PCL is 100% owned by ProCredit Bank Serbia. The Bank is 66.66% owned by ProCredit Holding (PCH), representing majority shareholder, where EBRD and Commerzbank AG (Germany) hold 16.67% each. ProCredit Holding (PCH) was founded in 1998 in Germany as "Internationale Micro Investitionen AG" (IMI) by Internationale Projekt Consult GmbH (IPC) and its employees (IPC Invest), the Dutch foundation DOEN and DEG, and other IFIs joined at a later stage. Currently, IPC (including IPC Invest) is the largest shareholder with 21.6% ownership. As of today, IFC with its 11.6% stake, together with KfW (15.3%) and DOEN (15.0%) are among the largest shareholders with FMO, BIO, TIAA CREEF, Fundasal and few other investors comprising the rest of the shareholding base.

The total project cost is up to EUR 15 million. The proposed IFC investment is EUR 15 million senior term loan for IFC’s own account. The IFC funds would be used for extending leasing finance to the SME and agriculture sector. The proposed investment is to be unconditionally and irrevocably guaranteed by PCB.

14.51 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	14.51
Equity

* These investment figures are indicative

The company’s headquarters is located in Belgrade. PCL is operating through Bank’s network of around 60 branch offices throughout the country.

The development impact for the project is high. It fosters:

- Access to finance for Agriculture:

The project will expand access to term finance for farmers. Government support for agri-sector is still minimal with only 10.9% of the agri-budget dedicated to credit lines for agriculture machinery and equipment. This points to the need for the private leasing companies such as ProCredit to meet a significant market gap.

- Development of the Leasing Sector:

The project will enable the growth of the leasing sector and assist it in playing a greater role in capital formation in the economy. It will also promote the emergence of Procredit Leasing as a credible player in the market and boost competition. Despite the high growth of financial leasing sector since the start of its operations in 2002 financial leasing sector remains underdeveloped.

- Term funding for SMEs:

The project will make much needed term funding available to Serbian SMEs. SMEs are an underserved segment in Serbia and this project will help SMEs make critical capital investments in order to make their operations more sustainable.

IFC has a strong role to play in this project.

IFC is providing term funding of longer maturity than Procredit Leasing or ProCredit Bank can raise from the market. This element of financial additionality is particularly important in the current environment where the ongoing credit crunch in the financial markets has affected the ability of banks and financial institutions, especially those from smaller emerging markets to raise term funding.

This project represents a continuation and upgrading of our role with the ProCredit group in Serbia. It goes beyond Procredit Bank and engages with the group’s leasing company.

The project will help to expand IFC’s reach to agrifinance sector which IFC’s FM projects in Serbia have hitherto not focused on. The project will also highlight the financing needs of the agribusiness sector and help highlight this segment as a viable business segment for the Serbian financial sector to explore.

Finally, IFC plays a role in contributing to the development of the Serbian leasing sector by promoting competition in a market dominated by only two major players.

If IFC were to not provide this investment to ProCredit Leasing, the company would face difficulty in raising funding of this maturity in the current market. Its growth would be affected and as a consequence, its leasing assistance to the SME and agribusiness segments would need to be reduced appropriately.

This project involves IFC support for the leasing business and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. Considering the nature of activities supported, the project will be required to:

- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the FI exclusion list, and ensures that the use of the leased equipment complies with the applicable national laws;
- Identify qualified persons to manage and implement the procedure;
- Demonstrate commitment and resources to implementing the procedure;
- When leasing to business activities with potentially significant social and environmental risks (e.g., mining, oil production), inquire and review S&E information available in the public domain and avoid leasing to businesses that have substantial unresolved environmental and social issues. In such cases, the company will also need to satisfy itself that the activity is being undertaken in compliance with the applicable national laws;
- Submit a periodic report to IFC as per a format to be provided by IFC.