26428 - OTO Finance

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Summary of Proposed Investment

Project Number

26428

Company Name

SUMMIT OTO FINANCE, PT

Date SPI Disclosed

Mar 26, 2008

Country

Indonesia

Industry

Financial Markets

Projected Board Date

May 16, 2008

Status

Completed

Sector

Finance Companies - Consumer Finance

Department

Regional Industry - FIG Asia & Pac

Environmental Category

C - No Impact

Previous Events

Approved : Jul 22, 2008
Signed : Sep 26, 2008
Invested : Dec 2, 2008

Project Description

The proposed project consists of an IFC loan in fixed rate Indonesian Rupiah to PT. Summit Oto Finance (SOF or the company), a motorcycle finance company based in Jakarta, Indonesia, and part of Sumitomo Corporation Group. The proposed investment is consistent with all aspects of IFC’s strategy. It would represent a stable source of funding which would help SOF to:

- expand its motorcycle financing activities to low income consumers,
- diversify its funding base, and
- reduce interest rate risks and better match its assets and liabilities.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	45.0
Equity

Development Impact

Strengthening the Micro and Small Business Sector:

A large number of motorcycle owners use these as part of their SME/ micro businesses as an efficient mode of transportation to deliver goods and services. The project will facilitate the increase of motorcycle financing available to SME/micro businesses which is necessary to expand their operations.

Deepening NBFI Sector:

Indonesia’s financial sector is still heavily dominated by banks, which account for 80% of the financial sector assets. Indonesia needs to develop Non-Banking Financial Institutions (NBFI) sector, which can efficiently provide financing to consumers and SMEs by lowering operational costs and serving smaller customers than most banks target. Additionally, NBFIs can provide healthy competition to banks which will eventually further foster the development of the financial sector. The project will provide the company with long-term fixed rate financial resources for its growth. The support IFC provides to SOF will help it develop its own funding sources which can provide it with the ability to compete with the banking system on an ongoing basis and provide efficient, competitive financing to consumers.

Create Significant Job Opportunities:

The vast majority of motorcycles sold in Indonesia have a significant local value added component involving assembly within local factories as well as parts sourced from local suppliers. Not only does the project support job creation within the company, but also as the demand for motorcycles increases due to more availability of financing, the project will also indirectly support job creation along the value chain from local suppliers to distributors.

Through the proposed investment, IFC will be playing an active role by supporting the company growth and diversifying SOF’s funding sources.

SOF has issued bonds and intends to continue issuing bonds in the future. However, to support its growth, SOF will need funding from different sources. Outside bonds, there are very limited sources of fixed rate rupiah financing. IFC’s $45 million equivalent, three-year, fixed rate Indonesian Rupiah loan will help the company achieve its financing target and diversify its funding sources, and improve the asset-liability structure and reduce the balance sheet risks.

Contacts

For Inquiries About the Project, Contact

Muliawan Gunadi, Corporate Secretary
Summitmas II, 8th floor, Jl. Jend. Sudirman Kav. 61062, Jakarta, 12290
Indonesia

Telephone: +62 21 252 2788
Fax: +62 21 252 6388

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This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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