46718 - M-Bank Loan

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Summary of Investment Information

Project Number

46718

Company Name

M BANK CLOSED JOINT STOCK COMPANY

Date SPI Disclosed

Jan 26, 2024

Country

Mongolia

Region

East Asia and the Pacific

Projected Board Date

Mar 5, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Sep 22, 2024

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Mar 25, 2024
Signed : Mar 28, 2024
Invested : Sep 19, 2024

Sector

Commercial Banking - General

Project Description

The proposed investment consists of a 3-year US$30 million syndicated senior loan facility to MBank Closed JSC (MBank, or the Bank), comprised of (i) an up to US$16 million A Loan, (ii) an up to US$8 million syndicated loan, and iii) a Trust Loan of up to US$6 million from IFC acting in its capacity as implementing entity for the Managed Co-Lending Portfolio Program (MCPP). The US$30 million facility will be committed in two tranches on a pro-rata basis between A Loan and syndicated loans.

The Project aims to support the Bank’s MSMEs portfolio, with at least 25% of the loan proceeds expected to support women-owned SMEs.

Associated Advisory Engagement

The proposed investment will also be complemented by an IFC advisory project to enhance MBank’s SME strategy and design supply chain finance products.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	16.0
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
Syndications	Loans to MSME (mix of Micro and SME)
Syndications	Loans to Woman-Owned SMEs
Straight Senior Loan	Loans to MSME (mix of Micro and SME)
Straight Senior Loan	Loans to Woman-Owned SMEs
Syndications	Loans to MSME (mix of Micro and SME)
Syndications	Loans to Woman-Owned SMEs
Syndications	Loans to MSME (mix of Micro and SME)
Syndications	Loans to Woman-Owned SMEs

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

Development Impact

Project-Level Outcome: 1) Improved access to finance for un(der)served MSMEs: IFC anticipates that, through the support to MBank, which is backed by a strong sponsor and an existing IFC client, the Project will enable MBank to expand lending to MSMEs, including women-led/owned MSMEs. Market-Level Outcome: 1) Inclusiveness: With financial institutions in Mongolia being concentrated mainly in the urban areas, IFC anticipates the Project will promote the use of an innovative digital channel to improve user experiences and financial inclusion for MSMEs more efficiently in the country. 2) Competitiveness: IFC anticipates the Project to use the digital platform and user-friendly digitalization, including potential data-based credit underwriting, to bring the catalytic effect to the competitiveness in the banking industry.

Financial Additionality: 1) Financing Structure: The proposed investment will provide mid-term funding to a digitally focused bank to on-lend to un/underserved MSME segment. The Project enables MBank to diversify its funding sources and enable the Bank to improve access to finance for MSMEs in Mongolia. 2) Resource Mobilization: IFC, through this syndicated senior loan financing package, aims to mobilize funds from international lenders to help diversify the funding sources of MBank. Non-Financial Additionality: 1) Knowledge, Innovation, and Capacity Building: The proposed investment will be complemented by IFC's advisory services with a particular focus on MSME banking and supply chain finance solutions.

E&S Category Rationale / Risks and Mitigation

The proposed project is a syndicated loan facility to support MSME lending of MBank, a digital bank in Mongolia. The activities to be supported by the project are expected to have moderate E&S risk, and the project has been categorized as a Category FI-2 project according to the IFC Sustainability Policy. The project will not support any higher-risk business activities that involve 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, d) risk of significant retrenchment or e) significant Occupational Health and Safety risks. Any coal-related activities, including coal mining, coal transportation or coal-fired power plants, and infrastructure services exclusively supporting any of these activities, will be excluded from the project. The project’s applicable E&S performance requirements will be the IFC Exclusion List and host country E&S laws and regulations. The key E&S risks are related to MBank’s MSME lending activities and its capacity to manage such risks. The typical E&S risks may include site-specific occupational health and safety, pollution, waste and wastewater, labor, and working conditions issues.

MBank has developed an E&S policy and procedure but has yet to implement them. The E&S policy and procedure include E&S risk screening, assessment, and portfolio monitoring. For this project, MBank will be required to upgrade its policy and procedures into an Environmental and Social Management System (ESMS) to assess and manage the E&S risks in accordance with the applicable E&S performance requirements for the project. The Bank must also nominate an ESMS officer and provide ESMS staff training. MBank’s own labor practices are generally in line with IFC Performance Standard 2 on Labor and Working Conditions

S.no	Title	Anticipated Completion Date	Status
1	ESMS implementation report	07/12/2024	Completed
2	Staff training	07/12/2024	Completed
3	ESMS upgrade	04/12/2024	Completed
4	ESMS Officer nomination	03/28/2024	Completed

Contacts

For Inquiries About the Project, Contact

MBank Closed JSC
Turbold Enkhtuvshin
Chief Financial Officer
+976-88882563
turbold.e@m-bank.mn
Central Tower 15th Floor, 8th Khoroo, Sukhbaatar District, Ulaanbaatar 14200, Mongolia
Websitehttps://m-bank.mn/

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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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