Financed ProjectsIS Bank, Georgia

Identification Code:

OP/17/0062

Total Operation Cost:

7.000.000

Maturity:

60 months

Operation Status:

Description and Purpose of the Operation:

IS Bank, Georgia

Countries of Operation:

Georgia (100,00 %)

Financial Product:

SME's

Sector:

Financial Institutions

Domain:

Private

Borrower/Client:

SME Finance Facility to Isbank Georgia

Co-Financiers/Participants:

N/A

Guarantors/Sponsors:

N/A

Developmental and Regional Cooperation Impact:

This operation involves a USD7 million lending facility with the Isbank Georgia, for on-lending to eligible small and medium sized enterprises (SMEs). Economically, it is expected to have marginal but favorable benefits for the Georgian economy, the most relevant being additional tax revenue gains from increased economic activity resulting from the financing provided, increases in employment, and multiplier effects for other parts of the economy. The regional cooperation element is low, because it is not yet known who the end beneficiaries of the facility will be, but most of the SMEs are likely to be mainly oriented to the domestic market. Nevertheless, the presence of Isbank in other BSEC countries increases the potential for the realization of regional cooperation benefits.

Environmental Classification and Impact (summary):

Financing SMEs through Financial Intermediaries (FIs) is associated with certain environmental and social (E&S) risks and impacts. These relate mainly to institutional settings and capability of the FIs to adequately identify, assess and manage the risks and impacts generated by its lending activities. The E&S due diligence of Isbank focused on the existing E&S management arrangements, such as policies, procedures, rules and responsibilities, the existing portfolio with the scope of identifying whether the Borrower is involved in financing high –risk projects, as well as on products and services that may have implications in the BSTDB E&S Exclusion List. The due diligence concluded that IsBank does not have a formal E&S management system in place and its activities are regulated only by the domestic legal requirements. In this respect, the Borrower does not meet the existing BSTDB’s E&S requirements for Financial Intermediaries. Therefore, it is deemed necessary for IsBank to adopt the corporate E&S requirements of the parent Bank, as well as develop its own E&S system commensurable with the nature and scale of its lending activity and integrate it into its overall credit appraisal process. This need to cover the following aspects: checking the eligibility of loans against the Exclusion List; identification of transactions of high and medium E&S risks and carrying out of the appropriate appraisal and monitoring of such transactions; and integrating of E&S clauses into credit agreements. It is also necessary for IsBank to formally assign the task of E&S risk assessment to a member of the management, and recruit an officer with the appropriate background, or train the existing credit risk officers to cover the E&S issues associated with its SMEs.

Operation Leader:

Financial Institutions I

E-mail:

fi1@bstdb.org