IFC’s Base of the Pyramid (BOP) Program is supported by the IDA Private Sector Window (PSW) through i) the PSW Blended Finance Facility (BFF) with a pooled first loss guarantee (PFLG) of up to US$325 million; and ii) the PSW Local Currency Facility (LCF) via cross-currency swaps with IDA. Without the PSW de-risking support, IFC’s lending activity to financial providers servicing BOP segment in PSW countries will be limited due to the high risk and currency challenges. This support is targeted to bolster resilience in the COVID-19 crisis. The concessionality (i.e., subsidy) provided by the BFF is estimated to 8.6% of the total PSW eligible program size (up to US$200 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 BFF PFLG. Further details and historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. This proposed 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.

27.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	27.0
Equity

* These investment figures are indicative

Project-level Outcomes: Stakeholder Effects: IFC anticipates that this Project will improve access to finance for MSMEs to support economic activity and resilience in the aftermath of the COVID-19 crisis. Market-level Outcome: Resilience: IFC anticipates that the Project will support resilience amongst microfinance and BOP finance providers catalyzing investments in the sector by demonstrating the viability of lending to BoP providers and crowding in other sources of international investors in support of these lenders.

The Project will provide local currency financing, not readily available in the market and increasingly scarce since the outbreak of the COVID-19 pandemic. An underdeveloped capital market limits the ability of private financial institutions to raise wholesale capital leaving smaller BOP lenders in Madagascar reliant primarily on deposits and short-term interbank loans, leading to an asset-liability mismatch for these institutions. Since the pandemic has significantly increased risk for financing to the MSME sector, it is increasingly difficult for financial institutions serving this sector to gain access to local currency financing with longer tenors.

UNICECAM The Project is categorized as FI-2 (medium risk) according to IFC's Policy on Environmental and Social Sustainability. The Project entails a senior unsecured loan to UNICECAM. The proceeds will be used for on-lending to MSMEs in Madagascar. UNICECAM's financing portfolio is mainly composed of lending to microenterprises active in agriculture and livestock, food and beverages and consumables. Lending activities to be supported by the Project predominantly have minimal or no adverse environmental or social impacts. IFC's investment will not be used to support any coal-related activities or any activities that may include: (a) involuntary resettlement; (b) potential 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. For this Project, IFC's applicable requirements for the supported asset class will be the IFC Exclusion List and environmental and social (E&S) laws in Madagascar. UNICECAM will also be required to be in line with World Bank Occupational Health and Safety (WB OHS) Guidelines for Life & Fire Safety (LFS) and the requirements of IFC's Performance Standard 2 on Labor and Working Conditions (IFC PS 2). The main E&S risks and impacts of the Project derive from the institution's capacity to develop and implement an E&S management system to identify and manage the potential E&S risks and impacts associated with the sub-projects supported under this transaction. These risks are typically associated with occupational health and safety issues, pollution prevention, waste and wastewater management, labor and working conditions issues, including those related to the contextual risk of child labor and land tenor issues in the agriculture sector. SIPEM The Project is a senior unsecured loan to SIPEM Banque in Madagascar to on-lend to MSMEs. SIPEM portfolio includes the following sectors: trade, agriculture, construction, services, small-scale manufacturing, and transportation sectors. The Project will not support Exclusion List activities and/or borrowers involved in coal related and higher-risk business activities that may include: (i) involuntary resettlement, (ii) risk of adverse impacts on indigenous peoples, (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or (iv) significant occupational health and safety risks. The portfolio to be supported within this project will likely comprise mostly medium and low E&S risk transactions. The project has therefore been categorized as FI-2 according to the IFC's Sustainability Policy. For this project, IFC's applicable requirements for the supported asset class will be the IFC Exclusion List and the applicable environmental and social national laws and regulations. The bank will also be required to be in line with IFC's life & fire safety requirements and the requirements of IFC's Performance Standard 2 on Labor and Working Conditions, including those related to the contextual risk of forced labor, and provide regular E&S performance reporting to IFC. The Project's key risks and impacts are associated with the Bank's capacity to develop, implement, and maintain a management system to identify and manage the potential environmental and social risks associated with the sub-projects supported under this transaction. These risks are typically associated with occupational health and safety issues, pollution prevention, waste and wastewater management, labor and working conditions issues, biodiversity, and community impacts, among others. Société Générale Madagascar The Project is categorized as FI-2 (medium risk) according to IFC's Policy on Environmental and Social Sustainability. The Project is a senior unsecured loan to Société Générale Madagascar (SGM). The proceeds will be used for on-lending to MSMEs in Madagascar. SGM's financing portfolio is composed of lending to retail, corporates and MSMEs, the latter active mainly in commerce, oil and gas, telecommunications, agriculture and food industries, real estate, services, manufacturing, textile, construction, and transportation sectors. Lending activities to be supported by the Project predominantly have minimal adverse environmental or social impacts. IFC's investment will not be used to support any coal-related activities or any activities that may include: (a) involuntary resettlement; (b) potential 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. For this Project, IFC's applicable requirements for the supported asset class will be the IFC Exclusion List and environmental and social (E&S) laws in Madagascar. SGM will also be required to be in line with Life & Fire Safety (LFS) and the requirements of IFC's Performance Standard 2 on Labor and Working Conditions (IFC PS 2). The main E&S risks and impacts of the Project derive from the Bank's capacity to expand the implementation of its E&S management system to identify and manage the potential E&S risks and impacts associated with the sub-projects supported under this transaction. These risks are typically associated with occupational health and safety issues, pollution prevention, waste and wastewater management, labor and working conditions issues, including those related to the contextual risk of child labor and land tenor issues in the agriculture sector.

