48884 - BOP Eskh GB

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Summary of Investment Information

Project Number

48884

Company Name

ESKHATA BANK OAO

Date SPI Disclosed

Feb 1, 2024

Country

Tajikistan

Region

Central Asia and Turkiye

Projected Board Date

Mar 15, 2024

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Mar 16, 2024

Department

Regional Industry FIG MCT

Industry

Financial Markets

Previous Events

Approved : Feb 9, 2024
Signed : Feb 15, 2024
Invested : Mar 14, 2024

Sector

Commercial Banking - SME Finance

Additional Project Attributes

Blended Finance

Project Description

The proposed project entails IFC’s subscription to the green bond to be issued by an existing IFC client OJSC Eskhata Bank (“Eskhata Bank”, “Eskhata” or the “Bank”). Eskhata Bank is one of the systemically important banks and the third largest bank in Tajikistan. The planned issuance by Eskhata Bank will be Tajikistan’s inaugural green bond issuance. The issuance will be structured in the form of a private placement to IFC and will comply with the International Capital Market Association (ICMA) green bond principles. The investment will be provided in Tajik somoni for the maturity of up to three years. The project will be part of the IFC’s Base of the Pyramid (BOP) Program and will be supported by IDA-PSW Blended Finance Facility and IDA-PSW Local Currency Facility.

Associated Advisory Engagement

Advisory services for Eskhata Bank related to this investment have been phased into two projects. The initial phase, Upstream Project #606853, was successfully concluded on June 30, 2023. During this phase, the Bank accomplished several key milestones, including the enhancement of its Risk Management practices, the launch of its Green Finance Roadmap, the development of Climate Finance capacity, and the identification of essential pillars for establishing its Green Bond Framework.

Building on this success and aiming to become Tajikistan's pioneering green bond issuer, Eskhata Bank sought further assistance from IFC to implement the recommendations and roadmap. This led to the initiation of Upstream Project #608416. The activities in this new phase are designed to encompass both pre- and post-issuance green bond support as Eskhata Bank continues its journey towards sustainable financial practices.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	10.0
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 MSME (mix of Micro and SME)

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

Development Impact

Expected project-level outcome: access to climate finance for MSMEs and low-income households to support economic activity and resilience in the context of the challenging macro-economic situation. Expected market-level outcome: (i) resilience: supporting resilience amongst BOP finance providers by helping the market deal with persisting uncertainty and tighter financial conditions and catalyzing investor response; (ii) sustainability: promoting environmental sustainability in Tajikistan by supporting the issuance of the first green bond in the country in line with international standards and generating demonstration effect to the wider market.

Financing Structure: supporting Eskhata Bank with longer term local currency financing through subscribing in the client as well as the country’s inaugural local currency green bond. The investment will also support the Bank through a proposed Advisory engagement with portfolio screening, eligibility assessment, development of a climate finance pipeline, and annual reporting as per the requirements of ICMA’s Green Bond Principles. The advisory program will build upon the ongoing Advisory support provided by IFC to the Bank to implement their green finance roadmap and finalize green bond framework.

E&S Category Rationale / Risks and Mitigation

The project entails IFC’s subscription to the green bond to be issued by an existing IFC client OJSC Eskhata Bank. The proceed from the issuance of IFC Bond will be used to support the Issuer’s lending program of climate-smart sub-projects to MSMEs and low-income households, in line with eligibility criteria (mainly energy efficiency) and in compliance with the Green Bond Principles as published by the International Capital Market Association (ICMA). There is no project finance to be developed under this project, no hydro, wind or large-scale solar PV. The supported portfolio is invested in trade, agriculture, construction, services, small-scale manufacturing, and transportation. The Bank will not support Exclusion List activities and/or borrowers involved in coal related and higher-risk business activities that may include: (i) involuntary resettlement, (ii) risk of adverse impacts on indigenous peoples, (iii) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or (iv) significant occupational health and safety risks. Thus, the portfolio to be supported within this project will likely comprise mostly medium E&S risk investments with potentially limited adverse environmental or social risks or impacts that are few in number, generally site-specific, largely reversible, and readily addressed through mitigation measures. The project has therefore been categorized as FI-2 according to the IFC’s Sustainability Policy. The key project risks and impacts are associated with the Bank Eskhata’s capacity to maintain the Environmental and Social Management System (ESMS) to meet the E&S applicable requirements for this project and demonstrate adherence to its ongoing implementation. For this project, IFC's applicable requirements for the supported asset class will be the IFC Exclusion List and the applicable environmental and social national laws and regulations. The bank will also be required to be in line with IFC’s life & fire safety requirements and the requirements of IFC’s Performance Standard 2 on Labor and Working Conditions, and provide regular E&S performance reporting to IFC.

The client has ESMS established, and E&S staff assigned. The ESMS is applied to the bank’s entire portfolio and contains sufficient instruments to tackle the risks associated with the supported portfolio. The ESMS assigns responsibilities for its implementation and provides for checking all loans against Exclusion List, categorization of loan applications according to the risk level and the E&S due diligence depending on the risk category. The ESMS includes required provisions and templates to ensure the MSME loan portfolio is screened against the applicable IFC’s E&S requirements, contains sufficient E&S due diligence (ESDD) tools and provisions on E&S monitoring of loans and internal audit to verify ESMS implementation. For this Project, the client will be required to maintain its ESMS practices and capacity.

Contacts

For Inquiries About the Project, Contact

Bank Eskhata OJSC
Daler Sadikov
Head of International Relations Department
+992 92 771 4866
D.Sadikov@eskhata.com
Gagarin Street 135, Khujand, Tajikistan
https://eskhata.com/

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