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IFC’s Local Currency Loans are Protecting African Clients against Foreign Exchange Risk


In Washington, D.C.:
Ludi Joseph
Phone: (202) 473-7700
E-mail:
ljoseph@ifc.org

In Johannesburg:

Desmond Dodd
Phone: +27-83-448-9873

E-mail:
ddodd@ifc.org


Washington, D.C., December 21, 2010—IFC, a member of the World Bank Group, is providing local currency loans to African clients to protect them against currency fluctuations and foreign exchange risk, while helping develop local financial markets.

This past month, IFC disbursed local currency loans that will help a microfinance institution support small businesses in Ghana, finance a new wheat mill’s operations in Rwanda, and support a student loan program in Namibia.  IFC also has just committed $4 million equivalent in Kenyan shillings to Braeburn Schools, an education provider in Kenya.


“In addition to enabling clients to borrow in their local currencies and manage risks better, IFC also helps develop long-term local currency markets to benefit investors and hedgers, and works closely with regulators to share best practices on financial derivatives,” said Shanker Krishnan, IFC Deputy Treasurer, who heads IFC’s derivatives group that creates local currency solutions for clients. “IFC has extended the maturity of cross-currency hedges in many markets, including Nigeria and Zambia.”

IFC extended its first local currency loan in Africa more than 10 years ago. Initially, these loans were in South African rand. Between 1997 and 2007, IFC made 24 loans totaling over 1.4 billion rand ($200 million equivalent).  In 2007, IFC began to move into other markets in the region and has since used cross-currency swaps to finance local currency projects in other African currencies, including Ghanaian cedi, Moroccan dirham, Nigerian naira, Rwandan franc, Tanzanian shilling, Tunisian dinar, and Zambian kwacha.  


The use of derivatives is one way through which IFC provides local currency loans in Africa.  In addition, IFC issues bonds in local currency or uses structured finance products, such as partial credit guarantees and risk-sharing facilities.  Over the past decade, IFC has committed local currency loans totaling more than $800 million equivalent in 24 African countries.  


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.