43909 - WCS Crisis Response Prime Bank

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Summary of Investment Information

Project Number

43909

Company Name

PRIME BANK PLC.

Date SPI Disclosed

Jun 26, 2020

Country

Bangladesh

Region

South Asia

Projected Board Date

Jun 27, 2020

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Mar 29, 2023

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 29, 2020
Signed : Oct 19, 2020
Invested : Oct 26, 2020

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The proposed Project is an up to US$35 million Working Capital Solutions (WCS) facility to be extended to Prime Bank Limited (“Prime Bank” or the “Bank”) in Bangladesh, under the FIG COVID-19 Emergency Response WCS Envelope (WCS Envelope). The WCS Envelope is designed to provide funding to existing IFC client banks in emerging markets that will then extend new trade-related or working capital loans to companies whose cash flows have been disrupted by the global outbreak of the coronavirus pandemic. This proposed Project is a one-year facility, renewable for an additional one year, for a maximum aggregate tenor of two years. This Project will support working capital, trade finance and FX liquidity needs of the sub-borrowers (export/import-based SMEs and Corporates) through Prime Bank’s Off-Shore Banking Unit.

In addition, IFC as implementing entity of the IDA Private Sector Window (PSW) Blended Finance Facility is expected to support working capital loans in PSW eligible countries under the WCS Facility with a first loss guarantee of up to US$215 million (“blended concessional finance co-investment”). Without the de-risking provided by IDA PSW, IFC will be limited in its ability to support Working Capital loans in IDA PSW countries given the increased demand for financing and the high risk in IDA PSW countries. This support is targeted in the context of responding and helping with the resilience measures around COVID-19 crisis.

The level of concessionality provided to the WCS Facility by the blended concessional finance co-investment is estimated to be approximately 3% of the total PSW eligible facility size, which will be up to US$860 million. This estimate is based on the difference between (i) a “reference price” (either a market price if available; the price calculated using IFC’s pricing model, which comprises three main elements: risk, cost and profit; or a negotiated price) and (ii) the “concessional price” being charged by the blended concessional finance co-investment. Further details and historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. As is the case with all of IFC’s blended concessional finance co-investments, this project has been assessed against the Enhanced Blended Concessional Finance Principles for DFI Private Sector Operations adopted by IFC and more than 20 other DFIs in 2017. Further information on these Enhanced Principles and IFC’s blended finance approach and governance can also be found at: www.ifc.org/blendedfinance. To support this increase in trade volumes at this most critical time, IFC is starting this support through existing clients while remaining open to engaging with other eligible financial institutions providing working capital in emerging markets.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	35.0
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 Corporates
Straight Senior Loan	Loans to SME Borrowers

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

Development Impact

This proposed Project is estimated to provide ~US$133 million of liquidity in aggregate over the maximum life of the Project (up to 2 years) to Prime Bank, which will then on lend to up to 110 export-import based corporate and SME customers and support critical sectors like RMG/textile, Power, Pharma, Chemical, etc. By sustaining the Banks' ability to provide these services, IFC's proposed facility is intended to promote the resilience of trade finance markets, as well as broader stability that comes about by providing for the going concern of market participants in Bangladesh. Turbulence in global funding markets, among other factors, has made it difficult for the extensive network of clients and partner banks to maintain their role as an enabling platform for liquidity to multiple emerging markets, many experiencing their own acute liquidity shocks while the need for liquidity increases. IFC expects the facility to attract additional private sector investors and partners to support emerging market liquidity, strengthening the market's ability to absorb shocks imposed by the current crisis.

IFC's additionality is driven largely by the countercyclical role during crises, especially at a times when other lending institutions or investors' appetite may be subdued. In this instance, the FIG Facility is the combination of (i) IFC's successful experience with rapid crisis response efforts, especially in the trade finance space; (ii) an extensive network of client banks that support emerging markets' sub borrowers and (iii) set of programs aimed at investing both large scale and transactional liquidity and capital for trade finance, working capital finance and mobilization capacity.

E&S Category Rationale / Risks and Mitigation

The project will support the Bank in increasing its lending to small and medium enterprises and mediumlow and low risk corporates through short-term working capital loans and FX trade-related lending under the COVID-19 facility. The project presents medium-low E&S risks and impacts which are readily manageable. Given the proposed use of proceeds, this project will not support coal-related activities and higher risk business activities that may involve 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. Hence, the project is categorized as Category FI-2 in accordance with IFC Sustainability Policy. The E&S requirements will include IFC Exclusion List, additional list of restricted commodities and relevant national 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.

Summary of Client Environmental and Social Management System (ESMS)

This is an existing client with an existing E&S risk management system (ESMS) and E&S officer responsible for the ESMS implementation. The current ESMS will be required to be applied for the proposed IFC project as well. The bank's HR policies are aligned with performance standard 2 on labor and working conditions.

Contacts

For Inquiries About the Project, Contact

PRIME BANK LIMITED
Shams Abdullah Muhaimin
Senior Executive Vice President
+880 (2) 55068720
shams.muhaimin@primebank.com.bd
Simple Tree Anarkali, 7th Floor, 89, Gulshan Avenue, Dhaka - 1212
www.primebank.com.bd

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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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