IFC is building on its substantial commitments to Sub-Saharan Africa as governments, businesses, and millions of people across the world's poorest continent brace for the fallout from the gathering financial crisis.
Grim economic news in the richest countries is spreading to the developing world through the threat of falling exports, reduced tourism receipts, and a drop in remittances.
IFC, which is supporting private sector growth to help create jobs and reduce poverty across Sub-Saharan Africa, has an especially important role to play in helping economies cope with the sharp financial downturn, during which foreign aid and direct investment will likely fall. Last year, IFC's activities reached 36 countries within the region.
Lars Thunell, IFC Executive Vice President and CEO, traveled to Ethiopia, Madagascar, and Zambia during the last week of November and first week of December 2008. He had the opportunity to see first-hand a number of IFC projects aimed at bringing opportunity through private-sector growth.
Addressing the Financial Crisis
To address problems before they erupt, IFC is working closely with clients, especially in Africa's poorest and most vulnerable countries, to help them identify risks and prepare for any contingency. Rather than reduce exposure to risky markets during the crisis, we are devising new strategies to better support these markets.
IFC has proposed a recapitalization fund of around $3 billion to help smaller developing countries which lack resources to shore up their banking systems. Subject to Board approval, the fund would launch with as much as $1 billion from IFC and at least $2 billion from governments, private banks, and other partners. Japan announced that it will contribute $2 billion to this fund.
To address problems of liquidity, the hallmark of the recent crisis, we are helping with short-term and trade finance funding to meet immediate needs in the marketplace and keep trade flows moving. IFC plans to double its Global Trade Finance Program from $1.5 billion to $3 billion. The trade guarantees issued under the program will have an average tenor of six months, thereby supporting up to $18 billion for short-term trade finance over the next three years.
This program has been most popular in Africa, where about half of the guarantees have been issued. The expanded facility would benefit participating banks based in 66 countries, including many of Africa's poorest economies. The program offers banks partial or full guarantees covering the payment risk in trade related transactions.
Development Highlights
Our strategy for Africa is built on improving the investment climate, supporting the growth of smaller businesses, and proactively developing large private investment projects. The emphasis is on assisting the poorest countries and those recovering from conflict.
In FY08, IFC committed about $1.4 billion to more than 60 projects in 25 Sub-Saharan African countries. We are delivering advisory services programs to 36 countries in the region, supporting efforts by governments and business to build strong, inclusive private sectors that will help create employment and reduce poverty.
Recent IFC development highlights in Africa include:
- A $213 investment package for West African bank Ecobank to help support its regional expansion and increased loans to small businesses
- A partnership with a Nigerian health care provider to provide subsidized health insurance to more than 22,000 people in the country
- An investment in Ghana Home Loans to help the specialized mortgage provider boost residential mortgage lending and provide better access to housing finance for Ghanaians
For more information contact:
Jason Hopps
Johannesburg, South Africa
Phone: +27 11 731 3120
E-mail: jhopps@ifc.org
