Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Elusive IFC Cash May Land in More Coffers

The World Bank's private-sector investing arm, the International Finance Corp., has hundreds of millions of dollars to lend to Russian businesses -- but getting some of that money can be a frustrating and lengthy process.

It took three years, for example, for Prosbusinessbank to secure a $5 million credit, despite the fact that the bank, which specializes in loans to small and medium-sized business, has assets of $167 million.

On Wednesday, IFC managing director Peter Woicke finally signed off on the subordinated convertible loan, which will help the bank expand its lending capacity. And it was the only deal signed on Woicke's 10-day tour of Russia.

The loan, Woicke said, underscores the IFC's commitment to promote sustainable private-sector investments here. However, critics of the corporation -- including the World Bank, which has to approve IFC projects -- say the IFC hasn't done nearly enough to promote Russian businesses.

Of the more than $1 billion in projects in Russia approved by the IFC, less than half has actually been disbursed. The remainder represents projects that have either been scrapped or delayed. And of the money that actually has been disbursed, a large portion has been not to truly Russian companies, but to local subsidiaries of major Western firms, which allows the IFC to offset its risk while technically fulfilling its mission to aid the development of Russia's private sector.

Examples include a $55 million loan this year to Ford Motors' European division for its plant near St. Petersburg, last year's $15 million credit to Swedish furniture giant IKEA and a $30 million loan to Ramenka, the parent company of Turkish hypermarket chain Ramstore.

Another way the IFC hedges its bets is by working in tandem with the EBRD. The two recently teamed up to provide $80 million -- $40 million each -- to Moscow's third GSM operator, Sonic Duo, partly owned by Finland's Sonera. The two also teamed up on an equity investment and loan to International Moscow Bank, which is 100 percent foreign owned.

"We are not satisfied with the IFC's activity in Russia so far," Andrei Bugrov, who oversees the World Bank's work in Russia and sits on its board of directors, said in an interview Wednesday. "We would like it to be more active."

"It is the IFC's mission to promote private-sector growth by real action, not by words," said Bugrov, who is accompanying Woicke on his tour.

Woicke admitted in an interview that the IFC could -- and should -- do more. "It is true that the level of disbursements under Russian projects was low in the past, but we are confident that it will grow considerably in the next few months," he said.

Earlier Wednesday, Woicke met with Deputy Prime Minister Alexei Kudrin to discuss ways of increasing the IFC's activity, and was pleased with the results. "I was surprised by the government's interest in medium and small-sized companies and in the needs of the private sector in general," he said.

Woicke said the IFC's mission here will focus on three major areas. The first is to support direct Western investment, such as a new $100 million loan to Ford.

IFC is also involved in helping Russia build a sound banking system, one of the government's main concerns. The most recent IFC project in this sector, aside from Wednesday's deal, was a $15 million guarantee to cover a 500 million ruble bond issue by Russky Standart bank.

The company also plans to work more closely with large Russian companies looking for medium- and long-term financing, which was hampered in the past due to poor transparency and bad corporate governance. Talks are under way with Krasnoyarsk Coal Co., or Krasugol, on a $300 million investment that Krasugol officials say will help improve the company's corporate governance and image abroad.

"The situation with these issues is changing considerably and we hope this process will continue," Woicke said.