The Bank was founded by several individuals, none of whom has a stake of more than 20%. All of the shareholders are well-established business people and apart from the banking services have interests in other industries, including trading, manufacturing and real-estate development projects. IFC purchased 15% of the Bank in mid-2006. In September 2006 Sweden-based East Capital purchased 11% stake in the Bank. Since November 2006 representatives of IFC and East Capital have a seat on the Board of Directors of the Bank and are taking active part in the Bank’s strategic management together with the local shareholders.

The proposed project is an investment package consisting of an A Loan of up to $20 million for IFC’s account and a B Loan of around $20 million (subject to market conditions).

20.0 million (USD)

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

* These investment figures are indicative

The Bank is headquartered in Moscow and has five full branches and six additional offices in the Moscow region, as well as sales offices in 25 key economic regions of Russia. Locko Bank plans to increase its territorial presence significantly and cover up to 35 regions by 2009. Investments will be made through the existing branch network.

The development impact of the project is expected to be significant in terms of its support for local businesses in the real economy, especially private companies which have outgrown the size of micro- or small-sized business. By providing financing to Locko Bank, IFC will enable the Bank to expand its lending operations and provide commercial financing to SMEs, thereby fostering economic growth and employment generation.

IFC has a strong role in this project as it helps to address financing needs of the Bank when the market resources are scarce or not available. The participation of IFC is expected to mobilize resources of foreign financial institutions, who are interested in financing the fast growing Russian bank specialized in SME. The B loan, if successful, will help the Bank at the time of the current market turbulence and will ensure funds at the amount sufficient to support business growth and liquidity.

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

While Locko Bank is an existing IFC client as this project will follow IFC''s revised Environmental and Social Review Procedure, during appraisal IFC will analyze the Bank''s portfolio and the activities proposed to be supported with IFC financing for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List; and/or
- The applicable National Social and Environmental Laws and regulations; and/or
- The IFC Performance Standards.

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

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

- Upgrade, if necessary, its existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons, if needed, to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Performance Requirements;
- Continue to submit a periodic report to IFC as per a format to be provided by IFC.