42255 - NTB Syndication

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Summary of Investment Information

Project Number

42255

Company Name

NATIONS TRUST BANK PLC

Date SPI Disclosed

Mar 21, 2019

Country

Sri Lanka

Region

South Asia

Projected Board Date

Apr 30, 2019

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Aug 29, 2024

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 12, 2019
Signed : Jun 27, 2019
Invested : Aug 7, 2019

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The project comprises of an up to US$50 million (IFC A-loan of up to US$16 million and mobilization via non-agented parallel loans of up to US$34 million), 5-year syndicated senior loan to Nations Trust Bank PLC (‘NTB’, the Bank), a mid-sized private commercial bank in Sri Lanka and an existing IFC client. The funds will be utilized by the Bank to fund its expansion in the SME lending space, with the possibility of a portion being carved-out for lending to women-owned SMEs (‘WSME’s) for which the bank will receive a performance incentive supported by the Women Entrepreneurs Finance Initiative (“We-Fi”). 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, thereby leading to job creation.

NTB was established in 1999 and IFC was a founder shareholder with a 15% stake but divested in 2004. While IFC granted a Senior Loan of US$50 million to NTB for on-lending to SMEs in June, 2017, IFC has engaged with NTB during its early years to help it develop its SME banking strategy and risk management framework. NTB has also been a trade finance client of IFC since 2007.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	16.0
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
Straight Senior Loan	Loans to Woman-Owned SMEs

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

Development Impact

(i) Access to finance for SME, including WSMEs: An estimated 56,000 MSMEs lack access to adequate finance in Sri Lanka and through this project IFC will indirectly provide funding to SMEs over the next 5 years. The Project will also help reduce the formal financing gap for WSMEs which is estimated at US$416 million. (ii) Job creation: improved access to finance for SMEs is associated with both direct and indirect job creation.

E&S Category Rationale / Risks and Mitigation

The bank is involved in lending long and medium-term products for corporates and SME, such as working capital, term loans, project and corporate finance and several short-term products. IFC's loan will be utilized for on-lending to SME businesses. The existing lending exposure primarily comprises medium risk sectors such as agriculture and fishing (including rice mills, tea plantations), construction (mainly contractors for residential and commercial properties), general manufacturing and trading business. These sectors have a potential of generating adverse environmental or social risks or impacts which are mostly site specific and readily manageable. IFC funds will not be used to support coal-related activities or higher risk business activities that may include significant Occupational Health and Safety risks or impacts on the environment, community health and safety, biodiversity, cultural heritage, involuntary resettlement or risk of adverse impacts on Indigenous Peoples. Hence, the E&S risk of the proposed investment is medium, and the project is categorized as FI-2. The applicable Performance requirements will be i) the IFC- FI Exclusion List; and ii) The host country E&S laws and regulations.

The key risks are related to the ability of the bank to identify and manage environmental and social risks associated with its lending activities, in particular lending to corporate clients. Additional E&S risks and impacts of the bank derive from the capacity and systems in place to manage these risks. The bank is an existing IFC client and thus the bank has appointed an E&S manager and is implementing an adequate E&S risk management system (ESMS) including an external communications mechanism. The bank has ESMS tools and guidance to identify high risk sub-borrowers and will apply the same to meet the requirements of this project. The client's HR policies and practices are in line with IFC PS-2 requirements.

Task Title & Description	Actual Due Date	Status	Comments	Completion Date
Other1 No ESAP required	02/15/2019	Completed	No ESAP needed	02/15/2019

Contacts

For Inquiries About the Project, Contact

Nations Trust Bank
Ajith Akmeemana
Chief Financial Officer
+94 (0) 11 4 313 106
Ajith.Akmeemana@nationstrust.com
No. 242, Union Place, Colombo 00200
http://www.nationstrust.com/

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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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