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
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.