Cairo, Egypt, May 21—The International Finance Corporation (IFC) will establish a Risk Management Facility (RMF) for the National Bank of Egypt (NBE), the largest commercial bank in the country. The new facility will allow NBE to offer its private sector clients medium and long-term fixed rate financing and a variety of risk management products.
The RMF Agreement was signed in Cairo at a ceremony held at NBE's offices. Mr. Jannik Lindbaek, IFC's Executive Vice President, who is visiting Egypt to discuss new private sector initiatives and Mr. Mahmoud Abdel Aziz, Chairman of NBE, signed the RMF Agreement.
This is the first such facility established by IFC in Egypt and will address the needs of business enterprises seeking longer fixed rate financing through the banking system, which has traditionally provided variable rate financing. For instance, it will allow NBE--upon executing interest rate swaps--to convert existing variable rate loans into fixed rate obligations. It will also allow private exporters to benefit through currency swaps by enabling them to better match their earnings--which are often in non-US$ denominated currencies, particularly with European Union countries--with borrowings that are US$ based. The RMF could permit the undertaking of approximately US$400 million of risk management transactions, depending on the type of transaction.
Mr. Lindbaek said at the signing, "This project will assist the Egyptian banking sector by introducing new products to the country's capital markets while helping a growing private sector access financial products that are necessary for their international competitiveness." He added that IFC's strategy is to promote the development of a competitive financial market and strong banking institutions by introducing new products and intermediaries through a combination of technical assistance, institution building and resource mobilization activities.
Besides providing the facility, IFC has been working with NBE and the Central Bank of Egypt to organize and arrange technical assistance to ensure careful management of these products. NBE is the largest commercial bank in Egypt with total assets of over US$15 billion. NBE has been a trendsetter in the reform process taking place in Egypt through privatizations, introducing specialized financial subsidiaries (for investments, brokerage, insurance and leasing), launching mutual funds and providing innovative banking services to its clients.
IFC, a member of the World Bank Group, is the largest multilateral source of equity and loan financing for private sector projects in developing countries.
