47305 - BOP PAMF

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Summary of Investment Information

Project Number

47305

Company Name

PREMIERE AGENCE DE MICROFINANCE

Date SPI Disclosed

Dec 22, 2022

Country

Madagascar

Region

Africa

Projected Board Date

Feb 10, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jun 22, 2023

Department

Regional Industry - FIG Africa

Industry

Financial Markets

Previous Events

Approved : Apr 19, 2023
Signed : May 17, 2023
Invested : Jun 20, 2023

Sector

Microfinance and Small Business - Non Commercial Banking

Additional Project Attributes

Blended Finance

Project Description

The proposed project consists of a 3-year senior unsecured loan of up to US$2 million in Malagasy Ariary to Premiere Agence de Microfinance (“PAMF” or the “Company”) to enable the provision of funding to Micro and Small-sized enterprises that have been negatively impacted by the COVID-19 pandemic in Madagascar (“the Project”). The project will be processed under IFC’s Base of the Pyramid (BOP) COVID-19 Crisis-Response Program (project #44915) and will be supported by IDA-PSW Blended Finance Facility and IDA-PSW Local Currency Facility.

Associated Advisory Engagement

Since 2019, IFC Advisory Services (AS) has been supporting the Company with the development and implementation of a digital strategy, including upgrades to risk management practices and the roll-out of a savings and credit (i.e. nano-loan) product. As part of this new Project, PAMF has expressed renewed interest in an engagement to support the further development of its operations. The AS team is currently formulating an engagement proposal.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	2.0
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)

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

Development Impact

Project-level Outcomes: Stakeholder Effects: IFC anticipates that this Project will improve access to finance for consumers, Micro, Small and Medium-sized Enterprises 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 up to 3-year 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.

E&S Category Rationale / Risks and Mitigation

The project will support on-lending to micro and small enterprises (MSE) in Madagascar. The MSE portfolio includes exposure to sectors such as trade, services, agriculture, and consumption amongst others, with overall medium environmental and social (E&S) risks. Therefore, the project has been categorized as FI-2 in accordance with IFC's Sustainability Policy. The key risks and impacts of the project derive from PAMF's capacity to identify and manage potential E&S risks associated with its lending activities. These risks are typically associated with labor and working conditions, occupational health and safety, pollution prevention and atmospheric emissions, and waste and wastewater management, amongst others. PAMF has developed an environmental and social management system (ESMS) for assessing and managing E&S risks and impacts. The ESMS is largely in line with the IFC requirements though some enhancements are necessary. An assessment of PAMF labor practices in relation to Performance Standard 2 revealed that PAMF partially meets IFC's labor requirements, though as part of this project, the MFI will strengthen its HR policies, including internal grievance mechanism and whistleblowing policy. As part of this project, PAMF will also enhance the E&S procedure and E&S capacity and provide evidence of ESMS implementation. IFC's investment will not be used to support any coal-related activities or any high-risk 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 MSEs will be the IFC Exclusion List and E&S laws in Madagascar. PAMF will be required to meet labor and working conditions in line with IFC Performance Standard 2 and IFC's Life and Fire Safety Standards for financial intermediaries (FIs).

PAMF has developed an ESMS that has been included in the credit process and assigned E&S capacity. The ESMS includes an E&S policy and E&S procedure through which PAMF commits to create positive E&S impact and manage E&S risks. The E&S procedure includes screening against excluded activities and a questionnaire to identify E&S risks related to a transaction. Compliance with local law is verified in parallel with the exclusion list check. Where E&S risks are identified, these can be mitigated through an action plan. PAMF excluded activities are partially aligned with the IFC Exclusion List. The questionnaire includes aspects related to waste, atmospheric emissions, contamination of water sources, hazardous products, impacts on flora and fauna, child labor and exclusion of women and is considered satisfactory. The procedure does not yet define an E&S risk categorization of transactions.

Contacts

For Inquiries About the Project, Contact

PAMF - Première Agence de Microfinance
Guy Ratsimbazafy
Chief Executive Officer
+261 32 05 035 05
g.ratsimbazafy@pamf.mg
1, Làlana Solombavambahoaka Frantsay 77 Antsahavola, Madagascar
https://www.pamf.mg/

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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
Nominate officers	03/10/2023
Staff Training	06/29/2023
Enhance ESMS	03/31/2023
Enhance HR policies and procedures in line with IFC Performance Standards 2	09/27/2023

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Summary of Investment Information

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