The International Finance Corporation (IFC), the private investment arm of the World Bank Group, has proposed to partner with HSBC Bangladesh to establish a $200 million risk sharing facility (RSF).
IFC’s share in the RSF will be 50 per cent i.e. its maximum exposure will not exceed $100 million equivalent, it said in a disclosure dated February 27.
Typically, an RSF is a bilateral loss-sharing agreement between IFC and an originator of assets in which IFC reimburses the originator for a portion of the principal losses incurred on a portfolio of eligible assets. The originator may be a bank or a corporation
The proposed RSF with HSBC Bangladesh will support the latter to extend additional finance to its existing clients in sectors which have significant impact on the growth of the country’s economy and are also of strategic importance and relevance to IFC, namely agribusiness, power, climate/clean energy, ready made garment and pharmaceuticals, it added.
Improved availability of credit to these sectors is expected to benefit consumers, producers and buyers along the value chain and therefore support economic growth, increase employment and encourage the generation of higher income in these sectors, IFC said.
In addition, it will support key local industries as ultimate recipients of funds under this project would be buyers of raw materials, processors and manufacturers in order to support their future growth.
HSBC is incorporated in Hong Kong and its ultimate holding company HSBC Holdings Plc is incorporated in London. Listed on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings Plc are held by more than 204,000 shareholders in 133 countries and territories.
The bank operates in Bangladesh through its branches and offers a range of financial services including commercial banking, retail banking, liquidity and cash management, trade & receivable finance, global markets & security services.
Over the years, IFC has drawn on its global and local experience and has provided a combination of investments and advisory services in Bangladesh. As of June 2017, IFC’s committed portfolio in Bangladesh is over $1 billion.
It recently proposed to provide up to $40 million in senior financing to IDLC Finance Ltd (IDLC), the largest non-banking financial institution in Bangladesh. In November last year, IFC said it is considering extending up to $40 million in a short-term loan to Dhaka-headquartered BRAC Bank Ltd. In August, it proposed an investment of around $2-3 million in online grocery supplier Chaldal Inc.
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