44011 - GTFP- IDA PSW

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Summary of Investment Information

Project Number

44011

Company Name

IDA PSW BFF

Date SPI Disclosed

Apr 10, 2020

Country

World Region

Region

Global

Projected Board Date

Apr 30, 2020

Environmental Category

FI-3 - No Impact

Status

Pending Signing

Last Updated Date

Aug 6, 2021

Department

Banking and Capital Markets

Industry

other

Previous Events

Approved : Apr 24, 2020

Sector

Other

Additional Project Attributes

Blended Finance

Project Description

IFC as implementing entity of the IDA Private Sector Window Blended Finance Facility (IDA PSW BFF) is expected to support IFC with two unfunded guarantee products of up to US$400 million under Global Trade Finance Program (GTFP - https://disclosures.ifc.org/#/projectDetail/SPI/23898): (i) pooled first loss (FL) of up to US$150 million and (ii) revolving limit enhancement (LE) of US$250 million that is expected to help GTFP leverage at least US$1 billion in trade finance in IDA PSW eligible countries. The indicative size of each component may change depending on market needs.

Without the support under the IDA PSW, IFC will not be able to provide the necessary trade finance in IDA PSW countries given the high risk inherent in booking trade finance transactions in these countries, in particular with a focus on fragile and conflict-affected states that are expected to be severely impacted by COVID-19. IDA PSW support will benefit the real sector importers and exporters that the local banks serve.

The level of concessionality (i.e. subsidy) to be provided under the IDA PSW support is estimated to be approximately 3% as a percentage of the expected US$1 billion incremental trade activity in IDA PSW eligible countries.. 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 for the IDA PSW FL coverage. LE is being provided by IDA PSW on the same terms as IFC and, thus, without price concessionality. 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. The aim to launch this facility is to assist the local banks in surviving the current market situation and bridging the financing gap. It is expected that, over time, with proper scale, IFC and other DFIs/ FIs would be able to support similar facilities/ FIs, potentially without/ with lower FL. To support this increase in trade volumes at this most critical time, IFC is open to engaging with other partner banks on similar structures, including when relevant with the support of blended concessional finance.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	650.0
Loan	0.0
Equity

Development Impact

The project builds on GTFP's global platform, increasing access to trade finance to emerging markets. The Project will provide increased access to trade finance to the Issuing Bank's customers, including both corporates and SMEs. On the market side, the project will further connect the Issuing Bank's cross border connections, increasing the country's integration through both financial and real sector channels. It will help to link more traders to other countries and connect the country's financial markets more deeply.

1. A non-financial source of additionality includes GTFP's catalytic role as a trusted facilitator among cross border correspondent banks. GTFP's guarantee structure helps to reduce key elements of confirmation risk for banks that provide this essential service for trade finance. 2. The Project taps GTFP's global financial institution network for trade finance, which, along with IFC's trade finance due diligence expertise, increasing the probability of new cross border relationship formation for the Issuing Bank. 3. IFC provides comfort to the Confirming Banks by mitigating non-commercial non-environmental and social risks, such as country, regulatory, project, or political risks, while adhering to IFC's principle of political neutrality. 4. The Project is expected to help the Issuing Bank strengthen its trade finance operations. In addition, the Issuing Bank will benefit from IFC's technical expertise in redesigning its trade solutions and marketing materials.

E&S Category Rationale / Risks and Mitigation

GTFP has been classified as a Category FI-3 project according to IFC Sustainability Policy. The investments under GTFP are considered to have low or limited E&S risks and impacts. The applicable E&S requirements are the Exclusion List and any other individual requirements or exclusions identified based on the activities of the client.

Given the E&S risk nature of this project, development of a robust ESMS was not needed.

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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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