47060 - Shinhan Finance

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Summary of Investment Information

Project Number

47060

Company Name

LLP MFO SHINHAN FINANCE

Date SPI Disclosed

Mar 13, 2023

Country

Kazakhstan

Region

Central Asia and Turkiye

Projected Board Date

Apr 14, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Dec 1, 2023

Department

Regional Industry FIG MCT

Industry

Financial Markets

Previous Events

Approved : May 23, 2023
Signed : Sep 27, 2023
Invested : Nov 29, 2023

Sector

Other Non-Banking Financial Institution (NBFI)

Additional Project Attributes

Blended Finance

Project Description

The proposed investment consists of a 5-year US$ 60 million senior financing with two identically structured senior loans (US$ 30 million each) to be disbursed over a 6 to 12-month period in Kazakh tenge (KZT) to LLP Microfinance Organization (MFO) Shinhan Finance (ShF or the Company) in Kazakhstan (the Project). Shinhan Card (the Guarantor and the Sponsor) will provide full and irrevocable guarantee for the Project. The proceeds will be on-lent to individual entrepreneurs and micro, small and medium-sized enterprises (MSMEs). At least 25% will be earmarked for on-lending to women owned MSMEs (WMSMEs). Subject to blended finance approval, ShF may also benefit from a performance-based incentive (PBI) provided by the Women Entrepreneurs Opportunity Facility (WEOF) and the Women Entrepreneurs Finance Initiative (We-Fi) to support growth of the WMSMEs business.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	60.0
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 MSME (mix of Micro and SME)
Straight Senior Loan	Loans to Woman-Owned SMEs

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

Development Impact

The development impacts of the Project will be delivered through increased access to finance for MSMEs, including WMSMEs in Kazakhstan. At the market level, IFC anticipates that the Project, via demonstration and replication channels, will support resilience amongst microfinance providers catalyzing investments in the sector by demonstrating the viability of providing longer-term and large scale lending to MFIs in the country and contribute to crowding-in other sources of international and domestic finance in support of these lenders.

E&S Category Rationale / Risks and Mitigation

The proposed project is with LLP MFO Shinhan Finance (the “Company”) consisted of two straight senior loans facility with the total amount up to US$60 million. IFC proceeds from this investment will be used to provide car loans and unsecured loans to MSMEs in Kazakhstan, including women-owned small and medium size enterprises (WSMEs). This project will not support any activities on IFC Exclusion List, coal-related activities, and higher risk business activities involving: 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 activities to be supported under the Project are expected to have low to medium E&S risks and the Project has therefore been categorized as FI-2 in accordance with IFC's Sustainability Policy. Key risks may derive from the Company's capacity to identify, assess, and manage E&S risks associated with its sub-borrowers activities, which typically include: occupational health and safety issues, labor and working conditions, waste and wastewater management. Applicable E&S requirements for this investment will be the IFC Exclusion List, and national E&S laws and regulations. In addition, the Company’s HR policy and practices will required to be in line with the requirements of IFC’s Performance Standard 2 (PS2) on Labor and Working conditions while their life & fire safety practices to be in line with national regulations.

Shinhan Finance has established an Environmental and Social Management System (ESMS) that is considered adequate for managing the environmental and social (E&S) risks associated with its lending activities. The ESMS defines applicable requirements, including the IFC Exclusion List and relevant national laws and regulations, and sets out procedures for E&S screening and due diligence. It also describes how E&S considerations are integrated into the credit appraisal and approval process, and clarifies internal roles and responsibilities, including those of the designated ESMS Officer.

E&S requirements are incorporated into loan documentation, including covenants as appropriate. Shinhan Finance has appointed an ESMS Officer and has sufficient capacity to implement the ESMS and oversee E&S risk management across its portfolio.

S.no	Title	Anticipated Completion Date	Status
1	Nominate officers	04/14/2023	Completed
2	Establish SEMS	04/28/2023	Completed
6	Staff Training	07/27/2023	Completed
9	Other1 - E&S Training Plan	04/28/2023	Completed
10	Other2 - ESMS Implementation and implementation records	10/25/2023	Completed
11	Other3 - Enhance HR procedures	04/14/2023	Completed

Contacts

For Inquiries About the Project, Contact

LLP MFO Shinhan Finance
Mr. Jaeman Ko
Chief Operating Officer
+7 727 355 25 50
j.ko@shinhanfinance.kz
Office 2/3, 2nd floor, 48 Auezov street, Almaty, Republic of Kazakhstan
https://shinhanfinance.kz/

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