BDC Botswana NHFO-SOE
On June 30, 2023, MIGA issued a guarantee to cover a loan facility from Commerzbank AG (Commerzbank) to Botswana Development Corporation Limited (BDC). MIGA is covering the risk of non-payment of both principal and interest for an amount of up to EUR57.0 million and a tenor of up to 10 years.
MIGA’s guarantee enables BDC to increase its ability to raise long-term financing from the private sector to promote growth in key sectors, job preservation and creation, as well as financial inclusion in Botswana. The long-term loan facility complements BDC’s other funding sources and enables it to provide financing to businesses operating in key industry sectors aligned with the country’s National Adaptation Plan Framework, and climate finance projects.
BDC provides debt and equity financing to clients in Botswana. For this project, the MIGA guarantee will support climate finance and lending to the following key sectors: manufacturing, agriculture, trade, hospitality and tourism, real estate, fintech and healthcare. Typical transactions associated with these sectors and SMEs have limited environmental and social (E&S) risk and impacts and as such, the portfolio is considered medium risk. This project has thus been categorized as FI-2 under MIGA’s Policy on Environmental and Social Sustainability (2013).
The main E&S risks of this project relate to BDC’s ability to identify, assess, and manage the E&S risks and impacts associated with its lending activities and the management of labor matters. MIGA analyzed BDC’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. MIGA also analyzed BDC’s E&S risk management procedures in line with the requirements of Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts (PS1), and BDC’s labor practices in line with the requirements of Performance Standard 2: Labor and Working Conditions (PS2). The applicable E&S requirements for this project will be: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in Botswana; and (iii) MIGA E&S Performance Standards.
As of December 2021, BDC’s investment portfolio (loans and equity) is mainly comprised of corporate finance and a smaller portion of SME finance. The main sectors covered include real estate, manufacturing, financial services, agriculture, consumer staples/retail, and hospitality. BDC has limited exposures to activities on the MIGA Exclusion List.
BDC has an E&S management system (ESMS) and an E&S team. The ESMS includes a detailed procedure for identifying, assessing, and managing E&S risks and impacts associated with clients’ activities. The ESMS enables BDC to assess E&S risks and impacts throughout the transaction cycle. Transactions are screened against BDC’s exclusion list, applicable E&S laws and regulations and the Performance Standards. Where required, corrective action plans are developed to address E&S gaps and E&S covenants are also included in facility agreements with clients. The E&S performance of projects is monitored by BDC. The E&S team is led by an E&S officer with support from other officers of the bank, and external consultants.
BDC will expand its exclusion list to include all activities on MIGA’s Exclusion List. To complement the ESMS, BDC will develop a procedure for receiving and addressing E&S concerns and requests for information from third parties, in line with the requirements of PS1.
BDC’s emergency response procedures are in line with the requirements of PS1. In response to the COVID-19 pandemic, BDC implemented remote work, physical distancing, and hygiene measures to minimize and manage the risk of exposure for its employees and clients.
BDC’s labor policies and procedures are in line with the requirements of PS2. Amongst other aspects, BDC has labor policies and procedures that address terms of employment, recruitment, renumeration, and benefits, grievance management, training, and occupational health and safety.
BDC will be required to report periodically to MIGA on the implementation of the ESMS and application of the Performance Standards.
The project’s primary development impacts will stem from improved consumer access to credit and environmental effects. In terms of environmental effects, BDC’s commitment to provide financing to eligible climate finance projects will help the country address its ambitious Nationally Determined Contributions (NDC) target (a 15% GHG emissions reduction between 2010 and 2030) under the Paris Agreement. Furthermore, the project effects include improvement in market competitiveness and improvements in sustainability, by increasing financing to consumers and by demonstrating the viability of financing climate-focused projects, respectively.