Bank of Palestine P.L.C

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	27017
Company name	Bank of Palestine
Country	West Bank and Gaza
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	May 12, 2008
Projected board date	June 19, 2008
Previous Events	Invested: October 31, 2008 Signed: July 28, 2008 Approved: June 19, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Bank of Palestine (BoP or the Bank) is the first and largest national bank with a well diversified branch network with 31 branches in West Bank and Gaza. Established in 1960, originally in Gaza city, the Bank has successfully expanded its presence and operations in West Bank, and in 2007 established its head office in a prestigious new building in Ramallah. BoP now has 19 branches in West Bank and 12 in Gaza. BoP has 14% market share of deposits and credit facilities among 22 foreign and local banks active in West Bank and Gaza. Operating as a universal bank, BoP is largely engaged in retail and commercial lending operations, with the largest card processing operations in West Bank and Gaza. BoP is the sole member and franchise owner for Visa and Master Card International in Palestine with over 1,500 point of sale machines throughout Palestine. BoP has a large and well diversified branch network with 30 branches and outlets across West Bank and Gaza.

The project is aimed to support the Bank’s growth and regional expansion plans.

Anticipated development impact of the project

The project will have strong development impacts. It will:

- support a leading local financial institution in its growth and regional (i.e. Jordan) and international expansion as well as enhance the depth and expansion of the financial system of West Bank and Gaza;
- enhance the Bank’s profile in its focus on banking products and services, including to SMEs and low income people, especially in frontier and conflict-affected cities of Gaza, which is crucial for the sustainable development of the private sector in West Bank and Gaza;
- share IFC’s expertise and knowledge of best practices with the Bank, facilitate capacity and institution building and helping the Bank with effective risk management and governance structures;
- strengthen the Bank’s capacity in environmental and social management;
- support existing and future projects and programs with the bank (eg Housing Mortgage and Student Loan, Private Equity and Funds)
- create a demonstration effect for other institutions to become active in West Bank and Gaza.

IFC's expected development contribution

The project will have strong development contribution. It will:

- provide long term partnership to a bank operating in a frontier and conflict-affected banking area;
- set a role model for other private investors to increase their exposures in financial markets of West Bank and Gaza.

Environmental and social issues - Category FI

The project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

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 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 Bank will be required to:

- Develop an, or upgrade, if necessary, any existing Social & Environmental Management System (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