Locko A+B Loan

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26901
Company name	ZAO Locko Bank
Country	Russian Federation
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	March 31, 2008
Projected board date	May 19, 2008
Previous Events	Invested: July 25, 2008 Signed: July 9, 2008 Approved: July 7, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project company is Locko Bank (Locko or the Bank), a medium-sized Russian commercial bank, strategically focused on lending to small- and medium-sized enterprises (SMEs). Having originally operated in Moscow and Moscow region, Locko is currently expanding into the regions of Russia. The Bank is a dynamically developing institution with strong asset growth and good market position.

The proposed project is a syndicated loan which will be used:

- to support the Bank's lending program to SMEs;
- for trade finance activities;
- as well as to support overall liquidity needs.

Anticipated development impact of the project

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's expected development contribution

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.

Environmental and social issues - Category FI

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.

IFC PROJECTS