43985 - WCS Crisis Response BRAC Bank

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Summary of Investment Information

Project Number

43985

Company Name

BRAC BANK LIMITED

Date SPI Disclosed

Jan 19, 2021

Country

Bangladesh

Region

South Asia

Projected Board Date

Jan 29, 2021

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Oct 28, 2023

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Feb 3, 2021
Signed : Apr 12, 2021
Invested : Apr 20, 2021

Sector

Commercial Banking - Trade and Supply Chain

Additional Project Attributes

Blended Finance

Project Description

The proposed Project is an up to US$30 million Working Capital Solutions (WCS) facility to be extended to BRAC Bank Limited (“BRAC 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 BRAC Bank’s Off-Shore Banking Unit.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
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$100 million of liquidity in aggregate over the maximum life of the Project (up to 2 years) to BRAC Bank, which will then on lend to up to 60 or more export-import based corporate and SME customers and support critical sectors like RMG/textile, Power, Pharma, Chemical, Edible Oil 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 proposed project is an US$ 30 million WCS facility to support BRAC Bank SME and medium-low and low risk corporate clients with working capital, trade finance and foreign exchange trade-related lending under the COVID-19 facility. 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. The project is categorized as Category FI-2 in accordance with IFC’s Policy on Environment and Social Sustainability. 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 included. 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 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)

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 SME 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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