The International Finance Corporation, the private sector arm of the World Bank Group, has opened an office for the first time ever in a GCC country. Located at Dubai International Financial Centre, the office will support the development of the region’s burgeoning financial markets and business community through direct and indirect investment and the provision of technical assistance.
IFC’s work within the GCC will focus on the region-wide process of privatizing, modernizing and expanding the region’s infrastructure, contributing to the development of the housing finance market, helping deepen and broaden the GCC’s capital markets, building institutions that will strengthen the region’s financial architecture, and providing technical assistance and funding programs to encourage entrepreneurship and the development of small and medium enterprises. Furthermore, IFC aims to set up partnerships with national businesses and institutions across the region as they expand to become competitive players on the regional and global stage.
According to Azmat Taufique, senior regional manager, Middle East and North Africa Department, IFC’s presence will bring a wealth of knowledge and expertise to the region in support of the rapidly developing financial markets in the GCC countries. “This year IFC is celebrating its 50th anniversary,” he said, “and we bring five decades of unparalleled experience and knowledge to the task of promoting sustainable private sector investment in the GCC. While GCC countries are relatively affluent, there are many challenges ahead that require the kind of long-term global experience IFC offers.”
Taufique cites the promising but volatile emerging capital markets throughout the region as an example of institutions in need of the kind of structural development that IFC can help provide. To meet this need, IFC is working with the private and public sectors as a founding member of HAWKAMAH, the region’s first institute for corporate governance, to set up systems and practices that ensure good corporate governance. “You have to build awareness of the value of corporate governance, assist the private sector in setting up corporate governance policies and practices, and build institutions on the foundations of good corporate governance. A major aspect of this process is education, training and technical assistance, which we provide. We bring unparalleled experience to this process and are especially adept at managing local political risk,” Taufique notes.
The development of the housing finance market in the region will be another focus of the IFC office in Dubai. “In most GCC countries there are no workable mortgage laws that allow people to buy their own homes,” Taufique says. “Up to now, GCC governments have subsidized housing for citizens in various ways. This solution is obviously not sustainable in the long-term. One of the problems GCC countries face when it comes to devising home loans is that banks have not been structured to accommodate large-scale mortgage lending programs. As a first step to help address that problem, last year we provided a long-term currency loan of up to $50 million to Saudi British Bank to support the growth of SAAB’s embryonic mortgage lending program, in addition to a loan to Alliance Housing Bank in Oman, to help the bank expand its commercial mortgage lending operations to Omani households.” Taufique added that “as many prospective home-owners in the region prefer shariah-compliant household financing, IFC invested $30 million in Kingdom Installment Company to support its shariah-compliant mortgage lending in Saudi Arabia. “These are the kinds of activities the IFC office in Dubai will continue to undertake in the region,” he adds.
The support for entrepreneurship is another major area IFC will be concentrating on. “The issue of unemployment and underemployment is at the top of the agendas of most GCC countries, even those with affluent populations,” Taufique says. “Gulf Arab societies are inherently entrepreneurial and assisting Gulf Arabs in creating and building their own ventures can be an effective solution to capacity building and job creation in the region.”
According to Taufique, a primary IFC objective in launching its offices in Dubai is to bring IFC much closer to the GCC region, which is one of the world’s most robust and rapidly transforming emerging markets. He notes that there have been encouraging developments in the GCC markets over the last two years but that many challenges lie ahead that must be faced for the region to maintain its equilibrium and achieve sustained growth.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition 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 FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.
