WASHINGTON, D.C., June 28 -- The International
Finance Corporation (IFC) has signed agreements to establish local currency
guarantee facilities for two finance companies in Cote d'Ivoire -- one
for CFA 1 billion (US$2.1 million equivalent) for Société Africaine de
Crédit Automobile and the other for the same amount for Société Africaine
de Crédit-Bail. Société Africaine de Crédit Automobile and Société Africaine
de Crédit-Bail are well-established Ivorian hire-purchase and leasing companies.
The IFC local currency guarantee facilities will help overcome a major
obstacle in Cote d'Ivoire: the limited access to medium- and long-term
local currency funding. The facilities will assist Société Africaine de
Crédit Automobile and Société Africaine de Crédit-Bail in raising medium-term
local currency funding so that they can then expand their lending activities
to local institutions. As the medium-term resources will be in the local
currency, rather than US dollars or French francs, the companies will be
able to avoi
d foreign exchange rate risk. Under the agreements, IFC will guarantee
any refinancing transaction done by the two companies, including CFA-denominated
loans from commercial banks and issuance of CFA-denominated commercial
paper. IFC will also consider other transactions on a case by case basis.
IFC-guaranteed transactions could qualify as reserve investment assets
under the new regional regulations for CFA Zone insurance companies, which
are eager to invest in high quality assets. "IFC local currency guarantees
are a very efficient means of improving local financial intermediation,"
said Tei Mante, Director of IFC's Sub-Saharan Africa Department. "This
is the first time IFC is offering local currency guarantee facilities to
its clients, and we plan to make this product more available in the future."
IFC is a member of the World Bank Group and is the largest multilateral
source of equity and loan financing for private sector projects in developing