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| XacBank |
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| 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 | 25137 |
| Company name | XacBank Ltd. |
| Country | Mongolia |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Active |
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| Date SPI disclosed | January 18, 2007 |
| Projected board date | February 20, 2007 |
| Previous Events | Invested: January 7, 2008
Signed: June 11, 2007
Approved: June 5, 2007 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| The proposed project is to provide a 7 year $5 million new loan to XacBank in Mongolia to support its growth in microfinance and expansion into traditional commercial banking business. XacBank is an existing IFC client. In June 2002, IFC provided the bank with an 8-year loan amounting to $400,000 with 2-year grace period. From January 15, 2005, the bank began to make repayment and has kept a good repayment record. |
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| Project sponsor and major shareholders of project company |
The project sponsor is XacBank. XacBank is Mongolia's first micro-credit company and the first non-bank financial institution (NBFI) licensed and supervised by the Bank of Mongolia. XacBank was registered as a bank in October 2001 after a merger between two NBFIs. It offers a wide range of financial services, including 16 credit products, 7 deposit products, money transfer, and foreign exchange services through a network of 64 branches and extension units.
Today, the bank has become one of the leading financial institutions in Mongolia specialized in microfinance. With assets of $72 million at the end of September 2006, it is the 7th largest bank in the country. It is serving 55,000 loan customers with an outstanding loan portfolio of $43.9 million.
Major shareholders of XacBank are: Mercy Corps (18.46%), MicroVest (17.37%), Triodos (13.88%), Tuushin LLC (13.22%), ShoreCap International (12.23%), and EIT LLC (10.94%).
XacBank became the first commercial bank rated by Moody’s in Mongolia. The ratings for XacBank include Bank Financial Strength rating of D, Ba2 for local currency deposits, B2 for foreign currency deposits, Ba2 for local currency issuer ratings and Ba2 for foreign currency issuer ratings. All ratings have a stable outlook. Also received “A” rating from Planet Rating agency in 2006. |
| Total project cost and amount and nature of IFC's investment |
| The total project cost is $5 million, and proposed IFC investment is a $5 million loan from IFC’s own account. |
| Location of project and description of site |
| XacBank is headquartered in Ulaanbaatar, the capital city of Mongolia. It has 64 branches and extension units across Mongolia. The bank makes loans through these branches and extension units. |
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| Anticipated development impact of the project |
| The project has a strong developmental impact as it will assist XacBank to expand operations in support of productive micro and small businesses, herders and small agricultural enterprises in rural areas across Mongolia nationwide. XacBank is the leader among Mongolian microfinance lenders with an average loan size of about MNT 891,634 ($730 equivalent). IFC’s proposed loan will support and help to sustain the strong growth it has demonstrated in recent years. Its loans, including those classified as consumer loans, are put to productive uses within Mongolia’s extended families thereby supporting livelihoods, employment generation in the private sector, and particularly in low income rural communities. The institution's strong performance, as demonstrated by its portfolio growth and profitability, its management methodology and control mechanisms and its outreach in rather remote and geographically challenging areas will serve as "best practice" examples for other rural finance institutions, state-owned and slated for privatization or otherwise. |
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| IFC's expected development contribution |
| IFC will be providing necessary funding through a new loan to support the bank’s lending operations to its micro and SME business clients. IFC will also play an important role by providing ongoing advice on the business plan and strategy implementation of the bank so as to help it become financially sustainable. |
| 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, for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements, if any, that would include a combination of:
- The IFC Microfinance Exclusion List; and/or
- The applicable National Social and Environmental Laws and regulations.
IFC will also review the capacity of the FI to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). As an existing IFC client XacBank has implemented an SEMS and provided regular annual environmental performance reports. As the proposed project will apply IFC’s revised social and environmental requirements, IFC will review the existing SEMS and suggest Supplemental Actions, if required, to address any gaps.
Based on the review, the project will be required to:
- Upgrade, if necessary, its existing SEMS, prior to disbursement to the satisfaction of IFC;
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Requirements;
- Commit to take action to remedy any gaps in SEMS implementation on an ongoing basis;
- Continue to submit periodic reports to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
XacBank
XacBank Building, Prime Minister Amar's Street
Sukhbaatar District, POBox-46/721
Ulaanbaatar, Mongolia 210646
Telephone: 976-11-318185
Fax: 976-11-328701
E-mail: bank@xacbank.mn
Website: www.xacbank.mn
Mr. Yang Li, Investment Officer
Global Financial markets Department
International Finance Corporation
E- mail: YLi@ifc.org |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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