47411 - DCM BTPN Debt

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Summary of Investment Information

Project Number

47411

Company Name

PT Bank SMBC Indonesia Tbk

Date SPI Disclosed

Aug 23, 2023

Country

Indonesia

Region

East Asia and the Pacific

Projected Board Date

Apr 27, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Feb 16, 2024

Department

CF4S4 - Regional Industry - FIG Asia & Pac/FIG Inv Ops East Asia & Pacific

Industry

Financial Markets

Previous Events

Approved : Apr 27, 2023
Signed : Jun 20, 2023
Invested : Aug 25, 2023

Sector

Commercial Banking - SME Finance

Additional Project Attributes

Blended Finance

Project Description

International Finance Corporation (IFC) is proposing an investment in bonds of US$500 million issued by PT Bank BTPN Tbk (BTPN or the Bank). The investment comprises (i) a green bond component (green bond) and (ii) a social bond component (social bond) to support the Bank’s lending programs for micro, small, and medium sized enterprises (MSMEs) including women-owned MSMEs and green financing (the Project). The proposed investment is consistent with the objectives of the World Bank Group’s Indonesia Country Partnership Framework (FY2021-2025), the World Bank Group’s Universal Financial Access 2020 initiative, and IFC’s Indonesia Strategy (FY2021-2024), as it supports MSME access to finance as well as investment in eligible green assets through one of the country’s systematically important banks, and contributes to capital market development through the issuance of green and social bonds.

The project is expected to be supported by the Market Accelerator for Green Construction (“MAGC”) Program, the Women Entrepreneurs Finance Initiative (We-Fi) and the Women Entrepreneurs Opportunity Facility (WEOF) as described in the Blended Finance Section.

The Bank is a strategic client of IFC since 2009 and has evolved to become the sixth largest private sector commercial bank, offering a wide range of financial products. As a leading domestic bank, BTPN serves nearly 9 million customers as of December 2022.

Associated Advisory Engagement

IFC and BTPN are exploring two advisory projects covering climate risk and supply chain finance to supplement the proposed investment. The climate risk advisory services would help BTPN to assess the transition risks and physical risks of its loan portfolio, with the aim of guiding the Bank to manage its climate-related risks and establish a transition plan. IFC would also support BTPN in strengthening capacity specific to supply chain finance and enhancing engagement with anchor borrowers and onboarding processes.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	500.0
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	Labeled: Green;Blue;Social-Loans/Bonds
Straight Senior Loan	Loans to MSME (mix of Micro and SME)

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

Development Impact

The most significant, expected Project-level outcomes are increased access to finance to MSMEs, including WMSMEs, and increased supply of climate finance to the market. At the market level, IFC anticipates that the proposed investment, via demonstration and replication, will contribute to increasing market integration by promoting the use of thematic bonds to attract funding from institutional investors while setting appropriate market standards for social bond issuance.

As a regulated and publicly listed bank, BTPN is subject to higher corporate governance standards and requirements by OJK. BTPN is fully committed to implementing good corporate governance across all levels of the organization, and has sound corporate governance structures, policies, and procedures in place. SMBC as BTPN’s sponsor is also continuously committed to improving the effectiveness of corporate governance.

IFC’s additionality in this Project is both financial and non-financial. Financial additionality is provided by supporting BTPN’s first issuance of a social bond and a green bond, both of which will help the Bank to access longer term funding needed to continue providing finance to underserved MSMEs and green projects, while better managing its asset-liability mismatch. Non-financial additionality is in the form of knowledge, innovation, and capacity building as IFC will provide technical expertise in the structuring of the thematic bonds, necessary updating of the Sustainable Finance Framework in line with International Capital Market Association’s Green Bond Principles and Social Bond Principles, and adaptation of an independent Second Party Opinion.

E&S Category Rationale / Risks and Mitigation

The proposed project entails an IFC investment in a privately placed social and a green bond to be issued by BTPN. The project will support MSMEs as well climate-related projects such as renewable energy (including solar), energy efficiency, green buildings, etc. While most of the portfolio to be financed from IFC proceeds will be of medium E&S risk, it is expected that it may also include a limited number of climate-focused sub-projects exposed to higher-risk activities. In cases when such sub-projects potentially 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, BTPN will be required to assess and require its borrowers to mitigate these risks and impacts in line with IFC’s Performance Standards (PS). In addition, all sub-projects financed from IFC proceeds will be subject to the application of the Exclusion List and relevant Indonesian E&S laws and regulations. The client will be required to continue application of Performance Standards 2 to its own human resource practices. The main E&S risks and impacts of the project derive from the E&S risks associated with the project-supported activities and the Bank’s capacity and systems in place to manage these risks. Typical E&S risks associated with the project may be related to labor and working conditions, occupational health and safety, pollution control and supply chain related risks amongst others. BTPN will disclose climate-related sub-projects supported by the proceeds of this bond for loans of US$20 million or more. The Bank will disclose a summary of its updated ESMS relevant to the asset class supported by the IFC’s proceeds on its website.

The Bank has developed and implemented an Environmental and Social Management System (ESMS) and has assigned E&S responsibilities. BTPN will be required to extend its ESMS, in particular, to address the application of the PS to relevant corporate finance transactions and strengthen procedures for E&S risk management of MSMEs as well as to enhance E&S capacity, particularly for the climate sub-projects to be supported by the Bank. BTPN will also be required to establish an external communications mechanism. In addition, the Bank will be required to provide training on the updated ESMS for relevant staff involved in the implementation of the project. BTPN has in place human resources practices and policies which are generally aligned with Performance Standard 2 on Labor and Working Conditions.

Contacts

For Inquiries About the Project, Contact

PT Bank BTPN Tbk
Hanna Tantani
Chief Financial Officer
+62 21 30026200

Menara BTPN, Jl. Dr. Ide Anak Agung Gde Agung Kav. 5.5 - 5.6, Jakarta12950
www.btpn.com

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

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Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

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CAO receives and addresses complaints in accordance with the CAO Policy, which can be accessed at: https://www.cao-ombudsman.org/policies-guidelines.

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.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

Task Title & Description	Anticipated Completion Date
Upgrade ESMS	09/01/2023
Develop staff training plan on the upgraded ESMS	09/01/2023

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Summary of Investment Information

Project Description

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Sponsor / Cost / Location

Development Impact

E&S Category Rationale / Risks and Mitigation

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Summary of Investment Information

Project Description

Associated Advisory Engagement

Sponsor / Cost / Location

Project Sponsor and Major Shareholders of Project Company

Total Project Cost and Amount and Nature of IFC's Investment

Blended Finance

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Development Impact

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