The signing of an agreement between the International Finance Corporation (IFC), the Arab Monetary Fund (AMF) and London-based IBCA paves the way for the Arab world’s first credit ratings agency. The new company, called the Inter-Arab Ratings Company (IARC), will introduce international debt rating standards to the region, encouraging local companies to improve their financial structures and reporting (MEED 13:10:95).

The three shareholders have drawn up a short-list of candidates to be president of the new company, with an appointment due before the end of October.

‘Setting up the IARC is in line with the IFC’s strategy to broaden the scope of financial markets in the Middle East and North Africa,’ Andre Hovaguimian, the IFC’s director for the Middle East, Central Asia and North Africa, said at the signing ceremony on 8 October, during the World Bank/IMF talks in Washington. ‘The IARC will further the development of the nascent debt markets in the region, where there is growing need for better information on the creditworthiness of local debt issuers and classification of assets.’

The new company has authorised capital of $5 million, with the AMF and IFC both taking a 20 per cent stake and the remainder held by IBCA. The main aim of the Bahrain head office will be to co-ordinate regional offices. The first of these offices, whose shareholders will include local entities, will be set up in Tunisia, Egypt and Jordan. Offices in Morocco and Lebanon are expected to follow.

Jassim al-Mannai, director-general of the AMF, said the idea for the IARC was first put forward by the AMF, and then developed with the IFC, before teaming up with IBCA. ‘IBCA was becoming interested in the Arab market and we decided it was the right agency to work with,’ he said.

‘With free markets opening across the region you need the capacity to come into the capital markets,’ Al-Mannai said. ‘Privatisation has been one instrument that has been very successful in Morocco, Jordan and Egypt and we will see many more companies coming into the capital markets.’