To reduce liquidity constraints caused by COVID-19 and increase access to finance for firms operating in the export sector in Turkey.
The proposed Eximbank COVID-19 Credit Line Project will be supported by a sovereign-backed loan (“Credit Line”) to Türkiye İhracat Kredi Bankası A.Ş. (Export Credit Bank of Turkey, “Eximbank” or the “Borrower”), the largest development bank in Turkey. The Credit Line will be guaranteed by the Republic of Turkey. Eximbank will on-lend the proceeds of the Credit Line to sub-borrowers operating in the export sector in Turkey for their working capital needs. This project will be processed under AIIB’s COVID-19 Crisis Recovery Facility (“Facility”), a framework designed to assist members to respond to the COVID-19 pandemic, and will follow the approach adopted under the earlier Turkey COVID-19 Credit Line Project (2020), which extended an aggregate USD 500 million credit line to Türkiye Sınai Kalkınma Bankası and Türkiye Kalkınma ve Yatırım Bankası, two of Turkey’s development banks.
AIIB’s Environmental and Social Policy (ESP) including the Environmental and Social Exclusion List (ESEL) is applicable to this Project. The Project has been placed in Category FI and the FI’s Sustainability Management System (SMS), is materially consistent with AIIB’s ESP requirements.
Given that this Project will finance working capital sub-loans for activities that do not include CAPEX or high environmental and social (E&S) risks (discussed below), the Project is generally expected not to induce potentially adverse impacts that would be unprecedented and can therefore be successfully managed using good practice in an operational setting.
Activities included in AIIB’s ESEL and those involving high E&S risks and potential impacts, to be elaborated in an Operations Manual (OM) for the Project, will not be eligible for financing. The latter would include all Category A activities and selected Category B activities that present higher E&S risks and impacts, such as (a) involuntary physical or economic resettlement; (b) risk of adverse impacts on Indigenous Peoples and/or vulnerable groups; (c) significant risks to or impacts on the environment, community health and safety, biodiversity and cultural resources; (d) significant retrenchment; or (e) occupational health and safety risks. Coal mining, coal transportation or coal-fired power plants, as well as infrastructure exclusively dedicated to support any of these activities will also be excluded.
Eximbank will be required under its SMS to: (a) screen the proposed use of funds by sub-borrowers against the ESEL; (b) assign an E&S risk rating to the activities proposed for sub-loan financing; (c) conduct an E&S assessment of the sub-borrowers and sub-loans; and (d) require sub-borrowers: (i) to comply with applicable E&S regulatory requirements; (ii) not to use sub-loan proceeds to finance high E&S risk activities (as described above); and (iii) to represent not to have been determined to be in breach of E&S regulations or to be reported as having materially contravened E&S good practices. Sub-borrowers will be required to implement an Environmental and Social Action Plan (ESAP) whenever deemed necessary to remediate any material gap with the applicable requirements of the SMS and OM within an agreed timeframe and will report to Eximbank on their E&S performance at least annually.
Eximbank has an External Communication Mechanism (“ECM”) for the public to express any concerns or opinions and suggestions on sustainability issues. Information on the ECM is available at https://www.eximbank.gov.tr/en/about-us/sustainability. Eximbank has agreed to establish a Project-level ECM.
Eximbank will be required to: (a) build a database allowing the tracking of the use of AIIB funds and E&S risk rating of the sub-borrowers; (b) monitor the sub-borrowers’ progress in fulfilling their E&S commitments; and (c) report to AIIB on an annual basis.