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Abu Dhabi, UAEThursday 13 December 2018

IFC to boost lending to Mena by 20% to $2bn

Renewable energy projects a priority for World Bank private sector lending arm

Mouayed Makhlouf , IFC Director for the Middle East and North Africa, says the lending body is investing most in countries that implement reforms. Pawan Singh / The National
Mouayed Makhlouf , IFC Director for the Middle East and North Africa, says the lending body is investing most in countries that implement reforms. Pawan Singh / The National

The International Finance Cooperation (IFC), the private sector lending arm of the World Bank, plans to boost lending to Mena countries by around 20 per cent to US$2 billion in its current financial year, and wants countries to speed up reforms to unlock further funding, its regional director said.

The World Bank unit, which lent Mena countries around $1.7bn in its last financial year (which runs to the end of June), provides more loans to countries undertaking reforms, said Mouayed Makhlouf, IFC’s Mena director, with Egypt set to be the key beneficiary in the year to June 2018.

Egypt is implementing a slew of reforms that helped the North African country get a $12bn loan from the International Monetary Fund last year. These reforms include floating its currency in November and cutting energy subsidies.

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“What helped is the reform of the Egyptian government and the very strong IMF programme that was adopted and agreed to with the IMF,” Mr Makhlouf said.

“The very strong reforms [in Egypt] we haven’t seen in any other government in the region and we hope others follow, especially in North Africa.”

IFC funding to Egypt is expected to triple to $1bn in this financial year from around $300 million in the previous 12-month period. Other markets that benefit from IFC financing are Jordan, Pakistan, Lebanon and Iraq.

“If you want to look where the development need is and where you can have the maximum return because it is linked, it is all in these risky markets,” said Mr Makhlouf.

Globally, the IFC made nearly $11.9bn in long-term investments from its own account in its last financial year, up by 7.2 per cent from a year-earlier period, and mobilised about $6.8bn from other investors.

In the Mena region, the IFC is focusing on infrastructure lending, particularly for renewable energy projects. The lending body owns around 10 per cent of Acwa Power through a $100m investment in the Saudi Arabian power and water company.

Around $700m of the $1bn the IFC expects to invest in Egypt this year is earmarked for renewable energy projects. Around half of last year’s IFC lending to Mena went to climate-related activities.

The IFC helped structure a €135m (Dh585m) green bond issued by Moroccan lender Banque Centrale Populaire in June, the first of its kind in the region, to invest in renewable energy in the North African country.

The lender bought €100m in the 10-year bond, while the remainder was bought by French development agency Proparco.

The IFC is hoping to help structure similar bonds to support renewable energy initiatives in Lebanon, which is exploring wind power projects, and Jordan, where the lender is investing in a number of clean energy projects, said Mr Makhlouf.

“The challenge is who buys the bonds,” said Mr Makhlouf. “We bought into the first one just to give comfort to the market and so that in the next issuance other investors can

come in.”

Across the Mena region, IFC wants more private investment in projects and industries dominated by the public sector, which lacks the funding and capacity to operate most of these projects.

“Mena is a group of non-homogenous countries, but the one homogenous factor is the public sector dominance,” said Mr Makhlouf.

“When you do make that switch from public to private, you are going to generate a lot of investment opportunities and that’s where we come in.”

The lender is also involved in new areas such as supporting institutions working with refugees or their host communities. It also aims to invest more in the water sector, with several countries in the region facing acute shortages.

The IFC also continues to make equity investments, which represent around 30 to 40 per cent of its annual investments.

The lending body is interested in venture capital funds and has invested in Dubai-based Wamda Capital, which in turn has investments in companies including ride-sharing app

Careem.