BNP Paribas Algeria Capital Optimization
On June 30, 2023, MIGA issued a guarantee to BNP Paribas S.A. (BNPP or the Group) covering its equity investment into its subsidiary in Algeria, BNP Paribas El Djazaïr (BNPPED or the Subsidiary). MIGA is providing capital optimization cover of up to USD192.85 million for a period of up to 3 years (the Project).
BNPP is a leading bank and key player in international banking, which has a presence in 65 countries, with close to 190,000 employees, including nearly 145,000 in Europe. The Group supports all its customers - individuals, associations, entrepreneurs, SMEs and institutions – in the success of their projects through its financing, investment, savings and protection solutions.
BNPPED, a 100% subsidiary of the BNPP Group since 2002, exercises a universal banking activity, thus addressing all types of customers: Individuals (including Algerians residing abroad), Professionals and Companies, through its network of 71 branches and 14 business centers in Algeria.
The Project supports all of BNPPED’s activities. BNPPED provides financial products and services to individuals, micro, small and medium enterprises (MSMEs), and corporates in Algeria. The main sectors supported include industrial manufacturing, automobile sales and repairs, real estate, and construction. These sectors are typically considered to have limited E&S risks and impacts which can be managed through mitigation measures. This project has been categorized as FI-2 in accordance with MIGA’s Policy on Environmental and Social Sustainability (2013).
The main E&S risks of this project relate to BNPPED’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 BNPPED’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. MIGA also analyzed the bank’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 the bank’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 Algeria; and (iii) the Performance Standards (for eligible corporate transactions).
As of December 2022, BNPPED’s portfolio included the following business segments – retail, MSME, corporates and financial intermediaries. The main sectors supported include industrial manufacturing, automobile sales and repairs, real estate, and construction. BNPPED has no exposure to activities on the MIGA Exclusion list.
In relation to E&S risk management, BNPPED has E&S officers who are responsible overseeing E&S risk management procedures. The bank implements BNPP Group E&S procedures which are focused on certain sectors, with the application of the Performance Standards (PSs) limited to Equator Principles transactions. Transactions in these sectors are screened for E&S issues and where applicable, mitigation measures are agreed with clients. BNPPED will be required to incorporate MIGA’s E&S requirements into the existing procedures for all non-retail transactions, including screening against the MIGA Exclusion List, compliance with national laws and regulations, and application of the PSs to eligible sub-projects. BNPPED will also develop and implement a procedure for addressing E&S concerns raised by third parties about projects financed by the bank.
BNPPED has emergency response procedures in place which meet the requirements of PS1. In addition, the banks’ labor practices are also in line with PS2.
BNPPED will be required to report periodically to MIGA on its portfolio, the implementation of the ESMS, including the application of the PSs, and on its labor practices.
The aim of MIGA’s guarantee is to help BNPP reduce the risk of some of its assets in Algeria, which lead to a reduction in the Group’s risk-weighted assets (RWA) on a consolidated basis. The RWA capacity that is freed up is expected to be used by BNPP to support the growth of its lending operations in Algeria, as possible, where credit to the private sector is low by regional standards. The Project is therefore expected to increase on a best effort basis access to finance primarily for domestic and multinational corporates operating in Algeria while encouraging climate-related lending consistent with BNPPED’s strategy.