42462 - DCM-BRAC Bank Affordable Housing Bond

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Summary of Investment Information

Project Number

42462

Company Name

BRAC BANK LIMITED

Date SPI Disclosed

Oct 7, 2021

Country

Bangladesh

Region

South Asia

Projected Board Date

Jul 12, 2021

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 21, 2022

Department

CF4S5 - Regional Industry - FIG Asia & Pac/FIG Inv Ops - South Asia

Industry

Financial Markets

Previous Events

Approved : Jul 12, 2021
Signed : Jun 15, 2022
Invested : Jul 19, 2022

Sector

Commercial Banking - Housing Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed IFC investment comprises of a subscription of up to US$50 million equivalent in Bangladeshi Taka (BDT) in an up to 5-year, fixed rate, senior, non-convertible, unsecured, privately placed debt instruments to be issued by BRAC Bank Limited (‘BRAC Bank’, the ‘Bank’), the longest-standing IFC Financial Institutions Group client in Bangladesh. The proceeds will be used to provide housing finance facility, including affordable housing finance facilities to low and middle-income households. This is expected to be the first housing bond issued in Bangladesh. The investment is expected to be supported by the International Development Association’s Private Sector Window (IDA PSW) and Local Currency Facility (LCF).

BRAC Bank was established in 2001 and has a total asset of US$5.5 billion as of June 30, 2021.

Associated Advisory Engagement

A potential IFC advisory services component is also being explored to assist BRAC Bank in expanding its affordable housing finance portfolio and managing the related risks efficiently.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
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	Housing Loans to Individuals

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

Development Impact

The Project is expected to contribute towards (i) increasing access to housing finance for urban households, with a focus on providing more access to housing finance to lower income households; and (ii) increasing the availability of longer-tenor housing finance in the market. At the market level, IFC will contribute via demonstration, replication and competition channels to: (i) integrating the housing finance sector with the local bond market and supporting the overall development of the corporate bond market; and (ii) fostering increased inclusiveness within the housing finance market by demonstrating the business case of moving down the market.

By providing longer term, local currency funding, IFC will support the Bank to broaden its housing finance outreach and provide housing loans with longer tenors, and enable the Bank to move down the market. This is expected to be Bangladesh's first housing bond and it will support both the growth of housing finance and stand out as an important milestone in the development of the country's domestic long-term bond markets. IFC's advisory support is expected to help the Bank to strengthen its business and operating models to identify segments for portfolio growth, enhance its product and services offering, and improve its customer service delivery. More specifically, IFC will assist the Bank to design and formally launch its affordable housing finance program.

E&S Category Rationale / Risks and Mitigation

The proposed project is a subscription of up to US$50 million equivalent in BDT debt instruments to be issued by BRAC Bank. The project will support retail housing loans. Housing/real estate developers will not be financed from the debt proceeds. However, during the ramp up period the proceeds may be applied to MSMEs. Therefore, the project is categorised as FI 2 in accordance with IFC's Policy on Environmental and Social Sustainability. Higher risk sub-projects including those involving 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 will not be eligible for financing from the proceeds of this loan. Coal related projects including coal mining, coal transportation or coal-fired power plants, as well as infrastructure services exclusively dedicated to support any of these activities will not be supported. The E&S requirements will include IFC Exclusion List, List of restricted commodities and applicable national E&S laws and regulations.

The key E&S risks and impacts derive from the Bank's capacity and systems in place to identify and manage environmental and social risks associated with its lending activities, in particular lending to MSME clients during the ramp up period. Being an existing client BRAC Bank has an Environmental and Social Management System (ESMS) and dedicated resources for E&S Risk Management. The client's ESMS is sufficient to manage E&S risks associated with MSME and corporate clients. The bank has existing procedures allowing for screening out higher risk sub-borrowers. The client will be required to apply its existing ESMS to its lending operations supported by this project. The bank's HR Policy and procedures are compliant with PS2 requirements on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

BRAC Bank Limited
Noman Nasir
Head of Financial Institutions Relationship
88 02 8801261
noman.nasir@bracbank.com
Anik Tower, Level-11, 220/B, Tejgaon-Gulshan Link Road, Dhaka 1208, Bangladesh
www.bracbank.com

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