47937 - KEP AGRI MSE 2

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Summary of Investment Information

Project Number

47937

Company Name

KEP TRUST

Date SPI Disclosed

Apr 5, 2023

Country

Kosovo

Region

Europe

Projected Board Date

May 12, 2023

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Jun 30, 2023

Department

Regional Industry FIG LAC & EUR

Industry

Financial Markets

Previous Events

Approved : Jun 6, 2023
Signed : Jun 23, 2023
Invested : Jun 27, 2023

Sector

Microfinance and Small Business - Non Commercial Banking

Additional Project Attributes

Blended Finance

Project Description

The proposed investment is an IFC senior debt investment of up to EUR9 million to KEP Trust (KEP or the Organization) , a leading microfinance institution in Kosovo. The investment will be shared equally between IFC’s own account and concessional financing provided by the Global Agriculture & Food Security Program (“GAFSP”). The proceeds from the proposed investment will be used for on-lending to individual entrepreneurs and micro-businesses in Kosovo, including smallholder farmers, microenterprises, women-owned small businesses and entrepreneurs operating in the agriculture sector and underserved rural areas. The project fits IFC’s and GAFSP’s strategy by directly supporting investment in micro and small enterprises and agribusiness in Kosovohe proposed investment is an IFC senior debt investment of up to EUR9 million to KEP Trust (KEP or the Organization) , a leading microfinance institution in Kosovo. The investment will be shared equally between IFC’s own account and concessional financing provided by the Global Agriculture & Food Security Program (“GAFSP”). The proceeds from the proposed investment will be used for on-lending to individual entrepreneurs and micro-businesses in Kosovo, including farmers, microenterprises, women-owned small businesses and entrepreneurs operating in the agriculture sector and underserved rural areas. The project fits IFC’s and GAFSP’s strategy by directly supporting investment in micro and small enterprises and agribusiness in Kosovo.

Associated Advisory Engagement

The project will build on the work by IFC’s advisory services to (i) facilitate access to agriculture finance aiming at building agriculture lending capacity of financial institutions; (ii) support financial institutions to improve agriculture lending procedures by designing and integrating digital data-based decision support systems and non-financial services (weather, prices, et) for Agri-MSMEs to better manage their agriculture businesses; and (iii) developing Climate Smart Agriculture Finance to expand bank lending while creating resiliency and sustainability of Kosovo agriculture to mitigate and adapt to climate change (project #606029) and to develop a legislative framework for microfinance in the country (iv) to support the transformation of the microfinance sector from NGOs to a commercial corporate entity (project #606474).

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management	0.18
Guarantee
Loan	4.80
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 Microfinance
Straight Senior Loan	Loans to Microfinance
Straight Senior Loan	Loans to Microfinance
Straight Senior Loan	Loans to Microfinance
Straight Senior Loan	Loans to Microfinance
Straight Senior Loan	Loans to Microfinance
Client Risk Management	Loans to Microfinance

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

Development Impact

The project is expected to provide increased access to finance for individual entrepreneurs and micro-businesses in Kosovo, including farmers, microenterprises, women-owned small businesses, and entrepreneurs operating in the agriculture sector and underserved rural areas. The project is also expected to promote greater resilience of the microfinance sector by providing funding to a top player thereby boosting the economic activity of agri-MSMEs, including those led by women. In 2020, credit growth in the MFI sector slowed to 2% compared to previous years (27% average between 2017-2019), due to the impact of the Covid-19 pandemic, with the most significant impact seen in the already underserved agricultural sector

IFC's additionality is both financial and non-financial: (i) providing needed longer-term funding of up to 3 years to KEP which relies on external funding from IFIs and development funds; (ii) mobilizing concessional funding from GAFSP to ensure affordable pricing for end-borrowers; (iii) strengthening the market's perception of the MFI sector and enhance the Organization's ability to attract additional funding from other financial institutions

E&S Category Rationale / Risks and Mitigation

The project has been provisionally classified as category FI-3 according to the IFC's Sustainability Policy. The environmental and social risks of the MFI's overall portfolio are considered to be low and carry minimal or no adverse environmental and social impacts. The Project will not support activities on IFC Exclusion List, coal-related activities, or higher risk business activities that 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. IFC's applicable E&S requirements are the IFC Exclusion List and the applicable environmental and social host country laws and regulations. In addition, KEP will be in line with the life and fire safety requirements, and requirements of IFC's PS2 on Labor and Working conditions. As part of the existing IFC Project, KEP has an appointed E&S officer and an existing Environmental and Social Management System (ESMS) established in 2019 and updated in 2021. The ESMS requires all loans to be screened against the IFC Exclusion List and applicable national laws in Kosovo, and includes an E&S policy, roles and responsibilities, and categorization guidance. KEP will be required to maintain adequate ESMS capacity and implementation, and proper labor practices in line with IFC's applicable E&S requirements.

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