EMBARGO: The IFC Annual Report embargo has been extended. Information in both volumes is not for publication or broadcast until 9am, Eastern Daylight Time (1300 GMT), Tuesday, October 9, 2001.
Washington, D.C., October 9, 2001
The International Finance Corporation’s net investments increased more than 14 percent to US$2.73 billion under challenging global economic conditions during the fiscal year ended June 30, according to the IFC 2001 Annual Report released today. Among the highlights in the report are:
· Forty-one percent of net investments were in high-risk or low-income countries, including first time investments in Armenia, Chad, and Syria; the use of innovative products increased substantially; and investments are increasingly reaching sectors targeted for their strong development impact.
· Committed financing in the Middle East/North Africa and Sub-Saharan Africa regions grew most rapidly. In MENA, IFC signed 18 transactions amounting to $956 million in FY01, up from $106 million the previous year. Sub-Saharan Africa saw an 86 percent increase in committed financing to $642 million in 51 projects. Of the 45 committed transactions amounting to $784 million in the Asia-Pacific region, IFC signed 18 transactions in India amounting to $224 million.
· Innovation helped clients attract financing from new classes of investors during 2001. “I am especially proud of our achievements in supporting clients through structured finance products and innovative risk management techniques,” said IFC Executive Vice President Peter Woicke. Committed local currency and other partial credit guarantee products in FY01 climbed to $547 million—20 percent of financing for IFC’s own account and up from only $3.8 million the previous year. The use of guarantees helped support trade finance in Sub-Saharan Africa, the Middle East and North Africa, and Asia and a novel student loan program in India (NIIT Limited). Through $23 million in committed risk management products, IFC helped companies in Bolivia, Indonesia, and Kenya hedge exposure to international markets.
· During FY01, total IFC financial commitments to micro and small and medium enterprises reached $551 million in 87 projects, amounting to 14 percent of gross transactions by volume. This compares to microenterprise and SME financing during FY00 of $426 million in 74 projects, or 11 percent of transaction volume. IFC has turned its focus mainly toward financing intermediaries that can best support small local businesses and create models that allow IFC to leverage its resources more effectively. (More detailed information on support for small and medium enterprises can be found in the World Bank Review of Small Business Activities 2001.)
· Investments in sectors IFC has targeted for their strategic priority—financial sector, infrastructure, information and communications technology, and the social sectors, such as health and education—reached 73 percent of gross investment, which includes investments for IFC’s own account and loan syndications.
· The financial sector alone accounted for 30 percent of gross investments, or $1.19 billion. IFC’s work in this sector helps create robust local institutions and add depth to markets so that a wider range of companies have access to capital and developing economies can more effectively buffer the volatility of the global economy. Financial sector transactions signed this year support activities as diverse as loans for low and middle-income family housing in Mexico (Hipotecaria Su Casita), advice and financing for local businesses in Namibia (Nedbank Investment Bank), and microlending to the poor in Bolivia, Bosnia and Herzegovina, Mexico, Moldova, and Ukraine.
In addition to equity and quasi-equity investments, loans, guarantees, and risk management products for its own account, IFC mobilized $1.20 billion in financing from other financial institutions through loan syndications involving 24 projects. For the first time, the Middle East and North Africa represented the largest volume of business for IFC syndications with $615 million in transactions signed. These included a large telecommunications project, Medi Telecom in Morocco, and two power projects, EDF Suez Gulf Power and EDF Port Said Power, in Egypt.
Global economic conditions contributed to a 37 percent decline in operating income in FY01 to $241 million from $380 million in FY00. Operating income excludes the effects of adopting new accounting standards for derivatives and hedging activities; including these effects, IFC’s net income totaled $345 million in FY01.
Gross investments signed, which include loan syndications, reached $3.93 billion in 205 projects, compared with $3.90 billion in 210 projects in FY00.
In his annual message, Mr. Woicke committed the private sector arm of the World Bank Group to building on its important strengths, especially its long-term perspective, innovation in finance, and willingness to renew itself. He noted that the challenge facing IFC is not only to expand investments in developing countries but to demonstrate that responsible, sustainable, and environmentally sound economic growth led by the private sector is possible in these markets.
In an effort to renew its approach to private sector development, IFC launched a Sustainability Initiative during FY01. “We have come to recognize that a more comprehensive approach to development is essential to reducing poverty and improving lives,” Mr. Woicke said.
The initiative builds on pioneering work underway at a project level to establish a business model suited to the speed and needs of the new millennium. Rather than relying on an old business model that calls for giving back to society after wealth is created, the new model recognizes that financial success is compatible with a broader social responsibility
as wealth is being created
. “Our challenge is to help developing nations use the new model as they grow. It is to identify business partners who can both compete successfully and incorporate sustainability,” Mr. Woicke said.
The 2001 Annual Report focuses on projects signed or approved during FY01 exhibiting IFC work with companies that already employ sustainable business approaches. In Peru, IFC
will lend $5 million to a leading ecotour operator, Inka Terra. The transaction provided IFC with an opportunity to promote ecologically friendly rainforest management and conservation while investing in a company with good financial prospects.
The 2001 Annual Report highlights cases where IFC adds value through technical assistance and investments. For example, since 1995 IFC has provided the Bank of Shanghai in China with comprehensive technical assistance on improving management, including a human resource management review during FY01. Through a $22 million equity investment, IFC promotes better corporate governance practices at the company on an ongoing basis. An IFC-appointed director on the Bank of Shanghai's board is working to help the board play a bigger role in overseeing the activities of the bank and setting up committees on auditing, risk management, and compensation that will provide directors with better information and capacity to review operations in the future. The introduction of international banking standards and best practices at the bank demonstrates their value to other financial institutions and is having an impact throughout China's banking sector.
IFC’s mission 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, and provides technical assistance and advice to governments and businesses. Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.
The annual report can be viewed on-line at:
http://www.ifc.org/ar2001
