Japan Plans to Invest $2 billion to Support Banks in Poorest Countries (english)

Washington, D.C., November 14, 2008 — Following a meeting today between Japanese Finance Minister Shoichi Nakagawa and World Bank Group President Robert B. Zoellick, Japan and the World Bank Group announced that the Japanese government would become a key founding partner in a World Bank Group fund by investing $2 billion to help recapitalize banks in smaller emerging markets.
The Japanese contribution would be the first to the fund, which was announced this week by Zoellick as part of a larger Bank Group response to the crisis that includes a substantial increase in financial support for developing countries. The fund aims to inject capital into banks in smaller emerging markets, which may suffer as investment flows decline in the wake of the global financial crisis. This would particularly hurt small and medium-sized enterprises.
Japan’s investment is a sign of the strong partnership between Japan and the World Bank Group. The contribution would be made through the Japan Bank for International Cooperation (JBIC) and would mark the successful launch of the fund.The fund is subject to the approvals of both IFC and JBIC boards.
„We highly appreciate the World Bank Group’s response to the financial crisis.”said Japan’s Finance Minister, Shoichi Nakagawa. “This initiative to recapitalize banks is similar to the domestic measures we are taking to stimulate the Japanese economy, especially with regard to supporting small and medium-sized enterprises.This further strengthens the relationship between the Government of Japan and the World Bank Group as well as JBIC and IFC.“
“I am delighted to be able to announce Japan’s contribution for this fund, which I believe will help significantly in shoring up banks in poor countries and will ultimately protect the poorest from the impact of the global financial crisis,” said Zoellick. “We very much value the strong partnership between Japan and the World Bank Group and hope other countries will follow Japan’s leadership in making such a significant contribution.”
“The proposed fund would be a very effective way to support the banking systems of countries which don’t have the resources to counter the effects of this global crisis. The amounts to be invested would go a long way in smaller economies and could help prevent the crisis from spreading,” said Lars Thunell, Executive Vice President and CEO of IFC.
IFC, the member of the Bank Group focused on private sector development, expects to invest $1 billion of its own money in the fund. IFC estimates that a fund of $3 billion would have a leveraged impact of around $75 billion as others co-invest with the fund, and the banks receiving capital would be able to lend to their clients at greater levels. In smaller, poorer countries these amounts could have a significant effect on the banking system and economy and help prevent systemic breakdowns and reduce the impact of the crisis on the poor.
On November 11, Zoellick announced that the Bank Group would substantially increase financial support for developing countries, including the launch or expansion of four facilities for the crisis-hit private sector that is critical to employment, recovery and growth. See World Bank Group Boosts Support for Developing Countries.

About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For more information about IFC visit www.ifc.org.