The Project Company is BRAC Bank, an existing IFC client. The Bank was set up in June 2001 by BRAC-one of the largest Microfinance Institutions (MFI) in the world with more than 8 million borrowers. In January 2007, the Bank was listed on the Dhaka and Chittagong Stock Exchanges. The main shareholders of Brac Bank include: Brac – 43.77%, IFC- 5.36% and Institutions & general public – 49.25%. The Bank has four subsidiaries - Brac EPL investments Ltd (merchant bank), Brac EPL Stock Brokerage Limited, Brac Asset Management Ltd and bKash Limited (mobile banking).

The total project cost will be up to $40 million comprising an IFC short term loan with a tenor of up to 12 months, renewable twice at IFC’s option for up to 3 years to provide trade and working capital solutions to SMEs and exporters in Bangladesh.

40.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	40.0
Equity

* These investment figures are indicative

Brac Bank is headquartered in Dhaka, Bangladesh. The Bank has 79 branches (including 46 SME/Agri branches and one offshore branch in the Dhaka Export Processing Zone) across the country and 230 ATMs. Transactions can be made throughout the country.

The key indicators for this Project will be the increase in number and value of short term transactions to finance SME working capital needs and number of SMEs financed. The demonstration effect of the IFC funding will encourage international banks to finance the local banking sector and increase their range of funding options. The Project will help accelerate economic growth in Bangladesh by providing SMEs and exporters with the necessary liquidity to finance their trade and working capital needs. IFC’s loan will support job preservation in the small business sector that may otherwise have been forced to reduce staff in the face of financing constraints.

Banks have played a pivotal role in supporting emerging market (“EM”) SMEs, but today even the international banks face new challenges, such as increasing sovereign and geo-political risks, that translate into increasing funding costs that directly impacts their ability and willingness to finance interbank market, especially for the smaller regional players. As a result, the enduring gap between the demand for liquidity in EMs and current global banking capacity constrains the private sector growth in these markets. IFC plays a unique role in addressing this gap through a comprehensive Short-Term Finance solution, especially in countries like Bangladesh which are SME driven and export-reliant to finance economic growth. IFC will play a catalytic role in providing urgent FX liquidity to banks in Bangladesh. Based on market demand, IFC could also play a potential mobilization role in bringing new funding to local banks.

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 relevant portfolio to identify high risk sectors and determine the Applicable Performance Requirements that would include a combination of: (i) The IFC Trade Finance Exclusion List; (ii) The applicable National Social and Environmental Laws and regulations; and (iii) Eligibility Criteria/E&S Checklist for high risk sectors. BRAC Bank is an existing IFC client and as such has a SEMS in place and has nominated a SEMS officer. IFC will review the existing SEMS of the client in the light of this investment and If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

IFC will also appraise the FI’s labor practices according to the IFC’s Performance Standards 2: Labor and Working Conditions.

Based on the review, the project will be required to:
· Upgrade its existing Social & Environmental Management System (SEMS), to the satisfaction of IFC
· Confirm the person responsible, qualified 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
· Demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions
· Submit a periodic report to IFC as per a format to be provided by IFC