Bank Societe Generale acquired a controlling stake of 60% in Bank Republic in September 2006 while European Bank for Reconstruction and Development (EBRD) bought another 10%. Societe Generale is one of the largest banking groups in Europe with shareholders’ equity of 26.5 billion Euro as of end-September 2006 and an AA credit rating from S&P. SG is IFC’s global partner in six different financial institutions, in Russia, Ukraine, and Jordan.

The remaining 30% of Bank Republic are held by two local individual shareholders.

The transaction consists of a financing package of up to $20 million to Bank Republic. The senior loan of up to $10 million for expansion of the Bank’s SME lending activities will be provided to the Bank early in 2007. The remaining $10 million is expected to be provided at a later stage.

20.0 million (USD)

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

* These investment figures are indicative

Bank Republic is headquartered in Tbilisi and has branches and service centers in 8 other Georgian towns and cities: Samtredia, Zugdidi, Telavi, Gori, Rustavi, Poti, Kutaisi, and Batumi. In 2007, the Bank plans to open 2 new branches and 8 new service centers both in Tbilisi and in regional industrial and economic centers. Expansion of the Bank’s SME lending activities will be made throughout the country.

The expected development impact of this project is high, because of achieving the following objectives in a frontier country:

- Contribute to further development of one of the leading Georgian banks by assisting BR in meeting increasing demand for credit from SMEs. BR plays an important role in terms of strengthening public confidence in the banking sector in general, providing financial intermediation in the Georgian economy and providing a role model for other banking institutions in the market. The importance of BR for Georgian banking sector increased after its acquisition by SG, since the latter is expected to bring to the Bank best international practices in product structuring and risk management. The partnership of Societe Generale and Bank Republic is expected to result in a transfer of SG’s universal banking expertise and product know-how to Georgia. Combined with BR’s well-known local brand, its strong domestic distribution channels, local expertise, and high-quality local management, this is likely to make Bank Republic a leading financial institution in Georgia and broaden access of Georgian companies, including SMEs, and individuals to high quality banking services and products.
- Facilitate the development of the SME sector and subsequent job creation in the country by improving SME access to finance from a well-managed local bank supported by an international strategic investor.
- Support efforts of one of the leading Georgian banks to diversify and to increase the maturity of its liabilities and therefore, better manage its asset and liability position.

IFC’s main role in the project is to support Bank Republic’s efforts to expand its SME lending program, and also to support SG, IFC’s global partner in a number of emerging markets, in one of the most frontier markets in the region.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the FI portfolio, and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List(s); and
- The applicable National Social and Environmental Laws and regulations.

IFC will also review, if required, the capacity of the FI to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, the project will be required to:

- Develop a Social & Environmental Management System (SEMS), prior to disbursement to the satisfaction of IFC.
- Identify responsible, qualified persons to manage and implement the SEMS.
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Requirements.
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis.
- Submit a periodic report to IFC as per a format to be provided by IFC.