main navigation menu miga logo
World Bank building

MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more.

Young woman bending down to tending to her outside chores

Explore different types of political risk insurance guarantees provided to investors and lenders.

Hyundai building

Explore global projects that support economic growth, reduce poverty and improves people’s lives.

Hands husking peas into a basket full of peas

Learn about the progress MIGA is making in its mission to support economic growth, reduce poverty and improve people’s lives.

Subscribe to Our Monthly Newsletter
x

About Dropdown Description

World Bank building

MIGA’s goal is to promote foreign direct investment into developing countries to support economic growth and more.

Our Impact Dropdown Description

Hands husking peas into a basket full of peas

Learn about the progress MIGA is making in its mission to support economic growth, reduce poverty and improve people’s lives.

Our Products Dropdown Description

Young woman bending down to tending to her outside chores

Explore different types of political risk insurance guarantees provided to investors and lenders.

Projects Dropdown Descriptions

Hyundai building

Explore global projects that support economic growth, reduce poverty and improves people’s lives.

Cambodia

National Bank of Canada Mandatory Reserves Coverage

$300 million
Banking
Project Brief
Active
twitteremail

Project description

On January 27th, 2022, The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group signed a contract issuing guarantee totaling USD 300 million to National Bank of Canada (BNC) for their equity investments (including retained earnings). The MIGA guarantee will cover Expropriation of Funds for mandatory reserves in its subsidiary in Cambodia, Advanced Bank of Asia Limited (ABA) for a period of up to 3 years.

BNC, based in Canada, is one of the largest and systemically important Canadian financial institutions with total assets equivalent of USD 261 billion as of 2020. Its subsidiary bank, ABA, outside of Canada is required to maintain reserves at the central bank of Cambodia, based on its volume of customer deposits. Mandatory reserves contribute to BNC’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). ABA provides financial products and services to retail and corporate clients in Cambodia. The MIGA guarantee provides coverage for NBC’s equity investment in ABA and as such, supports the bank’s general lending activities.

The main environmental and social (E&S) risks of this project relate to ABA’s ability to identify, assess, and manage the E&S risks and impacts associated with its lending activities and the management of labor matters at the bank.  MIGA analyzed the ABA’s portfolio for types of transactions, tenor, size, industry sectors, and exposure to MIGA’s Exclusion List.  MIGA also analyzed ABA’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 are: (i) MIGA Exclusion List; (ii) applicable E&S laws and regulations in Cambodia; and (iii) MIGA Performance Standards (for applicable transactions).

As of December 2020, loans to SMEs represented 84.5% of the bank’s portfolio, with loans to small corporates, financial intermediaries and individuals representing 11.6%, 1.9% and 1.8% respectively. The main sectors financed include wholesale and retail trade, real estate, services, hospitality, transportation and storage, construction, and manufacturing. These sectors are mostly medium-risk sectors, with limited E&S risks and impacts. ABA has no exposures to activities on the MIGA Exclusion List. The bank’s overall portfolio is considered medium risk; the project has thus been categorized as above.

ABA has an E&S team, and the bank implements an E&S management system (ESMS). The ESMS includes a detailed procedure for identifying, assessing, and managing E&S risks and impacts associated with clients’ activities. Core elements of the process include screening against ABA’s exclusion list, categorization, assessment of compliance with applicable E&S laws and regulations and screening against the Performance Standards (where applicable). 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 bank’s E&S team includes officers who are responsible for the day-to-day implementation as well as overall implementation of the ESMS and officers responsible for credit analysis.  E&S risk management has been provided to the E&S team and other officers of the bank involved in the implementation of the ESMS.

ABA will expand its exclusion list to include all activities on MIGA’s Exclusion List. In addition, to complement the ESMS, ABA will develop an external communication mechanism for receiving and addressing E&S concerns and requests for information from third parties, in line with the requirements of PS1.

MIGA also reviewed ABA’s emergency response procedures; the procedures were found to be in line with the requirements of PS1. In response to the COVID-19 pandemic, ABA implemented appropriate sanitization, infection control and social-distancing measures to minimize the risk of exposure for its employees and clients. MIGA’s review of ABA’s labor policies and procedures found the bank to be compliant with the requirements of PS2. Amongst other aspects, ABA has labor policies and procedures that address terms of employment, recruitment, renumeration and benefits, grievance management, training, and discipline.

ABA will report periodically to MIGA on the implementation of the ESMS and application of the Performance Standards.

Development Impact

By supporting ABA’s loan growth, MIGA’s guarantee helps improve access to finance for Cambodian MSMEs in the context of a financing gap estimated at 20-30% of GDP and at a time of increased pressure due to the COVID-19 crisis. In addition to improving access to finance to MSMEs, 75% of the freed-up capital will be used to support WMSMEs. The Project also enhances the stability and resilience of the MSME sector in Cambodia and demonstrates the viability of lending to a sector that is often perceived as risky. At the same time, the Project demonstrates the importance of adopting inclusive business models targeting WMSMEs.

MIGA’s coverage to BNC is aligned with the strategic objectives of the World Bank Group Country Partnership Framework (CPF) for Cambodia (FY2019-2023), as it supports private sector led growth through improved access to finance, particularly through provision of credit to MSMEs, with a focus on women-owned SMEs as well. The project particularly aligns with the objective of enhancing financial sector development and fostering private enterprises.

 

--------------------------------------------------------

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

twitteremail