150.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	150.0
Equity

* These investment figures are indicative

Project Level Outcome (FMF) - Increased access to finance for MSMEs with a focus on SCF in Indonesia: IFC’s forthcoming MSME finance gap report estimates the overall MSME finance gap to be US$234bn or about 23% of the country’s GDP. MSMEs in supply chains in Indonesia face additional barriers with limited access to finance to obtain the capital required to fulfill demands from large orders due to underdeveloped SCF market. Supported by the Project, FMF will expand their SCF business and in effect provide better quality of credit to MSMEs which best fit their needs, to a wider group of SME clients. Furthermore, IFC estimates that SME lending spurred by the Project through FMF will create between 8,100 and 12,700 jobs in the economy over the next 3 years. By improving access to finance for MSMEs, the Project will promote MSME growth, and catalyze job creation. Project Level Outcome (KBJ) - Increased access to finance for mobile devices with a focus on the less developed regions in Thailand: Despite the progress in financial inclusion in Thailand, disparities across and within regions contribute to overall inequality in the country. For many individuals in the less developed regions, internet-enabled mobile devices remain the primary sources of internet access and are thus an important lever in narrowing the digital divide and providing access to digital social and financial services. For low-income end users, even the cheapest handsets available on the market can be out of reach if they must pay for them upfront in cash. With IFC’s support, KBJ will grow financing for mobile devices primarily in the less developed regions, contributing to providing affordable financing schemes for mobile devices especially in those underserved regions, and promoting digital inclusion. Market Level Outcome (FMF) – Competitiveness: The proposed investment is expected to promote greater competitiveness in the SCF market for MSMEs in Indonesia through demonstration and replication channels. This constraint is especially severe for standalone firms, smaller-sized suppliers and distributors in supply chains. While most global FIs serve multinational corporates in SCF, only a few local FIs (primarily banks) have started to launch SCF programs, albeit with a primary focus on large corporates and larger-sized SMEs, despite the huge market potential in Indonesia estimated at around US$80bn. Currently there are limited product offerings to smaller MSMEs. MFCs such as FMF, which have experience in catering to MSMEs and providing customized products that suit their needs, are well-positioned to serve the MSME segment which is underserved by banks, while MFCs’ participation in this field is very limited. The Project will ensure greater access to finance for underserved MSMEs in the supply chains and create competitive pressure on market to adopt and replicate similar SCF models. Market Level Outcome (KBJ) – Competitiveness: The Project will promote greater competitiveness in the mobile device finance market in Thailand’s less developed regions through demonstration and replication channels. While banks dominate the financial sector, their lending is biased towards large corporates and urban areas, and they lack incentives and strategic focus to develop targeted product offerings that cater to underserved segments. By supporting KBJ, a growing player in the less developed regions, this Project will demonstrate to other FIs the viability of a business model that contributes to improved affordability of mobile devices in the less developed regions, creating a more competitive financing market for this segment and increased penetration of the digital economy.

Financial Additionality - Financing Structure: This Project will entail a local currency loan facility for FMF and KBJ with a three-year tenor. The loan facility for FMF will comprise US$75 million in IDR equivalent of senior loan with a corporate guarantee and US$25 million in IDR equivalent of senior loan without a guarantee, to be committed in multiple tranches. By allowing multiple commitments for a long term facility with and without corporate guarantee based on IFC’s wide range of product experiences and structuring expertise especially in emerging markets, IFC will provide flexible funding structure to FMF as per its funding needs. The longest tenor of KBJ’s current long-term loans is 2 years. With this facility, IFC will provide a longer-term funding which will signal confidence in the company and enable KBJ to focus on making new disbursements. Non-financial Additionality: Knowledge, Innovation and Capacity Building: The proposed investment will be complemented by knowledge sharing and capacity building, aimed at: (i) supporting FMF in strengthening SCF operation; and (ii) helping FMF and KBJ refine the Responsible Finance Practices.

The project is a senior loan facility to support the microfinance and SME (MSME) lending of PT KB Finansia Multi Finance (FMF) in Indonesia and consumer financing of KB J Capital Co., Ltd. (KBJ) in Thailand. E&S risks of MSME lending activities to be supported are expected to be moderate. The consumer lending to be supported will encompass personal financing which has minimal/no adverse E&S impacts. The project has been categorized as a Category FI-2 project according to IFC Sustainability Policy. The project will not support any higher risk business activities that 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, d) risk of significant retrenchment, or e) significant Occupational Health and Safety risks. Any coal-related activities including coal mining, coal transportation or coal-fired power plants, and infrastructure services exclusively dedicated to support any of these activities will be excluded from the project. Applicable E&S performance requirements of the project for FMF will be IFC Exclusion List and host country E&S laws and regulations. FMF and KBJ will be required to comply with the IFC Performance Standard 2 on Labor and Working Conditions for their own operations.

The key E&S risks are related to FMF’s MSME lending and its capacity to manage such risks. The typical E&S risks may include site-specific occupational health and safety, pollution, waste and wastewater, labor and working conditions issues.

FMF is an existing client of IFC and has implemented a simple E&S management system (ESMS) for microfinance activities and assigned an E&S officer. For this project, FMF will be required to upgrade existing ESMS and provide related staff training to assess and manage the E&S risks of SME lending in accordance with the applicable E&S requirements. FMF and KBJ will be required to strengthen its policies and practices on non-discrimination and equal opportunity. FMF will be also required to enhance its grievance mechanism and HR procedures (management of termination and disciplinary actions) as well as fire safety management.

S.no	Title	Anticipated Completion Date
1	ESMS upgrade	07/28/2024
2	Staff training	07/28/2024
3	HR procedures upgrade	11/24/2024