NLB is the largest Slovenian financial services company and is part of the NLB Group, which comprises 55 banks and financial institutions in Slovenia, Southern and Eastern Europe, EU countries and former Soviet countries. NLB held 31% of banking sector assets in Slovenia as at the end of 2008, and the NLB Group is active in banking, leasing, factoring, forfaiting, insurance and asset management.

The total project cost is EUR30 million through a senior loan to finance the Bank’s lending operations to small and medium enterprises in the Republic of Macedonia.

34.91 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	34.91
Equity

* These investment figures are indicative

The Bank has its head office in Skopje, Republic of Macedonia, and as of October 2009, has 48 branches throughout the country, 20 of which are in the capital Skopje.

The proposed IFC investment will support SME lending activities of the Bank in a rather underdeveloped market such as the Republic of Macedonia. In this country, where private sector credit/GDP is at significantly lower levels compared to EU, IFC will contribute to expanding access to term finance and support SMEs’ capital investment plans. The SME sector is an important driver of the Macedonian economy still offering attractive growth opportunities. Increased availability of term financing through the domestic banking sector will support private sector credit growth. As the Republic of Macedonia is a former Yugoslav republic, the Project will signal IFC’s confidence in the long-term prospects of the country’s banking sector and economy and will help strengthen the country’s standing as an investment destination. In the short-term, IFC’s liquidity support will buttress the market’s confidence in the Bank’s standing and credibility. The Project is a good example of IFC’s strategy to support intra-regional investments by NLB based in Slovenia, a transition country (albeit one that is now an EU member), into other countries in its region. The successful implementation of the Project will help an experienced strong local sponsor to grow further as a regional player, and facilitate transfer of capital and modern banking practices from Slovenia into the lesser developed markets, such as the Republic of Macedonia. At the same time, the Project supports a key player in the Macedonian banking sector to weather the ongoing global economic crisis and to continue providing essential funding to an economy, which has suffered under the effects of the worldwide crisis.

1. Support/engagement in a young country: Through the Project, IFC will be expanding its footprint in a country which has won its independence relatively recently and is still in the process of shaping its economy to fit its needs as a sovereign nation. Due to the impact the current crisis had on the region, many investors are shying away from investments in countries in Eastern Europe and the Balkans. Therefore IFC’s engagement will be crucial in strengthening the country’s economy as one of the pillars of an independent and democratic state, thereby creating greater social stability. 2. Longer term funding: IFC will provide longer term funding that the Bank would find difficult to source from the private sector market, particularly for frontier markets such as the Republic of Macedonia. This is relevant in the context of the current global crisis that has affected the ability of European banks and their subsidiaries to raise long-term funding. Without this Project, the Bank may need to curtail the extent of long-term lending it provides to SMEs. 3. Signaling confidence: The Project signals IFC’s confidence in the long-term prospects of the economy and banking sector of the country. 4. Establishing strategic partnership: Through this Project, IFC is building a long-term strategic partnership with NLB and the Bank which will provide a platform for IFC to undertake other initiatives across the region. NLB is one of the key emerging regional players, and such a partnership will give IFC further reach into many of the smaller markets in the region, as in the case of this Project.  1. Support/engagement in a young country: Through this Project, IFC will be expanding its footprint in a country, which has won its independence relatively recently and is still in the process of shaping its economy to fit its needs as a sovereign nation. Particularly during a period where many investors are shying away from investments in countries in Eastern Europe and the Balkans, due to the impact the current crisis had on the region, IFC’s engagement is crucial to support Macedonia’s drive of strengthening its economic base as one of the pillars of an independent and democratic state, thereby creating greater social stability. 2. Longer term funding: IFC will provide longer term funding that the Bank would find difficult to source from the market, particularly for a frontier markets such as Macedonia. This is particularly relevant in the context of the current global crisis that has affected the ability of European banks and their subsidiaries to raise long-term funding. Without this Project, the Bank may need to curtail the extent of long-term lending it provides to SMEs. 3. Signalling confidence: The Project signals IFC’s confidence in the long-term prospects of the economy and banking sectors of the country. 4. Establishing strategic partnership: Through this Project, IFC is establishing a long-term strategic partnership with NLB and the Bank which will provide a platform for IFC to undertake other initiatives across the region. NLB is one of the key emerging regional players, and such a partnership will give IFC further reach into many of the smaller markets in the region, as in the case of this Project.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. IFC''s appraisal will focus on the Bank’s portfolio risk and capacity to manage environmental and social risks. In addition, due diligence will be carried out on the Bank''s HR policies and practices to determine compliance with IFC''s Performance Standard 2: Labor and Working Conditions requirements, and if needed to provide recommendations to address any gaps.

The Bank will be required to develop a Social and Environmental Management System (SEMS), appoint staff responsible for SEMS implementation, and submit annual environmental performance reports to IFC.