50480 - BOB ECB 2025

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Summary of Investment Information

Project Number

50480

Company Name

BANK OF BHUTAN LIMITED

Date SPI Disclosed

May 29, 2025

Country

Bhutan

Region

South Asia

Projected Board Date

Jun 30, 2025

Environmental Category

FI-2 - Limited

Status

Pending Disbursement

Last Updated Date

Oct 9, 2025

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 30, 2025
Signed : Oct 6, 2025

Sector

Commercial Banking - General

Additional Project Attributes

Blended Finance

Project Description

The proposed investment entails a senior, unsecured debt investment of up to US$20 million equivalent in Bank of Bhutan (BOB or the Bank) under Bhutan’s revised External Commercial Borrowing (ECB) guidelines. The loan is structured as a Bhutanese Ngultrum (BTN) linked, fixed rate, amortizing loan with tenor of upto 5 years. The IFC loan proceeds will be utilized by BOB to grow and expand their micro and small enterprise (MSE) loan portfolio.

Subject to BFC approval, the Project will be included in the FIG MSME Platform which is supported by a pooled first loss guarantee (“PFLG”) of up to US$40 million provided by International Development Association (IDA) 20 Private Sector Window Blended Finance Facility (IDA-PSW BFF) allocated to the SME Envelope under the MSME Finance Platform, as well as IDA-PSW Local Currency Facility (LCF) in the form of cross-currency swap.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	20.0
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

Increased access to finance for micro, small and medium enterprises (MSMEs), especially micro and small enterprises (MSEs): IFC expects this investment will enhance financing for MSMEs, particularly micro and small enterprises in Bhutan. MSEs or Cottage and Small Industries (CSIs) are the backbone of the Bhutanese economy. CSIs constitute 95% of the total industries/enterprises in the country and employ over 100,000 people (12% of population), including women and the vulnerable section of society. CSIs play a major role in supporting economic growth and balancing regional development. Beyond the project level outcomes, IFC anticipates that the Project will increase competitiveness in Bhutan’s MSME, finance market, particularly for the Bhutanese CSI industry, thus helping address the country’s access to finance gap. Therefore, through this Project, IFC’s support to a large lender with wide and deep market penetration will promote increased competitiveness in the MSE sector by demonstrating lender confidence in the MSE segment and the viability of scaling up lending to this segment.

IFC’s additionality in this Project is both financial and non-financial. Financial additionality is provided via financing structure by providing longer-tenor financing to support BOB diversify its liability franchise. IFC’s investment will serve as a demonstration transaction and establish benchmarks (in terms of tenor and pricing) for other investors. Non-Financial additionality is provided in the form of non-commercial risk mitigation by attracting foreign investments in financial institutions in Bhutan under the ECB route.

Indicator	Metrics	Calendar Year 2022	Calendar Year 2023	Calendar Year 2024
Board Composition Total (#)	number	Not Available	Not Available	Not Available
Board Composition Women (#)	number	Not Available	Not Available	Not Available
Female Direct Employment (#) Operations And Maintenance	individuals	Not Available	Not Available	Not Available
Number of Senior Management Positions	individuals	Not Available	Not Available	Not Available
Number of Women In Senior Management	individuals	Not Available	Not Available	Not Available

E&S Category Rationale / Risks and Mitigation

The project entails a senior loan of up to $20 million to Bank of Bhutan (BoB, or the Bank) for on lending to, micro, small and medium Enterprises (MSME) segment. BoB’s MSME portfolio mainly comprises businesses engaged in agribusiness, small scale manufacturing, hotel and tourism, service industry and small and medium sized construction companies engaged in small scale commercial and residential projects. These industry sectors in the MSME segment present medium-low Environmental & Social (E&S) risks and impacts. The typical E&S risks areas include labor and working conditions, supply chain risk related to labor and biodiversity (e.g., in the agribusiness segment), air emissions, waste management, and handling of hazardous materials, in the MSME borrower’s operations. The project will not support coal-related activities, hydro power projects 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, d) risk of retrenchment or e) 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, and ii) the host country laws and regulations.

The key E&S risks are related to (i) the ability of the bank to identify and manage environmental and social risks associated with its lending activities, and (ii) the capacity and systems in place to manage these risks. The bank has developed an Environmental and Social Safeguards Policy (ESSP). However, the ESSP is not aligned to IFC PS 1 requirements. It has appointed an E&S officer who is responsible for the implementation of ESSP. As a part of this project, the ESSP will be upgraded to include screening mechanisms to screen out higher risk transactions, mechanism for E&S due diligence and E&S performance monitoring. The bank's HR policies are aligned with IFC Performance Standard 2 on labor and working conditions and it follows the applicable life and fire safety requirements in its own operations.

S.no	Title	Anticipated Completion Date
1	Upgrade the Environmental and Social Safeguards Policy in line with IFC PS 1 requirements	10/31/2025
2	Staff Training	10/31/2025

Contacts

For Inquiries About the Project, Contact

Bank of Bhutan
Tshering Tenzin
Director, Corporate Services
(+975) 02-334333
tshering.tenzin@bob.bt
Post Box 102, Norzin Lam, Thimphu
https://www.bob.bt/

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IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

IFC complaint response is separate from and complementary to IFC’s clients’ project level grievance mechanisms and IFC’s Independent Accountability Mechanism (CAO). Lodging a complaint directly with IFC does not, at any time, restrict access to CAO.

Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

Independent of IFC and MIGA management and reporting directly to the IFC and MIGA Boards of Executive Directors, CAO helps resolve issues raised about the environmental and social impacts of projects through a neutral, collaborative, problem-solving approach via its Dispute Resolution function. It also reviews IFC’s and MIGA’s compliance with environmental and social policies, assesses related harm, and recommends remedial actions through its Compliance function. Additionally, CAO provides advice to IFC, MIGA, and their Boards to enhance environmental and social sustainability performance and minimize the risk of harm.

Complaints may relate to environmental and social harm regarding any aspect of the planning, implementation, or impact of a project or sub-project, and can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of an IFC- or MIGA-financed business activity.

Complaints can be submitted by any of the following methods:

Online form: available at https://www.cao-ombudsman.org/
Mail/Hand Delivery to: 2121 Pennsylvania Avenue, NW, Washington, DC 20433, USA
Voice mail: +1 202 458 1973
Email: cao@worldbankgroup.org
SMS, WhatsApp, Telegram, and Signal: +1 202 650 2627

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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