42232 - Hamkorbank Loan

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Summary of Investment Information

Project Number

42232

Company Name

HAMKORBANK JSCB

Date SPI Disclosed

Feb 23, 2022

Country

Uzbekistan

Region

Central Asia and Turkiye

Projected Board Date

Mar 25, 2022

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 4, 2022

Department

CF5IS - Regional Industry FIG MCT/FIG MCT Investment Services

Industry

Financial Markets

Previous Events

Approved : May 23, 2022
Signed : Jun 16, 2022
Invested : Nov 2, 2022

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The proposed Project consists of an up to US$50 million equivalent investment package to Joint Stock Commercial Bank with Foreign Capital Hamkorbank (Hamkorbank or the Bank), a private Uzbek bank, to support the Bank’s local currency financing of micro, small and medium enterprises (MSMEs) and help it expand offering to women-owned SMEs (WSMEs), including women-owned very small enterprises (WVSEs). The package includes: (i) an IFC A loan of up to US$15 million equivalent to be disbursed as an Uzbek Soum (UZS)-linked loan; and (ii) an up to US$35 million mobilization of B Loans. An additional parallel loan mobilization is also being considered. The proceeds of the financing package will be used for on-lending to MSMEs, including WSMEs and WVSEs.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	15.0
Equity

Development Impact

The Project has an Anticipated Impact Measurement and Monitoring rating of Good based on an AIMM score of 48. On an unadjusted basis (i.e., without likelihood factor), the full potential AIMM score could reach 64. The most significant, expected Project-level outcome is increased access to financial services for MSMEs in Uzbekistan, including women-owned SMEs. Beyond the Project, IFC anticipates that the investment will promote greater market inclusiveness in Uzbekistan via competition and demonstration channels.

IFC’s additionality through this project is both financial and non-financial. Financial additionality is provided through: (i) financing structure by providing long term local currency funding; and (ii) resource mobilization, where IFC is playing the role of the leading investor and mobilizing financing on commercial terms. Non-financial additionality is anchored in knowledge sharing and capacity building, leveraging IFC’s global knowledge in its Banking on Women programs.

E&S Category Rationale / Risks and Mitigation

The project is an investment package consisting of an A loan and a mobilization to Hamkorbank, a private Uzbek bank and the IFC's existing client, to support the Bank's financing of micro, small and medium enterprises (MSMEs) and help it expand offering to women-owned SMEs (WSMEs). The bank's portfolio is dominated by SMEs, followed by retail, corporate, and microfinance loans with MSMEs being mainly in production, services, trade, transportation and communication, agriculture, construction, procurement sectors. The Bank will not support Exclusion List activities and/or borrowers involved in coal related and higher-risk business activities that may include: (i) involuntary resettlement, (ii) risk of adverse impacts on indigenous peoples, (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or (iv) significant occupational health and safety risks. The portfolio to be supported within this project will likely comprise mostly medium and medium-low E&S risk transactions. The project has therefore been categorized as FI-2 according to the IFC's Sustainability Policy. For this project, IFC's applicable requirements for the supported asset class will be the IFC Exclusion List and the applicable environmental and social national laws and regulations. The bank will also be required to be in line with IFC's life & fire safety (LFS) requirements and the requirements of IFC's Performance Standard 2 on Labor and Working Conditions and provide regular E&S performance reporting to IFC.

The project's key risks and impacts are associated with the bank's capacity to sufficiently manage E&S risks in its SMEs portfolio to meet the E&S applicable requirements, particularly the risks associated with the supply chain in textile sector and in the bank and maintain a solid external communications mechanism to mitigate any contextual reputational risks. Hamkorbank has developed and implements a satisfactory ESMS, which is regularly updated to meet the up-to-date E&S requirements. The most current ESMS is applicable to the entire portfolio and with applicable E&S requirements being the Exclusion List, E&S laws and regulations of Uzbekistan and IFC Performance Standards. The ESMS includes E&S risks categorization, E&S risks review processes during project appraisal and monitoring, E&S roles and responsibilities, training, internal/external grievance mechanism, and review of public information to assess and address any reputational risks associated with borrowers. Additionally, it includes the environmental and social due diligence (ESDD) tools including the one for borrowers operating in textile sector to assess and monitor forced labor risks in supply chain of the bank's textile borrowers, and the one for high-risk loans to assess alignment with IFC Performance Standards. ESMS officer is appointed, and regular training is provided to the relevant staff. Hamkorbank established an external communications and grievance mechanism to respond to any complaints from NGOs and other stakeholders. For this project the bank will be required to continue maintaining proper implementation of the ESMS in line with applicable E&S requirements and being in line with LFS and IFC's PS2 Requirements. The bank will be also required to disclose their ESMS.

Contacts

For Inquiries About the Project, Contact

Joint Stock Commercial Bank with Foreign Capital Hamkorbank
Alexander Khan
Director of Treasury Department
+ 998 (71) 150 9123
khan.alexander@hamkorbank.uz
85 Bobur Street, Andijan city, Republic of Uzbekistan 170119
www.hamkorbank.uz

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