WASHINGTON, D.C., Oct. 1- The International Finance Corporation (IFC) has formally announced the "Extending IFC's Reach Initiative," a program to expand the geographic range of IFC's activities to smaller and poorer countries and countries undergoing particularly difficult transitions to market economies. Sixteen countries, or clusters of neighboring countries, have been selected for the program. A list of the countries follows this release.
The Extending IFC's Reach Initiative was established to promote private sector development in countries where IFC's activity has been severely constrained as a result of challenging country conditions and obstacles to private sector activity.
"IFC's traditional program of investment and advisory activities is strongest in countries where workable solutions have been developed to overcome impediments to private investment, but we are looking for ways to increase IFC's impact in the poorest countries and most difficult investment environments," said Jannik Lindbaek, IFC's Executive Vice President. "Through this Initiative, we will take on additional risks and expenses to make a real difference on the ground."
The Initiative will be implemented as a three-year pilot program and will have two basic elements. First, in each of the selected countries, IFC will place investment staff in the field to provide an extended IFC presence in the country. Field staff will develop an understanding of the country's needs in the private sector. They will cultivate relationships with local entrepreneurs, the financial and legal communities, government authorities and representatives of other multilateral and bilateral development institutions. They will work closely with clients to develop viable projects.
Second, IFC has created a US$40 million Small Enterprise Fund to support smaller-scale investments in the pilot program countries. The Extending IFC's Reach Initiative will seek opportunities for the full range of IFC activities. However, IFC expects that in many instances the only feasible investments may be small because of the limited scope of private enterprise in these countries. The Small Enterprise Fund will be used to invest in projects with total costs between US$250,000 to US$5 million. IFC's own investments are expected to range from US$100,000 to US$2.5 million, covering approximately 40 percent of each project's total cost. The Fund will primarily provide debt financing but will also have the flexibility to make equity and quasi-equity investments and to provide local currency guarantees.
The countries covered under the Initiative are geographically diverse. While significant obstacles to private sector development remain in these countries, they are all taking positive steps to establish a more open, market-based economy. For example, in Mongolia, one of the most impoverished countries in Asia with limited infrastructure and lack of a modern financial sector, IFC will seek opportunities for investment in tourism, textile and leather projects. The territories of West Bank and Gaza also pose significant hurdles for private sector investment. IFC will seek to promote micro-lending facilities and assist small business entrepreneurs in structuring bankable projects. In Bosnia-Herzegovina, whose economic asset base of companies, factories, banks, and infrastructure has been depleted by war, IFC expects to establish a small business lending facility and a venture capital fund to provide equity capital to small and medium sized businesses. To respond to the needs of Senegal and the countries of Weste
rn Africa, one of the poorest regions of the world, IFC will open an office in Dakar to provide support for business ventures in sectors such as agribusiness and tourism.
"We see implementation of the Initiative as an extremely valuable learning experience. It will tell us much more about how to operate successfully in the most challenging environments and to develop tailored investment programs for these markets," added Mr. Lindbaek.
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.
COUNTRIES TARGETED FOR EXTENDING IFC'S REACH INITIATIVE
Albania
Azerbaijan
Bosnia-Herzegovina
Cambodia and Lao People's Democratic Republic
Central Africa: (Central African Republic, Chad, Congo, Equatorial Guinea, and Gabon)
El Salvador
Ethiopia and Eritrea
FYR Macedonia
Guyana and Eastern Caribbean: (Antigua and Barbuda, Dominica, Grenada, St. Kitts & Nevis, and St. Lucia)
Kazakstan
Mongolia
Mozambique
Senegal and Western Africa (Mauritania, Mali, The Gambia, Guinea, Cape Verde, Guinea-Bissau)
Slovak Republic
Uzbekistan
West Bank and Gaza