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IFC and Arab Monetary Fund Support Legal Reforms to Boost Business Lending


In Cairo:
Riham Mustafa
Phone: +202 24 61 42 30
E-mail:
RMustafa@ifc.org


Abu Dhabi, United Arab Emirates, April 16, 2011—IFC, a member of the World Bank Group, together with the Arab Monetary Fund, is supporting access to finance for small business in the Middle East and North Africa through the launch of the Arab Secured Transactions Initiative.
The Arab Secured Transactions Initiative will help the region’s financial institutions feel confident lending to small businesses, which in turn will get the credit necessary to grow their enterprises. The Initiative aims to promote best practices regarding the reform of collateral laws in the region, which in many cases do not allow small and medium size firms to use movable assets as collateral.

Movable assets, in the form of equipment, inventory, or accounts receivable, are often the only assets a small firm has available to use as potential loan collateral.

“Bank credit is very concentrated in our region and many segments of the private sector face difficulties accessing credit, particularly small and medium enterprises, which are vital to achieving sustainable economic growth in the region,” said Dr. Jassim Al Mannai, Chairman of the Arab Monetary Fund. “We hope such initiatives will lead the way to better access to credit, creating a positive impact on small business activities and the private sector in general, as well as contributing to the soundness of our financial system.”

The Arab Secured Transactions Initiative will begin with an assessment of secured lending laws across the region, raising awareness about positive changes that could be made, and ultimately partnering with governments to pilot reform programs.

“Significant economic potential is unlocked when small and medium enterprises are able to use their movable assets as collateral for loans,” said IFC CEO and Executive Vice President Lars Thunell. “Given the great need for jobs and opportunity in the Middle East and North Africa, it is more important than ever to ensure that the region’s SMEs grow and thrive.”

Research shows that 70 percent of firms in the Middle East and North Africa do not have access to credit and that small and medium firms struggle to obtain the financing they need to grow and create jobs. In the 2011 IFC/World Bank Doing Business Report, Middle East and North Africa region countries scored an average 3 out of 10 on the “strength of legal rights index” in the category “Getting Credit,” a measure of credit information sharing and the legal rights of borrowers and lenders.

IFC and the Arab Monetary Fund hope that as better collateral laws and registries are developed across the Middle East and North Africa based on the Arab Secured Transactions Initiative, the level of credit available will increase, while the costs to borrowers decline as financial institutions grow confident their loans are secure.

About IFC

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in developing countries. We create opportunity for people to escape poverty and improve their lives. We do so by providing financing to help businesses employ more people and supply essential services, by mobilizing capital from others, and by delivering advisory services to ensure sustainable development. In a time of global economic uncertainty, our new investments climbed to a record $18 billion in fiscal 2010. For more information, visit
www.ifc.org.
 
About AMF

AMF is a regional Arab organization, founded in 1976, whose mission is to lay the monetary foundation of Arab economic integration and to accelerate the process of economic development in all Arab countries. AMF member countries (22) include Jordan, United Arab Emirates, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritania, Yemen, Comoros. For more information, visit
www.amf.org.ae.