47876 - WCS COVID RESPONSE BRAC 2023

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Summary of Investment Information

Project Number

47876

Company Name

BRAC BANK LIMITED

Date SPI Disclosed

Jun 8, 2023

Country

Bangladesh

Region

South Asia

Projected Board Date

Jun 12, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Jul 7, 2023

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 16, 2023
Signed : Jun 22, 2023
Invested : Jul 5, 2023

Sector

Commercial Banking - SME Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed investment comprises a US dollar-denominated working capital solutions (WCS) senior A loan of up to US$50 million under the COVID-19 Emergency Response WCS Envelope (WCS Envelope) to BRAC Bank Limited (BBL or the Bank), a FIG portfolio client in Bangladesh since 2004 (the Project). This is structured as a one-year facility with two annual rollover options at IFC’s discretion, for a maximum aggregate tenor of three years. The Project will support working capital, trade finance, and foreign exchange liquidity needs of eligible sub-borrowers (export / import-based small and medium enterprises (SMEs), as per IFC’s definition of targeted sectors), through BBL’s offshore banking unit and enable the Bank to continue supporting key sectors of the Bangladeshi economy, where the impact of COVID-19 persists.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
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 SME Borrowers

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

Development Impact

The Project will contribute towards increasing access to US dollar-denominated working capital and trade finance funding for SMEs in Bangladesh and will help SMEs to preserve and grow their trade business operations. At the market level, IFC anticipates that its financing will not only provide liquidity support to leading banks in the trade finance segment in Bangladesh but will also send a positive signal to the market and contribute towards attracting additional international investors to support local banks with much needed FX liquidity. This, in turn, will contribute to building resilience of the trade finance market via demonstration and replication channels.

E&S Category Rationale / Risks and Mitigation

The project will support BRAC Bank in increasing its lending to small and medium enterprises (SME) through short-term working capital loans and FX trade-related lending under the COVID-19 facility. BRAC’s SME portfolio mainly comprises businesses engaged in agro-based industries, wholesale/retail trading, and small-scale manufacturing companies. These industry sectors present medium-low Environmental & Social (“E&S”) risks and impacts which are readily manageable. The typical risks areas include labor and working conditions, occupational health and safety, supply chain risk including child labor and forced labor, air emissions, waste management, and handling of hazardous materials, in the SME borrower’s operations. Given the proposed use of proceeds, this project will not support coal-related activities and higher risk business activities that may 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 or d) significant Occupational Health and Safety risks. Hence, the Project is categorized as Category FI-2 in accordance with IFC’s Sustainability Policy. The E&S requirements will include IFC Exclusion List, additional list of restricted commodities and relevant national E&S laws and regulations.

The key risks are related to the ability of the bank to identify and manage E&S risks associated with its lending activities to the SME clients. This is an existing client with an existing E&S risk management system (ESMS) and E&S officer responsible for ESMS implementation. The ESMS details screening against IFC Exclusion List and restricted commodity list and includes due diligence procedures (generic/ industry specific) as per the latest Environmental and Social Risk Management Guidelines of Bangladesh Bank (the central bank of Bangladesh) for assessment of compliance with relevant national E&S laws and regulations for its entire lending operations. The current ESMS is adequate for this IFC project. The Bank's HR policies are aligned with IFC Performance Standard 2 on Labor and Working conditions and follows the applicable Life and Fire Safety requirements.

Contacts

For Inquiries About the Project, Contact

BRAC Bank Limited
Noman Nasir
Head of Financial Institutions Relationship
88 02 8801261
noman.nasir@bracbank.com
Anik Tower, Level-11, 220/B, Tejgaon-Gulshan Link Road, Dhaka 1208, Bangladesh
www.bracbank.com

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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.

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