financial inclusion among agri-players: The Project is expected to address the significant financing gap faced by smallholder farmers in Timor-Leste through agri-financing and developing supply chain solution for agri related economy activities to improve the productivity of the smallholder farmers, which is expected to increase the flow of bankable agri-financing and further deepen financial inclusion among agri-players; (3) Improve financial access for women micro-borrowers: The Project will support KIF to grow its agri-financing portfolio while at the same time continue supporting the Company's strong gender focus in expanding its reach to women borrowers, which are still facing financial constraints in Timor-Leste; (4) Promote gender equality in the workplace: In line with the country's high level of gender gap, the nature of the business model and operational impediment to women to assume certain roles have made it challenging for KIF to achieve gender equality in the workplace. Through this Project, KIF is encouraged to develop action plan to address the gender-based job segregation, which have been identified as the key to improve gender equality in the workplace.

Through this Project, IFC is expected to provide additionality in the area of: (1) Financing Structure: Providing medium-to-long term funding to develop products to address the financing needs of borrowers in agri sector, while the tranche commitment and revolving feature will provide the Company with flexibility to effectively manage its funding requirement and liquidity position. The longer-term funding is not readily available in the market for MFIs as explained by local banks' reluctance to lending to the sector given the higher perceived risk and limited deposit mobilization capacity due to US$1 million regulatory cap on deposits under the ODTI license.; and (2) Knowledge, Innovation and Capacity Building: Supporting the Company in expanding its agri-financing business through advisory services for capacity building and knowledge sharing based on IFC's experience in regional and global markets to foster adoption of international best practices and benchmarks in the specialized area of lending for agri and supply chain financing.

E&S Category Rationale / Risks and Mitigation

The proposed project is to provide a senior loan of up to US$5 million to KIF which will be used to finance borrowers in the agriculture sector. KIF is a microfinance institution operating in Timor-Leste. The project will not support coal-related activities and higher risk business activities that may include a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant Occupational Health and Safety risks.

The project has been categorized as FI-3 in accordance with IFC Sustainability Policy as the purpose of the proposed investment is to support KIF’s operations which have low E&S risks. The applicable performance requirements will include the IFC Exclusion List and applicable national E&S laws and regulations. KIF will be required to manage its E&S risks through the improvement of the existing simple environmental and social management system. KIF's own HR practices are broadly in line with the objectives of IFC Performance Standard 2 Labor and Working Conditions. KIF will be required to improve its life and fire safety standards and practices for its own operations.

Contacts

For Inquiries About the Project, Contact

Kaebauk Investimentu no Finansas, S.A.
Angelo B. C. Soares
Chief Executive Officer
+670 7726 2887

(Next to China Embassy)Aitarak Laran, Dili, Timor-Leste
www.kaebuk.javatek.co.id

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