The International Finance Corporation—a member of the World Bank Group— cooperated with Omni Bridgeway, specialists in resolving non-performing loans (NPLs) and legal disputes, to create the IFC’s first NPL resolution platform in MENA, helping financial institutions unlock their capital and encouraging new lending.
The IFC and Omni Bridgeway have jointly made available $100m to establish a new investment vehicle, which will be managed by Omni Bridgeway’s regional expertise centre in Dubai.
The centre, in which IFC has taken a minority interest, targets to invest in, manage, and resolve up to $1bn of NPLs and associated legal disputes.
The project, under IFC’s Distressed Asset Recovery Programme (DARP), will focus on Egypt, Pakistan, Morocco, Tunisia, Greece, and Lebanon, helping banks in those countries to redeploy capital to ramp up lending to businesses and boost economic growth and employment.
Raymond van Hulst from Omni Bridgeway said that the partnership with the IFC will help us expand into new markets, where accessing capital and expertise for the NPL and dispute resolution is a challenge. In the MENA markets, the banking sector contributes significantly to economic development, he added.
The investment is part of the IFC’s strategy to introduce innovative debt asset resolution capacity globally, facilitate financial institutions to offload NPLs, and de-risk their balance sheets and free up capital.
It also aims to rehabilitate and re-integrate defaulted debtors into the formal credit markets, and to create a secondary market in NPLs.
“When banks have unresolved NPLs on their books, the flow of credit stalls, as does growth,” said Manuel Reyes-Retana, regional industry director-financial institutions group, Middle East and Africa at the IFC. “In MENA, resolving NPLs and distressed assets is increasingly important to help drive growth and employment.”
The IFC’s $5.4bn global DARP programme was launched in 2007. It combined $2bn on IFC’s own account and co-investments from third-party investors of $3.4bn, making the IFC a market leader in distressed asset acquisition and resolution in the IFC’s countries of operation.