PROJECT

Projects

Summary of Investment Information

Project Number

47117

Company Name

SLGP Credit Corp PNG

Date SPI Disclosed

May 13, 2024

Country

Papua New Guinea

Region

East Asia and the Pacific

Projected Board Date

Jun 17, 2024

Environmental Category

FI-2 - Limited

Status

Pending Approval

Last Updated Date

May 13, 2024

Department

CF4E1 - Regional Industry - FIG Asia & Pac/FIG South East Asia & Pacific

Industry

Financial Markets

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

The proposed investment consists of an unfunded Risk Sharing Facility (“RSF”) with a maturity of up to 8 years in an amount of up to US$7.5 million equivalent in Papua New Guinea (PNG) Kina through Credit Corporation Finance Limited (the “Company” or “CCFL”). The RSF will cover up to 50% of the credit risk on the portfolio in an amount of up to US$15 million equivalent of loans to very small enterprises (VSE) as well as small and medium enterprises (SMEs) to be originated by CCFL (the “Project”). The proposed Project would come under the Small Loan Guarantee Program (“SLGP”), a programmatic approach to risk sharing which aims to enhance and strengthen the capacity of financial institutions for risk taking and financing of SMEs in IDA-PSW countries. The Project seeks to leverage CCFL’s liquidity position, through the de-risking product, to support underserved SMEs.

 

Blended Finance Section

The risk-sharing facility of up to US$7.5 million could benefit from blended finance support, as part of the SLGP. The SLGP is supported by a pooled first loss guarantee provided by the IDA IFC-MIGA Private Sector Window’s Blended Finance Facility (“IDA PSW-BFF”). IDA PSW-BFF was created by the World Bank Group to catalyze private sector investment in IDA countries, with a focus on fragile and conflict-affected states. IDA PSW BFF support would enable IFC to rapidly roll out a program of risk sharing facilities to reach underserved SME segment of the market that are otherwise not served due to the associated high risk.  

 

The level of concessionality (i.e., “subsidy”) to be provided by IDA PSW-BFF is estimated to be around 9% of the total portfolio of US$800 million for the entire SLGP. The estimated level of concessionality 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 under the Program.  

 

As is the case with all IFC’s blended concessional finance co-investments, this project has been assessed against the Enhanced Blended Concessional Finance Principles for Development Finance Institution (“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 historical information on estimated subsidy levels in IFC’s blended finance portfolio can be found at: www.ifc.org/blendedfinance. The SLGP is a platform approach that can be accessed by other financial institutions in IDA PSW markets. 

 

Associated Advisory Engagement

 IFC’s Advisory Services support will primarily consist of SLGP RSF onboarding support, pipeline development and thematic capacity building. Depending on CCFL’s needs, targeted additional support may be considered. Currently, IFC Advisory is helping CCFL to develop a credit risk management framework (#607262).                                                  

Sponsor / Cost / Location

Development Impact

E&S Category Rationale / Risks and Mitigation