WASHINGTON, D.C., Oct. 16—The International Finance Corporation (IFC) signed investment agreements in Lahore, Pakistan today to provide financing of US$2.04 million to software manufacturer, Systems (Private) Limited of Pakistan (Systems), for a US$4.5 million expansion project. This is the first time that the Corporation is investing in the software industry.
Established in 1977, Systems is one of the country's leading companies for information technology products. Its services include software design and implementation, system integration and application re-engineering. It has created a number of software packages and is engaged in ongoing R&D to develop others. Its innovative software packages include a product to rectify the year 2000 problem (the so-called millennium bug), which will cause computers and software applications to malfunction from the year 2000, and a publishing product that involves the recognition of Arabic, Persian and Urdu characters. Its products are marketed in the U.S., Far East, and Europe by its subsidiary, Visionet Systems, Inc. (incorporated in the U.S.)
IFC's investment will enable Systems to market its software products commercially and fulfill domestic and offshore service contracts. The expansion will include the purchase of computing hardware, software tools and infrastructural support, including communication links and physical facilities, as well as the hiring and training of additional technical personnel.
IFC's financing will consist of a venture capital facility of US$2 million and an option for an equity investment of US$40,000.
Mr. Andre Hovaguimian, IFC's Director for Central Asia, Middle East and North Africa, said, "The project will help alleviate an important constraint in the development of the local software industry and create additional employment opportunities for software professionals. It will also give a strong impetus to the software sector in Pakistan and encourage foreign companies to subcontract software services to Pakistani firms." Mr. Hovaguimian added that, without IFC's financing, the project would not have taken place since local financial institutions do not lend to this sector and local sources of venture capital are not available.
Mr. Aezaz Hussain, Managing Director of Systems, said, "The project will help put Pakistan on the world map of software producers. It is especially timely, given the huge market opportunity provided by the year 2000 problem."
As a result of IFC's participation in the Systems project, it is hoped that local and foreign financiers will be persuaded to invest in the software industry in developing countries and adopt a venture capital financing structure suited to the industry's risk-return profile.
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.