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IFC-led initiative seeks to clean up financial systems in developing countries

October 5, 2009: IFC, a member of the World Bank Group, today unveiled a new program to tackle rising levels of troubled assets and corporate debt in developing countries in an effort to help clean up financial systems, get credit flowing, and support recovery from the global financial crisis.

IFC will contribute up to $1.55 billion to the Debt and Asset Recovery Program over three years and expects to mobilize up to an additional $5 billion from other international financial institutions and private sector partners. DARP, as the program is known, will invest directly in businesses that need to restructure debt and in pools of distressed assets and indirectly via investment funds targeting pools of distressed assets and companies.

Lars Thunell, IFC Executive Vice President and CEO, said, High levels of troubled assets in developing countries mean individuals and businesses suffer reduced access to affordable finance. By helping companies and banks deal with debt and troubled assets, the Debt and Asset Recovery Program will address this issue and support recovery from the global financial crisis.

In initial transactions under DARP, IFC is collaborating with the European Bank of Reconstruction and Development and CRG Partners, a restructuring fund manager focused on Central and Eastern Europe. IFC is working on a distressed debt facility with Standard Bank of South Africa, and partnering with Tata Capital and Capital Services to launch a company to service non-performing loans in India.

IFC is in discussion with IFIs and governments including the German DEG Deutsche Investitions- und Entwicklungsgesellschaft mbH, OPIC, the Development Bank of Austria, and the government of Austria to collaborate on projects focusing on debt restructuring initiatives under DARP, and is working on transactions with private sector partners in Europe and Central Asia, Latin America and the Caribbean, and East Asia.

Due to the global financial crisis, businesses face difficulties refinancing debt and banks have rising levels of non-performing loans. These problems are projected to worsen with up to $1.5 trillion in emerging market corporate debt due to mature in 2009, according to the International Monetary Fund. DARP will support projects in low-income and poor countries. It was launched at the Private Sector Development Institutions Roundtable event held in Istanbul during the World Bank Group and IMF Annual Meetings 2009.

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