44416 - WCS COVID NTB

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Summary of Investment Information

Project Number

44416

Company Name

NATIONS TRUST BANK PLC

Date SPI Disclosed

Nov 2, 2020

Country

Sri Lanka

Region

South Asia

Projected Board Date

Oct 9, 2020

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Oct 13, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Nov 9, 2020
Signed : Dec 21, 2020
Invested : Jan 4, 2021

Sector

Commercial Banking - Trade and Supply Chain

Project Description

The proposed investment comprises of a one-year (renewable up to one year) Working Capital Solutions (“WCS”) loan of US$25 million to Nations Trust Bank PLC (“NTB” or the “Bank”) under the IFC COVID-19 Emergency Response WCS Envelope (WCS FIGE). The WCS FIGE is designed to provide funding to existing IFC client banks in emerging markets that will in turn extend trade or working capital facilities to support the financing needs of companies in countries affected by the coronavirus pandemic to maintain trade flows, stabilize the economy, support employment, and restore supplies of key goods and services. The proposed project is specifically aimed at supporting NTB’s working capital and trade-lending program to Sri Lankan enterprises, including Small and medium enterprises (“SMEs”), whose cash flows have been disrupted as a result of the COVID-19 outbreak.

NTB was established in 1999 and IFC was a founder shareholder with a 15% stake, but divested in 2004. The Bank is a long standing IFC client where IFC has had multiple investment and advisory engagements. IFC granted a Senior Loan of US$50 million to NTB for on-lending to SMEs in June, 2017 and a US$ 16 million Senior Loan (as part of a mobilization which included a US$ 20 million parallel loan) with a gender carve-out in June, 2019.

Associated Advisory Engagement

N/A

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	25.0
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

By supporting the clients' capacity to sustain operations during an acute shock, IFC positions the private sector to support the economic recovery process, shortening the time it will take for the most vulnerable to return to their traditional income-earning opportunities. The impact also comes from IFC's ability to respond promptly and sustained availability of output in times of crisis.

Additionality of the Project is driven by IFC's counter-cyclical role during crises and arises from its unique ability to deploy at scale in terms of volume and geographic reach with its (i) successful experience in rapid crisis response; (ii) extensive client and partner networks; and (iii) set of programs aimed at investing large scale, transactional liquidity and working capital in emerging markets.

E&S Category Rationale / Risks and Mitigation

IFC's loan under the COVID-19 facility will be utilized for providing short term working capital loans to small and medium enterprises and medium -low and low risk corporates. The existing lending exposure primarily comprises medium risk sectors such as agriculture and fishing (including rice mills, tea plantations), construction (mainly contractors for residential and commercial properties), general manufacturing and trading business. These sectors have a potential of generating adverse environmental or social risks or impacts which are mostly site specific and readily manageable. IFC funds will not be allowed to be used to support coal-related activities or higher risk business activities that may include significant Occupational Health and Safety risks or impacts on the environment, community health and safety, biodiversity, cultural heritage, involuntary resettlement or risk of adverse impacts on Indigenous Peoples. Hence, the E&S risk of the proposed investment is medium, and the project is categorized as FI-2. The applicable Performance requirements will be i) the IFC- FI Exclusion List; and ii) the 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)

The bank is an existing IFC client and thus the bank has appointed an E&S manager and is implementing an adequate E&S risk management system (ESMS) including an external communications mechanism. The bank has ESMS tools and guidance to identify high risk sub-borrowers and will apply the same to meet the requirements of this project. The client's HR policies and practices are in line with IFC PS-2 requirements.

Contacts

For Inquiries About the Project, Contact

Nations Trust Bank PLC
Mr. Ajith Akmeemana
Chief Financial Officer

Ajith.Akmeemana@nationstrust.com
Nations Trust Bank, No. 242 Union Place, Colombo 00200, Sri Lanka
https://www.nationstrust.com

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Complaints can be submitted by any of the following methods:

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

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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