Dhaka, Bangladesh, November 19, 2003
— The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an Agreement to issue a local currency guarantee of up to $5 million with United Leasing Company Limited (ULC) in Bangladesh. Credit enhancement from the proposed guarantee, will assist ULC to borrow the equivalent amount of local currency from Citibank Bangladesh and use the longer tenured funding to further expand its portfolio of leases to the SME sector in Bangladesh
“IFC's experience has demonstrated that leasing is one of the most effective ways to provide financing to small and medium-sized businesses,” said Declan Duff, IFC’s Director of Global Financial Markets. “This project is an important part of IFC’s initiative to step up the availability of local currency funding for SMEs in Bangladesh.”
The proposed guarantee will facilitate the mobilization of longer term local currency financing from the more liquid foreign banks to leasing companies which serve the SME sector. SMEs are the key drivers of economic growth in the country but remain underserved by the formal financial sector. Access to capital remains a major constraint to business growth in Bangladesh and with this guarantee, IFC seeks to encourage banks to provide increased longer term funding to meet the growing needs of private sector enterprises in Bangladesh. “By providing this guarantee, IFC is supporting ULC’s strategy to offer its clients longer term leasing products as well as establish a more diverse funding base,” added Dimitris Tsitsiragos, Director of IFC’s South Asia Department.
ULC was incorporated in 1989 and is the second largest leasing company in the country catering to the financing needs of SMEs operating in Bangladesh. Given the lack of long-term local funding sources, ULC has financed its small business lending by participating in various SME targeted lending programs designed by the World Bank, the Asian Development Bank and KfW of Germany.
“We are pleased that IFC has agreed to assist us in obtaining funding from the banking sector,” said Mr. M. M. Alam, Managing Director of ULC. “This transaction will enable us to leverage our ability to raise funds at competitive rates and enhance our ability to service the demand for longer term leases."
The mission of IFC (www.ifc.org) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY03, IFC has committed more than $37 billion of its own funds and arranged $22 billion in syndications for 2,990 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY03 was $16.8 billion for its own account and $6.6 billion held for participants in loan syndications.
