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Kosovo

ProCredit Mandatory Reserves Coverage

€33.3 million
Banking
Summary of Proposed Guarantee
Proposed

Project description

This summary covers equity investments by ProCredit Holding AG & Co. KGaA (ProCredit) into its subsidiary ProCredit Bank JSC, Kosovo (ProCredit Kosovo). ProCredit has applied for MIGA guarantees of up to EUR33.3 million in mandatory reserves cover for a period of up to 5 years.

ProCredit is parent company headquartered in Germany and operates 12 banking subsidiaries in  Southeastern Europe, Eastern Europe, Ecuador, and Germany. ProCredit is a development-oriented banking group with a primary focus on lending to Small and Medium-Sized Enterprises (SMEs). ProCredit’s subsidiary banks outside of Germany are required to maintain reserves at the central banks in their respective jurisdictions, based on the volume of customer deposits that these subsidiaries have. Mandatory reserves contribute to ProCredit’s overall risk-weighted assets (RWA) at the consolidated level, resulting in less headroom for other assets at a given level of capital.    

Environmental Categorization

This Project is categorized as FI-2 under MIGA’s Policy on Environmental and Social Sustainability (2013). ProCredit Kosovo is a commercial bank providing loans to SMEs and retail clients and has a network of 18 branches throughout Kosovo. ProCredit Kosovo is a subsidiary of ProCredit Germany and it has been a MIGA client since 2010.

MIGA analyzed the portfolio of ProCredit Kosovo for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List. As of December 2019, SME finance accounts for approximately 69.7% of the bank’s total outstanding portfolio exposure and retail banking 30.3%. The largest sector exposures in the SME portfolio include wholesale and retail trade, consumer goods, food and beverages, construction and real estate, furniture and related products, and other sectors. In addition, ProCredit Kosovo promotes investments in renewable energy projects and its portfolio includes support to solar photovoltaic, hydropower, geothermal, biomass and biogas projects. ProCredit Kosovo does not have any exposure to activities on MIGA’s Exclusion List and is not engaged in supporting coal projects. The main environmental and social (E&S) risks of this Project are associated with the subsidiary’s lending activities in medium to high E&S risk sectors and its capacity to manage these risks. The applicable E&S requirements for the ProCredit Kosovo portfolio will be: (1) MIGA’s Exclusion List; (2) applicable national environmental and social laws and regulations; and (3) the MIGA’s Performance Standards.

Being an existing MIGA client ProCredit Kosovo has an E&S officer and has implemented a ProCredit Environmental Management System (EMS) which is in line with the requirements of MIGA Performance Standard 1.The group system consists of three pillars: i) internal environmental performance; ii) E&S risk assessment in lending and, iii) the green finance. The Bank is following the Group Standards for Managing the Environmental and Social Risk of Lending June 2020  that reflects the requirements of ProCredit Exclusion List, national laws and regulations and MIGA Performance Standards. Thus, Procredit Kosovo is in compliance with the E&S requirements under MIGA’s existing guarantee.

ProCredit Kosovo has developed a set of human resources policies and procedures, in line with ProCredit Human Resources Management Policy, requirements of the national legislation and all the applicable requirements of MIGA Performance Standards 2: Labor and Working Conditions.

ProCredit Kosovo follows a group level Business Continuity Policy that describes among other things business continuity planning and strategies at the various stages of emergency, requirements for trainings and regular testing. The Bank also  has in place a subsidiary specific Business Continuity Plan) and an Emergency Response Plan that cover emergency response procedure, crisis management and business recovery protocols for the critical business processes, internal/external notification and decision tree, requirements for training and drills and the requirements for auditing of the business continuity plan. To respond to COVID-19 pandemic and following the national guidelines, ProCredit Kosovo has implemented social distancing and hygiene measures, work from home arrangements, as well as the awareness training on travel and safety at work. ProCredit Kosovo policy and plans reflect the requirements of the emergency preparedness and response plan under MIGA Performance Standard 1.

Based on MIGA’s review and applicable performance requirements, ProCredit Kosovo will update its procedures on external communications in line with the MIGA Policy on E&S Sustainability 2013 requirements.

ProCredit Kosovo will report periodically to MIGA on the development and implementation of the EMS and application of the Performance Standards.

Development impact

The aim of MIGA’s proposed guarantees is to help ProCredit reduce the risk of some of its assets, which would lead to a reduction in the group’s RWA on a consolidated basis. The RWA capacity that is freed up is expected to be used by ProCredit  to extend more credit in Kosovo, primarily to SMEs.

MIGA’s proposed coverage to ProCredit is aligned with the World Bank Group Country Partnership Framework (CPF) for Kosovo, as it will support private sector led growth through access to finance particularly through provision of credit to SMEs.

 

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MIGA supports its clients (as defined in MIGA Policy on Environmental and Social Sustainability) in addressing environmental and social issues arising from their business activities by requiring direct investment clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities. MIGA support to Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations as per the requirements of Performance Standards 1. 
In addition, Affected Communities have unrestricted access to the Compliance Advisor/Ombudsman (CAO), the independent accountability mechanism for MIGA. The CAO is mandated to address complaints from people affected by MIGA-guaranteed business activities in a manner that is fair, objective, and constructive, with the goal of improving environmental and social project outcomes and fostering greater public accountability of MIGA.
Independent of MIGA management and reporting directly to the World Bank Group President, the CAO works to resolve complaints using a flexible, problem-solving approach through its dispute resolution arm and oversees project-level audits of MIGA’s environmental and social performance through its compliance arm.
Complaints may relate to any aspect of MIGA-guaranteed business activities that is within the mandate of the CAO. They can be made by any individual, group, community, entity, or other party affected or likely to be affected by the environmental or social impacts of a MIGA-guaranteed business activity. Complaints can be submitted to the CAO in writing to the address below:


Compliance Advisor/Ombudsman

International Finance Corporation

2121 Pennsylvania Avenue NW

Room F11K-232

Washington, DC 20433 USA

Tel: 1 202 458 1973

Fax: 1 202 522 7400

E-mail: cao-compliance@ifc.org