Yapi Kredi Lease Energy Efficiency

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	26169
Company name	Yapi Kredi Finansal Kiralama A.O.
Country	Turkey
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	January 25, 2008
Projected board date	March 17, 2008
Previous Events	Invested: June 16, 2008 Signed: June 10, 2008 Approved: May 29, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed project has the dual aim of expanding SMEs’ access to finance and promote energy efficiency among SMEs in Turkey. The proposed project is a loan of up to $50 million equivalent to Yapi Kredi Finansal Kiralama A.O. (YKL or the company), one of IFC’s longstanding partners in Turkey with extensive reach, especially in the SME market segment. The proposed project is IFC’s first significant initiative to help develop Turkey’s nascent market for Energy Efficiency (EE). The loan will finance the expansion of YKL’s leasing portfolio to SMEs with a special focus on financing EE projects.

In addition, the German development agency, Kreditanstalt für Wiederaufbau (KfW), is also considering to finance up to EUR30 million for EE related subloans on similar terms and conditions to IFC’s financing. In this respect, the proposed project is part of a broader partnership between IFC and KfW to support the development of EE finance through Financial Intermediaries (FIs) in Central and Eastern Europe.

Anticipated development impact of the project

The project is expected to have multiple development impacts, including:

- Promoting EE Finance:

IFC support in development of leasing financial products for energy efficient and renewable energy equipment will help the end users to find proper financing and to raise awareness.

- Reduced Energy Consumption and Reduced Pollution:

The leasing sub-projects are expected to reduce energy consumption for the relevant industries i.e. light industries (textile, printing, food), power and heat generation etc.) as well as in industrial and commercial buildings. Reduced energy consumption is a global priority, as well as important at the national level in the interest of reducing dependence on imported energy. Investments in energy efficiency offer a cost effective way to meet growing energy demand while reducing emissions. Benefits to environment will result from reducing pollution emissions (as a result of reduction of energy use and materials). Reduced pollution may result in improved health and living-environment quality for those in the vicinity of the plants. Reduced pollution, particularly CO2, will also contribute to efforts to mitigate the effects of global warming.

- Increasing Access to Finance for SMEs:

This project will help expand SMEs’ access to critically-needed term finance for non-EE projects as well. Leasing companies have traditionally been one of the key providers of term finance for SMEs, and this project will help make term finance available to more SMEs by working with an SME-focused leasing company.

IFC's expected development contribution

IFC is providing longer term funding to support leasing companies’ reach into the SME market. Long term funding is still lacking from market sources even for the more reputed leasing companies such as YKL.

IFC is helping to promote and catalyze energy efficiency as a distinct market segment that the Turkish financial sector should recognize and cater to. In Turkey, EE finance is a relatively new and under-developed sector. With a decade of experience in EE financing, IFC is in a strong position to leverage its global knowledge to help establish a successful EE financing model in Turkey through the cooperation with KfW.

The proposed advisory services (AS) package will help YKL develop energy efficiency financing products as well as to recognize and monitor these leases separately. Through a tailored AS, IFC will help the company develop and introduce a new product to the market and will support YKL’s efforts in extending its client base and diversifying its loan portfolio by increasing the share of retail clients.

IFC’s mobilization impact is demonstrated through KfW’s involvement to further support EE lease portfolio of the company.

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.

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

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

- Develop and/or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons 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;
- Submit a periodic report to IFC as per a format to be provided by IFC.

IFC PROJECTS