46702 - BOP Patria MSME Loan

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Summary of Investment Information

Project Number

46702

Company Name

PATRIA BANK SA

Date SPI Disclosed

Dec 16, 2022

Country

Romania

Region

Europe

Projected Board Date

Dec 7, 2022

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Dec 25, 2022

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Dec 7, 2022
Signed : Dec 14, 2022
Invested : Dec 23, 2022

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The project entails an up to EUR20 million, up to 5-year with 1-year grace senior loan for IFC’s own account, under the COVID-19 Base of the Pyramid Program, to Patria Bank SA (“Patria” or “the Bank”), a publicly listed commercial bank on the Bucharest Stock Exchange. IFC’s loan will be used to increase access to finance for micro, small and medium enterprises (“MSMEs”) in Romania with 50 percent of proceeds earmarked to women-owned SMEs (“WSMEs”). The Project is expected to be supported by WEOF and We-Fi in the form of a performance-based incentive (PBI) of up to US$0.112 million (equivalent to up to 0.56% of the total project cost of EUR 20 million) to incentivize on-lending to underserved WSMEs and WVSEs in Romania. The estimated subsidy to be provided by WEOF and We-Fi assumes that the Project will fully reach the agreed impact and shall only be paid out upon achievement of the pre-defined gender targets.

WEOF is an initiative which IFC is undertaking in partnership with the Goldman Sachs Foundation to help expand access to capital for women entrepreneurs in developing countries and demonstrate the commercial viability of investing in women and We-Fi is a multi-donor initiative to address barriers to financial access and provide related services that address public and private-sector constraints to women entrepreneurs and women-led SMEs across the world, thereby promoting jobs and boosting economic growth. 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, IFC’s blended finance approach and governance and details and historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. IFC is open to engaging further with financial institutions and consider structures similar to the one proposed in this investment with the support of blended finance when appropriate.

Associated Advisory Engagement

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.72
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 Woman-Owned SMEs
Straight Senior Loan	Loans to SME Borrowers

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

Development Impact

Development Impact: (i) Project Impact Assessment: The Project aims to increase access to finance to MSMEs, including WSMEs, in Romania. (ii) Market Impact Assessment: The Project aims to support resilience amongst MSMEs finance providers, catalyzing investments in the sector, by demonstrating the viability of lending to these providers. The Project is expected to deepen inclusiveness in Romania by supporting lending to WSMEs through demonstration and replication channels.

Financial additionality: The Project will support Patria Bank with a five-year term financing, not readily available and increasingly scarce on the market since the outbreak of the COVID-19 pandemic. Non-Financial Additionality: IFC’s engagement will provide comfort to other potential lenders, particularly in the current environment where the pandemic and the war in Ukraine have adversely impacted investor appetite to provide long term financing.

E&S Category Rationale / Risks and Mitigation

The Project has been categorized as FI-2 in accordance with IFC's Sustainability Policy. The key sectors in Patria Bank's MSME loan portfolio are medium/low risk activities including mainly agribusiness, trade, retail, real estate, manufacturing, services, transport & logistics, and financial institutions. Most of the portfolio to be supported through this Project is expected to have potential limited adverse environmental and social risks or potential impacts that are few in number, generally site specific, largely reversible, and can be readily addressed through mitigation measures. IFC's applicable E&S requirements for the MSME asset class will be the IFC Exclusion List and the applicable environmental and social (E&S) national laws and regulations. In addition, Patria Bank will be required to be in line with life & fire safety requirements and the requirements of IFC's Performance Standard 2 on labor and working conditions. The Project will not support any activities on IFC Exclusion List, coal-related activities, and higher risk business activities that may include 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. The key E&S risks and impacts of this Project are related to the ability of Patria Bank to identify and manage potential E&S risks associated with its lending to MSMEs.

Patria has developed an Environmental and Social Management System (ESMS) in line with IFC's applicable E&S requirements which outlines the E&S policy, procedures, tools, monitoring, reporting and responsibilities for E&S risk management of MSME lending activities. The ESMS is required to be approved by the Bank's management and implemented to the asset class as per the timeline agreed with the Bank. Additionally, the Bank has built internal capacity for proper ESMS implementation and provided E&S training plan. Training programs will be delivered to the relevant staff in accordance with the approved training plan and periodic reports will be submitted to IFC.

Contacts

For Inquiries About the Project, Contact

Patria Bank SA
Capital Markets and Investor Relations Department

+40 372 148 165
capital@patriabank.ro
42 Pipera Street, 10th Floor, Bucharest, Romania
www.patriabank.ro

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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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Task Title & Description	Anticipated Completion Date
Staff Training	03/21/2023
Submit approved E&S Management System (ESMS)	12/19/2022
ESMS implementation records	06/17/2023

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