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Projects

Summary of proposed guarantee

Summaries of proposed guarantees are provided prior to Board consideration and before final contract signing, and they are therefore subject to change. Project briefs are disclosed after Board consideration and contract signing and reflect the terms of the project at the time of contract signature. Environmental and Social Review Summaries are provided for projects assigned an Environmental Assessment Category of A or B.

 

Project name
Turkish Eximbank
Project ID
9416
Fiscal year
2015
Status
Proposed
Guarantee holder
Citibank International plc
Investor country
United Kingdom
Host country
Turkey
Environmental category
FI
Sector
Financial Services
Date SPG disclosed
August 22, 2014
Projected Board date
September 25, 2014
Gross exposure
 $500.0 million
Project type
Non-SIP
Strategic priority area
Middle Income

Project Description

This summary covers a proposed loan facility from a syndicate of commercial banks to Turkiye Ihracat Kredi Bankasi AS (TE), Türk Eximbank. Citibank International plc, serving as the lenders’ agent bank, has applied for a MIGA guarantee for an amount of up to $500.0 million for a tenor of up to 11 years covering  principal and interest, against the risk of non-payment of their long-term financing to TE.

The project involves an increase in medium and long-term financing by TE to the Turkish export sector, focusing on mostly small and medium enterprises (SMEs). TE’s increased longer-term lending capacity will be funded by the €250 million ($345 million) 10-year loan facility from Citibank Europe Plc., Norddeutsche Landesbank – Girozentrale (NORD/LB), and Société Générale S.A. The loan facility will complement TE’s other funding sources and will enable it to provide much-needed medium and long-term funds to SMEs and contribute to Turkey’s efforts to grow its export sector.

Environmental Categorization 

The project is a category FI-2 under MIGA's Policy on Environmental and Social Sustainability. The facility guaranteed by MIGA will be used to support medium and long-term loans (approximately 80 percent of which are expected to be working capital loans and 20 percent investment loans) for small (less than 250 employees) and medium (between 250 and 1499 employees) size enterprises. In the TE portfolio, direct lending of medium and long-term loans is concentrated mostly in medium-risk and low-risk sectors (e.g., manufacturing and services) as opposed to high-risk sectors (e.g., mining and infrastructure). The financing guaranteed by MIGA will be used to fund business activities that have a potentially limited adverse environmental or social impact, that are few in number, generally site-specific, largely reversible and readily addressed through mitigation measures. The financing guaranteed by MIGA will not be used for high-risk projects.

TE has an overall system for evaluating credit risk, which for the MIGA-guaranteed financing will include screening against a negative list that is consistent with MIGA’s Exclusion List and consideration of environmental and social risks and impacts. Given the nature of activities supported by the MIGA-guaranteed financing, the system will ensure compliance with MIGA’s Exclusion List and applicable local environmental and social laws. TE relies on the Ministry of Environment to review environmental and social impact assessments (when required) and monitor environmental compliance of investment projects. The Ministry of Environment’s review and monitoring is evidenced by provision and renewal of environmental approvals and permits. TE will also ensure ongoing compliance of its employment practices with MIGA’s Performance Standard Two on Labor and Working Conditions, and will provide MIGA with an annual monitoring report summarizing the implementation of the system for managing environmental risks and impacts and the overall environmental and social performance of the portfolio.

Development Impact

The MIGA-supported loan facility is expected to allow TE to provide longer term financing at cheaper pricing. This is especially relevant for SMEs, which currently lack attractive financing options.

Export strategies are an integral part of Turkey’s short- and medium-term development plans. The MIGA-supported loan facility is aimed specifically at helping TE reach its credit-expansion targets for SMEs. TE’s increased lending capacity, based on the expanded resources realized through this MIGA-supported funding, enables companies operating in Turkey to maximize their export opportunities, improves the competitiveness of Turkish exports in foreign markets, and assists in job creation and retention among Turkish exporters.

 

 
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