The project consists of a financing package of up to USD 110 million to Arab African International Bank ("AAIB").
The facility will comprise (i) a senior loan of up to USD 30 million for on-lending to private small and medium enterprises ("SMEs"); (ii) a senior loan of up to USD 30 million under the Egypt Sustainable Energy Financing Facility ("EgyptSEFF"), of which up USD 15 million is expected to be co-financed by either the Agence Francaise de Developpement ("AFD") or the European Investment Bank ("EIB") under the same conditions; and (iii) a trade finance limit of up to USD 50 million for guarantees and cash advances.
EgyptSEFF is a comprehensive financing facility programme in the amount of up to EUR 140 million for sustainable energy investments. The funds will be made available to Participating Financial Institutions ("PFIs") in Egypt for on-lending to eligible private sector sub-borrowers for sustainable energy investments. The facility will promote penetration of energy efficient ("EE") and renewable energy ("RE") technologies, appliances and equipment in Egypt by stimulating demand and raising awareness of the benefits of investments in such technologies.
The EBRD loan will enable AAIB to develop its SME lending activities and expand access to finance for underserved private SMEs, and to support on-lending to private sub-borrowers for EE and RE projects, which are of particular relevance in the context of high energy intensity of the Egyptian economy.
The SME loan will increase the availability of finance to private SMEs allowing greater access to finance for this largely underserved segment.
The EgyptSEFF loan will generate transition impact by promoting expansion of lending into energy efficiency and renewable energy in Egypt. It will have positive demonstration effects particularly with respect to utilising financial intermediaries for energy efficiency and small renewable energy investments.
In addition, the project will contribute to the development of the internal capacity of AAIB for financing energy efficiency and renewable energy projects. This will be achieved by dedicated technical assistance, providing training to loan officers and helping AAIB with product design and the establishment of the necessary procedures, tools and structures for financing energy efficiency improvements.
ARAB AFRICAN INTERNATIONAL BANK
AAIB is the fifth-largest bank in Egypt. The bank has market shares of 5% by loans and 4.5% by deposits.
EBRD Finance Summary
Up to USD 110 million in total financing, of which:
(i) up to USD 30 million SME loan;
(ii) up to USD 30 million EgyptSEFF loan (of which up to 15 million to be cofinanced by either EIB or AFD); and
(iii) up to USD 50 million trade finance limit.
Total Project Cost
Environmental and Social Summary
Categorised FI (2014). AAIB will be required to comply with PRs 2, 4 & 9. Under the SME Loan the client will be required and apply the EBRD's E&S Procedures for Corporate and Small Loans and submit annual environmental and social reports to the EBRD. All projects under EgyptSEFFwill be required to comply with the national environment, health and safety and labour regulations and standards as well as the E&S eligibility criteria for RE and EE sub-projects. This will be confirmed to AAIB by a Project Consultant who will be hired by the EBRD to cover this issue. AAIB will be required to confirm compliance with the E&S requirements as well as the PRs by providing annual environmental and social reports to the Bank.
Technical cooperation under the SME loan will be considered. It would assist AAIB to develop a new SME business unit and to enhance its capacity and know-how in SME lending, including a review of its product range and risk management approaches.
AAIB will benefit from the support of the grant resources from the European Union's Neighbourhood Investment Facility and funds from the EBRD Shareholder Special Fund provided under the EgyptSEFF framework. Donor funds will support a comprehensive technical assistance programme to provide (i) implementation support AAIB and its customers, and (ii) verification of the outcome of completed projects, as well as investment incentives to AAIB and end borrowers.
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