Credit Lines
1. Training: IFC should carefully assess the intermediary's capacity to implement the credit line, including its environmental requirements. If necessary, IFC should provide training to a designated core group of credit officers in the intermediary. IFC should address any shortcomings through further training and more direct assistance.
2. Exchange rate risk: It is risky for IFC to provide foreign-exchange denominated credit lines in inflationary environments, where currency devaluation is likely. IFC should then either:
- require intermediary banks to target borrowers who have some foreign revenues; or
- consider providing or helping to mobilize local currency funding.
3.
IFC supervision: IFC should allow adequate time for reviewing sub-projects. IFC should ensure that the intermediary understands the procedures for reviewing sub-projects and reporting requirements, particularly with regard to environmental requirements.
4.
Objectives: IFC should establish close links between the policy objectives of the credit line, eligibility criteria for sub-projects and financial covenants. IFC should ensure during appraisal that senior management of the intermediary understand the objectives of the credit line.
The above lessons are based on 19 lessons from past IFC investments.
Last updated December 1998.
