Monday, March 07, 2011

World Bank’s International Finance Corporation Lends $400 Million to Expand Phone Service in Iraq

New York Times: A Big Push to Expand Mobile Service in Iraq
AME Info: IFC-Led Financing for Zain Iraq to Improve Telecoms Services, Support Growth in Iraq
Reuters: Zain Iraqi Unit Gets $400 Million World Bank Loan

In an effort to foster development and improve telecommunication service in war-torn Iraq, the International Finance Corporation (IFC) recently announced that it has finalized a 7-year, $400 million extension of credit to the telecommunications firm Zain Iraq. Zain Iraq intends to use the proceeds of the loan to update and improve the mobile phone infrastructure in Iraq, while expanding the mobile service coverage area to poorer regions of the country.

Currently in Iraq, approximately 21 million people have access to mobile phone services, which translates into a 77 percent penetration rate into the entire population. This rate lags behind the rates of some of Iraq’s neighbors, such as Bahrain, Saudi Arabia, Jordan and Kuwait, where penetration rates are nearly 100 percent. Nevertheless, the fact that 21 million Iraqis have access to mobile phone services is impressive considering that prior to 2003, while under the reign of Saddam Hussein, Iraqis did not have any access to mobile phone services.

The organization that sponsored the loan, the International Finance Corporation, is one of the organizations that comprise the World Bank Group (also known as the World Bank). The goal of the IFC is to promote economic growth in developing countries. To this end, the IFC provides developmental advice to the governments and businesses of developing nations. The IFC also facilitates investment in those nations by arranging loans to fund development projects. The IFC focuses especially on investment in the private sector, helping businesses like Zain Iraq. The funding for these loans comes not only from the IFC itself, but can also from private banks and other organizations. These private investment institutions are able to participate in IFC loans by lending the IFC money, which the IFC uses to fund the loan to the ultimate recipient. For example, the funding for the loan to Zain Iraq came from not only the IFC, but also from five other private investment institutions who participated in the loan.

The IFC is hopeful that the loan to Zain Iraq will contribute to stable economic growth in Iraq. By expanding and improving the telecommunications industry in Iraq, Zain Iraq’s project should help that industry serve as another source of employment for Iraqis. Iraq currently has little diversity among its sources of employment, relying largely on its oil industry to provide jobs. In addition, when finished, the project will give more Iraqis access to a reliable source of communication, which is essential to economic development and business growth, as well as economic integration with other countries. The IFC also hopes that this investment will encourage foreign investors to invest in the development of Iraq. To date, such investors have been reluctant to invest in war-torn Iraq because of its perceived political instability.

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