UNICECAM UNICECAM has adopted a list of excluded activities in line with the vision and mission of the organization and Malagasy laws, which is partially aligned with the IFC Excluded List. This exclusion list has been communicated to staff and is included in the credit process. UNICECAM still needs to establish other elements of an Environmental and Social Management System (ESMS). In addition, HR policies and LFS are partially in line with IFC PS 2 and the WB OHS Guidelines. To mitigate the risk associated with this Project, UNICECAM is required to develop and implement an ESMS that is commensurate with the risks associated with micro and small loans, appoint an E&S Officer, and provide E&S training to relevant staff. In addition, UNICECAM is expected to develop and implement an employee grievance mechanism in line with IFC PS2 and a formal Life and Fire Safety management system. SIPEM The Bank is required to develop an ESMS commensurate with the risks associated with on-lending to micro, small and medium enterprises. The ESMS will include required provisions and templates to ensure the eligible MSME loan portfolio is screened against the applicable E&S laws and regulations of Madagascar as well as the IFC exclusion List. The Bank is also required to designate an E&S officer in charge of developing and oversighting the implementation of ESMS and ensure regular trainings on ESMS for staff. The bank's HR policies and procedures will be further enhanced to fully meet the IFC's Performance Standards 2 on Labor and Working Conditions including developing a non-Discrimination policy and procedures, an anti-Harassment policy and procedures as well as a formal internal staff grievance mechanism. The Bank is also required to manage the life and fire safety risks in accordance with the World Bank Group Environmental, Health and Safety General Guideline and develop a formal Life and fire safety management system. Société Générale Madagascar SGM follows the ESMS established by Societe Generale Group (SG) for operations in Africa. The ESMS entails screening clients as well as transactions based on the Group's exclusions and reputational risk. The ESMS prioritizes clients as well as project finance and structured finance transactions in higher risk sectors, as defined in the Group's policies. The scope of the ESMS is required to expand to cover MSMEs. SGM has a dedicated E&S expert that oversees the implementation of the ESMS and has provided E&S training to relevant staff. HR policies and procedures are aligned with the requirements of IFC Performance Standard 2 on Labor and Working Conditions and Life and Fire Safety requirements, expect for the employee grievance mechanism. To mitigate the risk associated with this Project, SGM is required to expand its E&S Management System (ESMS) to cover E&S risks and impacts associated with MSMEs and provide evidence of implementation. In addition, SGM is required to develop and implement an employee grievance mechanism in line with IFC PS2.

Task Title & Description	Anticipated Completion Date
UNICECAM and SIPEM: Nominate officers	06/17/2022
SGM: Update ESMS	06/17/2022
UNICECAM and SIPEM: Establish ESMS and Develop an E&S Training Plan	06/30/2022
SGM: Submit implementation report and Enhance HR policies and procedures in line with IFC Performance Standards 2	09/28/2022
UNICECAM and SIPEM: Deliver E&S training; Manage the life and fire safety risks in accordance with WB OHS guidelines; Enhance HR policies and procedures in line with IFC Performance Standards 2	09/28/2022
UNICECAM: Submit implementation report; SIPEM: Provide evidence of the implementation of the ESMS, including sample of Environmental and Social Due Diligences	12/27/2022