Hana Short Term

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

28556

Company name

PT. Bank Hana Indonesia

Country

Indonesia

(IDA)

Sector

Commercial Banking - General

Environmental category

Department

Reg Ind, Financial Markets, ASIA

Status

Active

Date SPI disclosed	October 22, 2009
Projected board date	November 23, 2009
Previous Events	Invested: July 21, 2010 Signed: December 23, 2009 Approved: December 20, 2009

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed project seeks to support PT Bank Hana (“Hana Indonesia”, the “Bank”, or the “Company”), an IFC investee bank and a wholly owned subsidiary of Hana Bank Korea, by providing a short term finance facility of up to $8 million. The tenor of the facility will be up to 360 days with an option to be renewed annually up to two times subject to satisfactory performance.

The project would represent IFC’s commitment to support its long-term partner, particularly in:
- Strengthening Hana Indonesia’s position in trade finance; and
- Supporting the pre-export, post-export, and working capital financing needs of Hana Indonesia’s clients, export oriented SMEs

The project is aligned with IFC’s strategic priority of building long-term partnerships with emerging global players in developing countries and is in line with IFC Indonesia Financial Markets strategy to strengthen the banking sector by bringing international best practice to better serve SMEs. The project is also expected to promote further trade relationships mainly between Indonesia and Korea by supporting the supply chain financing needs of Indonesian exporters.

Project sponsor and major shareholders of project company

Hana Bank Korea:
Hana Bank Korea (“Hana Korea”) is one of the major players in Korea’s banking industry. Since its incorporation as Hana in 1991, it has successfully completed six merger and acquisitions, making it the fourth largest bank in Korea. Hana Korea is the majority shareholder of Hana Indonesia with a 70.1% ownership stake.

Hana Financial Group:
Hana Korea is a wholly owned subsidiary of Hana Financial Group (“HFG”), an IFC investee company. HFG’s shareholding structure as of December 2008 is as follow: Angelica Investments (9.62%), GS Dejakoo (8.67%), JPM Securities (4.22%), National Pension Fund (3.90%), Deutsche Bank (2.65%), Posco (2.20%), and public (the remaining balance). IFC has 0.15% shares in HFG.

Mr. Bambang Setijo and PT. Trisetijo Manunggal Utama (“TMU”):
Mr. Setijo and TMU are the local sponsors of Hana Indonesia, each with 5% ownership. In 2007, IFC and Hana Korea established a strategic alliance to invest and acquire a small local bank, PT Bank Bintang Manunggal (“BIMA”). BIMA was then transformed into Hana Indonesia. Prior to acquisition by IFC and Hana Korea, BIMA was owned by Mr. Setijo (10%) and TMU (90%). TMU is an investment holding company controlled by. Mr. Setijo.

Total project cost and amount and nature of IFC's investment

The total project cost would be US$8 million. The proposed project would consist of IFC loan financing in US$ on IFC’s own account to Hana Indonesia. Hana Indonesia, however, is requested to co-finance at least 15% of each sub-loan at comparable terms for the first year, 25% for the second year, and 50% for the third year.

Location of project and description of site

Hana Indonesia is headquartered in Jakarta, Indonesia and has 17 branches located in West Java and Central Java. Hana Indonesia, currently ranked 93rd in terms of asset size, targets to be one of the top 40 banks in Indonesia and build up its presence with more branches throughout Indonesia. The proposed investment will support Hana Indonesia’s SME clients which are customers or potential customers of existing branches.

Anticipated development impact of the project

The project is expected to have Development Impacts in the following areas:

Promoting South-South Trade
The project will promote South-South trade by providing the necessary funding for Indonesian exporters who export goods mainly to Korea through a partnership with a Korean bank based in Indonesia. IFC’s facility will help address the funding needs at pre-shipment, post-shipment, or working capital phases.

Supporting SME segment
The Project will allow IFC to support the SME segment, which is an important driver for the economy, by providing the necessary short-term financing through a partnership with a local bank.

IFC's expected development contribution

The proposed project allows IFC to play an active role in:

Increasing the Availability of Short-Term Financing for Local Exporters
There is limited availability of short-term US$ funding in Indonesia, especially at this time of crisis where credit has significantly weakened. Hana Indonesia, a new entrant to the Indonesian banking markets, faces tight liquidity in US$ which constraint Hana from supporting its clients, the Indonesian exporters. Through this Project, Hana Indonesia would address its clients’ US$ financing needs.

Building the Confidence in the Market by Providing Liquidity Support
By further supporting IFC’s strategic partner, IFC hopes to demonstrate the confidence in the local financial markets and hence positively affect the local credit environment and the financial markets. The proposed project is going to be a pilot project for Short-Term Finance in Indonesia before IFC extends the same facility to other local banks.

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. Applicable Performance Requirements includes a combination of: (i) IFC MFI Exclusion List; (ii) Applicable National Social and Environmental Laws and Regulations; and (iii) IFC’s Performance Standards. The client will be required to have a functional Social and Environmental Management System (SEMS) approved by IFC, and appoint an Environmental and Social officer to ensure sound execution of the SEMS. The client will need to submit annual environmental performance reports to IFC according to an IFC-approved reporting format.

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