43897 - BoA Kenya RSF

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Summary of Investment Information

Project Number

43897

Company Name

BANK OF AFRICA KENYA LIMITED

Date SPI Disclosed

May 28, 2020

Country

Kenya

Region

Africa

Projected Board Date

Nov 20, 2020

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Mar 16, 2022

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Dec 3, 2020
Signed : Nov 22, 2021

Sector

Commercial Banking - SME Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed project is an up to US$5 million risk sharing facility to provide 50% loss coverage to an aggregate portfolio of loans to Small and Medium Enterprises (SMEs) (“SME RSF”) of up to US$10 million equivalent in local currency originated in Kenya. This project will support the bank as it grows its lending into the SME sector.

Associated Advisory Engagement

The project will include 2 Advisory Service components (a) an RSF-related capacity building package to ensure optimal utilization of the facility (including climate and women targets) and (b) a general SME advisory package to support the Bank to strengthen their SME lending operations in areas such as (i) segmentation and related organizational adjustments, (ii) market research and value chain product development so as to allow a more proactive business development approach for SMEs and (iii) staff training.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	6.33
Loan
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
Guarantee	Loans to SME Borrowers
Guarantee	Loans to VSEs

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

Development Impact

Accessibility of finance for SMEs in Kenya: IFC anticipates that by providing BOA Kenya with a tool to mitigate the higher risk of lending to the Very Small Enterprises (VSE) and SME segment, the Project will help increase access to finance for currently underserved SMEs in the country. Market impact: IFC anticipates that the project has the potential to promote greater market competitiveness by demonstrating the commercial viability of lending to underserved VSE/SME segments.

IFC's additionality in this Project is both financial and non-financial: Financial additionality includes: (i) the innovative financing structure in the form of an efficient and replicable risk mitigation tool, combined with capacity building through an advisory engagement leveraging IFC's global knowledge in risk sharing facilities and the SME/VSE sector. Non-financial additionality includes: (ii) standards-setting by helping the Bank to strengthen environmental & social (E&S) standards.

E&S Category Rationale / Risks and Mitigation

The project has been categorized as Category FI-2 according to IFC’s Environmental and Social Sustainability Policy. The proposed investment entails a risk sharing facility of up to US$5million with BOAK on a portfolio of eligible SMEs. BOAK’s current SME portfolio includes exposures to sectors such as trade, manufacturing, building and construction, and transport and communication. As such, the portfolio supported under the RSF is expected to comprise business activities with limited adverse environmental and social risks or impacts that are few in number, generally site-specific, largely reversible and readily addressable through mitigation measures. As part of the project, BOAK will be required to screen eligible SMEs against the IFC Exclusion List and national E&S laws and regulations in Kenya. Given the project is likely to support SMEs in low to medium risk sectors, the project is not expected to support Higher Risk Transactions that may include: a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on environment, community health and safety, biodiversity, cultural heritage, or d) significant Occupational Health and Safety risks. In addition, transactions involving coal mining, coal-related activities and upstream oil and gas activities will be excluded from the RSF’s portfolio.

The main E&S risks and impacts of this project relate to the ability of BOAK to identify and manage the potential E&S risks and impacts associated with the lending activities to SMEs, as well as the bank’s labor practices. The E&S risks and impacts associated with SME activities are typically low to medium environmental and social risks such as waste management, pollution prevention, labor and working conditions and occupational health and safety, etc.

Summary of Client Environmental and Social Management System (ESMS)

BOAK has an E&S management system (ESMS) for assessing E&S risks and impacts associated with its lending activities, and a designated E&S officer. The ESMS is applicable to all lending activities of the bank, including SMEs. As part of this project, BOAK will be required to continue implementing the ESMS, provide SME-focused E&S risk management training to ensure bank officers have the requisite knowledge to ensure adequate implementation of the ESMS, and provide samples of the initial E&S assessments conducted under the project. In relation to labor standards, BOAK’s human resources policies are generally in line with the requirements of IFC Performance Standard 2 on Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

Bank of Africa Kenya
Ronald Marambii
MD
+254 020 3275315
Ronald.Marambii@boakenya.com
BOA House, Karuna Close off Waiyaki Way, Westlands, Nairobi,Kenya
www.boakenya.com

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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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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Task Title & Description	Anticipated Completion Date
Staff Training	01/31/2021
ESMS Implementation	10/31/2020

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