48183 - GBIME Nepal SME

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Summary of Investment Information

Project Number

48183

Company Name

GLOBAL IME BANK LIMITED.

Date SPI Disclosed

Oct 3, 2023

Country

Nepal

Region

South Asia

Projected Board Date

Nov 17, 2023

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Feb 3, 2024

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Dec 13, 2023
Signed : Dec 20, 2023
Invested : Feb 1, 2024

Sector

Commercial Banking - General

Project Description

The proposed investment comprises of a US$56 million investment through a 3-year USD denominated senior loan to Global IME Bank (GIBL or the Bank), to be used exclusively for on-lending to small and medium enterprises (SMEs) in Nepal (the Project) with US$14 million carveout for green financing and US$14 million carveout for gender financing. Of the US$56 million, US$26 million will be through mobilization. GIBL is a fast-growing commercial bank with a strong retail and small and medium enterprise (SME) segment. The shortage of liquidity in the financial sector is prevalent in Nepal, and the business operations and economic activities of SMEs have been hampered by the COVID-19 pandemic. The proposed facility will assist the Bank to further extend capital to the SME segment and contribute to improving liquidity in the financial sector and support the fast recovery of SMEs impacted by the COVID-19 pandemic, including the underserved rural SMEs.

GIBL is the largest bank in Nepal in terms of total assets and has grown every year in size and profitability. The Bank has a large stable deposit base, low cost to income ratio, high retail assets, good asset quality and decent profitability. The Bank has an experienced senior management team with a strong vision to grow the Banks operations profitably while maintaining high levels of corporate governance.

For the year ended 16 July 2023, the Bank reported total assets of US$4,049 million, loan book of US$2,845 million, net worth of US$451 million and deposits of US$3,279 million. The Bank has robust asset quality (with a gross non-performing assets ratio of 3.08% and provisioning coverage ratio of 116.27%) and healthy profitability with return on total assets of 1.38% and return on equity of 12.36%. GIBL is rated “A” by ICRA.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.0
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
Syndications	Loans to SME Borrowers
Syndications	Loans to Woman-Owned SMEs
Syndications	Labeled: Green;Blue;Social-Loans/Bonds
Straight Senior Loan	Loans to SME Borrowers
Straight Senior Loan	Loans to Woman-Owned SMEs
Straight Senior Loan	Labeled: Green;Blue;Social-Loans/Bonds

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

Development Impact

Stakeholder Effects: (i) Increased access to finance for SMEs, including women owned SMEs: The project is expected to contribute positively towards access to finance for SMEs in Nepal, which identify access to finance as a major constraint. In addition to the growth in the overall SME portfolio, Global IME Bank intends to pursue a more inclusive strategy by increasing its outreach beyond the urban areas and cater to SMEs in rural areas with due focus on women owned SMEs. SMEs play a central role in the creation of employment in emerging markets. By improving access to finance for SMEs, the investment with Global IME Bank is expected to create more jobs in the economy. (ii) Increased access to finance for women-owned SMEs: The Project also aims to address access to finance constraints by women-owned SMEs in Nepal. (iii) Increased access to climate finance: The Project also will contribute to climate mitigation efforts in Nepal by increasing access to climate finance for clean transportation, climate smart agriculture, energy efficiency, biomass, biogas, solar projects and equipment. IFC anticipates that the Project will build Global IME Bank's capacity to identify and evaluate green lending opportunities and increase access to green financing in Nepal over the next three years.

Financial additionality will comprise the following: (i) Financing Structure derived from IFC’s provision of medium-term financing which is not readily available in Nepal; and (ii) Resource mobilization as IFC plays an anchor role in mobilizing other institutional private investors. In addition, non-financial additionality will be provided through Knowledge, Innovation, and Capacity Building as IFC assists the Bank in establishing its climate and gender finance business lines.

E&S Category Rationale / Risks and Mitigation

The project entails a senior loan of up to $56 million to Global IME Bank Ltd. ('GIBL" or the "Bank') to provide financing to Small and Medium Enterprises (SME). GIBL's SME portfolio mainly comprises businesses engaged in wholesale/retail trading, small scale manufacturing, and agribusiness. These industry sectors in SME segment present medium-low Environmental & Social ('E&S') risks and impacts which are readily manageable. The typical risks areas in the SME borrower's operations include labor and working conditions, occupational health and safety, supply chain risk including child labor and biodiversity risks in the agribusiness, air emissions, waste management, and handling of hazardous materials. The project will not support coal-related activities, or 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 Environmental and Social Sustainability Policy. IFC's applicable performance requirements for this project will be i) the Exclusion List; ii) additional list of restricted commodities and activities and iii) the host country laws and regulations.

GIBL is an existing client with a satisfactory Environment and Social Management System (ESMS) in place based on the Nepal Rastra Bank Guidelines and an E&S officer responsible for implementing the ESMS. The ESMS details screening against IFC Exclusion List and restricted commodity list and includes due diligence procedures for assessment of compliance with relevant national E&S laws and regulations for its entire lending operations. It also lays down criteria allowing to screen out higher risk transactions. The ESMS also has guidelines for periodic supervisions of its portfolio companies. The ESMS is adequate for this project. GIBL has developed and implemented HR policies which are in line with IFC Performance Standard 2 requirements on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

Global IME Bank Limited
Ananta Raj Kafle
Head – Treasury & International Banking
+977 1 4223442
Ananta.kafle@gibl.com.np
Kamaladi, Kathmandu, Nepal
www.globalimebank.com

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