Growth and Opportunities: The Middle East and North Africa

IFC's activities in the Middle East and North Africa have never been stronger, both in terms of investments and advisory services. Our efforts are helping bring tangible benefits to millions of people across the region.

IFC Executive Vice President and CEO Lars Thunell is visiting the region, beginning with his first official trip to Saudi Arabia since joining IFC in 2006. Thunell will emphasize the importance of improving access to housing finance markets, as well as expanding access to finance for smaller businesses throughout the region.

IFC in Saudi Arabia

The visit to Saudi Arabia highlights IFC's continuing commitment to a well-established partnership and recognizes the country's reforms toward developing the private sector. The World Bank Group's Doing Business 2008 report, which ranks 178 economies on the ease of doing business, named Saudi Arabia among the top 10 reformers for last year. The country was the seventh-fastest reformer globally and second-fastest in the region, with reforms in three of the 10 areas studied.

Saudi Arabia has one of the most active private sectors in the region. In FY07, more than 25 percent of IFC's total commitments in the Middle East and North Africa were with Saudi businesses that are expanding regionally. IFC has established a presence in the country and will continue to increase our efforts. So far, we have committed close to $130 million (500 million riyals) in key sectors such as housing, insurance, and leasing.

Housing finance is a priority area for IFC, and we are helping make a difference in Saudi Arabia. The strong demand for housing here reflects some of the fastest population growth in the region. The people are heavily concentrated in cities, with over half under age 25. At about six people per household, Saudi Arabia also has a higher density per housing unit than Egypt, India, Malaysia, and South Africa.
In April 2007, IFC signed an $27 million agreement with three well-known Saudi companies—the Arab National Bank, the Dar Al-Arkan Real Estate Development Company, and the Kingdom Installment Company—to create the first independent, specialized, Shariah-compliant housing finance institution in Saudi Arabia. The Saudi Home Loans Company will promote home ownership by making housing more available and affordable for the country's lower- and middle-income people.

In FY06, IFC supported the first-ever emerging market residential mortgage-backed securitization based on Islamic finance in the Gulf Cooperation Council countries, providing up to $30 million in credit enhancements for mortgage-backed securities issued by the Kingdom Installment Company, a private housing finance firm. The loan supports the company's growing operations, primarily for more on-lending to small and medium enterprises in the country.

To continue building on previous efforts and partnerships, Thunell will meet with government officials and representatives from the private sector while in Saudi Arabia. He will sign an agreement with three of the country's leading savings institutions as a first step to establishing a housing finance facility.

Thunell will also sign a public-private partnership agreement with the General Authority of Civil Aviation to work closely with the government in developing three "airport cities" under private sector participation schemes in Dammam, Jeddah, and Riyadh. This builds on an earlier project to rehabilitate the Hajj Terminal, a specialized passenger terminal for religious pilgrims at the King Abdulaziz International Airport in Jeddah.

IFC's Growth in the Region

In laying out his vision for the World Bank Group, President Robert Zoellick suggested six strategic themes; one of them is to support further development and create opportunities in the Arab world.

IFC is doing its part by reaching new clients and helping poor people across the Middle East and North Africa. Our priorities here are to help improve the business environment, broaden and deepen access to finance for small and medium enterprises, encourage private sector participation in infrastructure, and stimulate the housing sector.

In FY07, our commitments for the region grew significantly to $1.2 billion for 40 projects, and we mobilized an additional $249 million through loan participations and structured finance. Excluding projects classified as regional, 42 percent are in frontier countries, which are low income or high risk. These include Afghanistan, Iraq, Pakistan, the Syrian Arab Republic, the West Bank and Gaza, and Yemen. New clients accounted for over half and South-South (interregional) investments for 57 percent of investment volume.

IFC's advisory services in the region are also growing rapidly, with an emphasis on improving infrastructure and access to finance. In FY07 about a third of our advisory spending was in the region's neediest markets, which IFC refers to as frontier. IFC also focuses on building capacity for small and medium enterprises by introducing management training tools such as the IFC SME Toolkit and IFC Business Edge, a specialized training curriculum.

Increasing Impact

With this strategy, IFC has increased its development impact in the region. Our activities have generated tangible results, boosting employment, mobilizing additional financing for projects, and providing critical support for smaller businesses.

In 2006, for example, we helped create jobs for about 73,000 people and generate power for nearly 17 million customers, as well as helped generate around $800 million in government revenues. Also, our clients had just over 206,000 loans outstanding to micro, small, and medium enterprises, for a total amount of $2.3 billion. Our activities have also helped enhance regulatory reform in countries across the region.

For more information contact:

Riham Mustafa
IFC Communications Analyst
Phone: +202 2 461 9150 ext. 306
E-mail: rmustafa@ifc.org