The investment will promote basic service delivery and institutional preservation, as well as extending support to livelihoods, human capital, and basic economic recovery, within the context of Yemen’s ongoing armed conflict and humanitarian crisis by supporting financing for a group of six Yemeni companies that produces and distributes wheat, flour, sugar, and dairy products.
Photo: ©Scott Wallace/World Bank
Project Background
Yemen is experiencing one of the world’s worst humanitarian crises. An estimated 3.6 million people have been displaced since the current conflict escalated in early 2015 and over 84 percent of the population currently require humanitarian assistance in order to survive. The ongoing conflict and instability have forced the economy to contract by over a third. Exacerbating the crisis, remittances and donor fund inflows have fallen significantly as a result of the economic fallout due to the global COVID-19 pandemic.
Yemenis now experience some of the highest risks for food insecurity and acute malnutrition in the world. The country is almost entirely dependent on imports for its staple foodstuffs and the Yemeni private sector, which handles most of the country’s food supply, has been facing enormous challenges. These include supply chain disruptions, strict prepayment requirements from international suppliers, increased credit risk, as well as constrained availability of foreign currency.
The International Finance Corporation’s (IFC) investment in Hayel Saeed Anam (HSA) Foods, with support from the International Development Association’s Private Sector Window (IDA PSW), will help provide safer and fortified staple food products to Yemen’s population.
Project Objectives
The project is intended to support HSA Foods in financing its permanent working capital. Due to the strict advance payment requirements of international raw material suppliers, the lack of commercial bank financing in Yemen, and difficulties accessing foreign currencies, HSA Foods has faced significant challenges in financing its ongoing business. Maintaining its operations will allow the company to continue to serve the Yemeni domestic market with essential foodstuffs. The project will also help HSA Foods support the activities of the United Nations World Food Program in Yemen as one of its commercial partners. In addition, approximately 4,400 jobs will be safeguarded, with the potential to increase the number of employees as production grows.
Transaction Structure
The project consists of an IFC A loan of up to US$75 million to HSA Foods with a tenor of five years, including a two-year grace period. To support the transaction, IDA PSW Blended Finance Facility will provide IFC with a first-loss guarantee of up US$37.5 million covering 50 percent of the A loan.
Rationale for Using Concessional Funding
Given the extremely fragile and insecure business environment in Yemen, access to long-term financing from banks and other investors is extremely limited. Borrowers in Yemen have difficulties providing collateral to international lenders as recovery values of collateral offered by borrowers in Yemen is limited, due to the challenges of enforcement and the lack of buyers for recovered assets in Yemen. The concessional support from IDA PSW is essential to de-risk the transaction for IFC and enable it to provide HSA with financing.
Impact on Markets
HSA Foods is a market leader playing a critical role in addressing the food security challenges faced by the Yemeni people. The project will help build resilience in the food sector and demonstrate to other investors the potential viability of investing in the sector and the country. Private sector engagement has been identified as an important element of livelihood support and basic economic recovery. Support for a significant private sector employer, as well as aid to HSA Foods in maintaining approximately 4,400 employees, align with both the World Bank’s priority of advancing food security within the country and the IDA19 Special Theme of Jobs and Economic Transformation.
Blended Finance Facility-supported projects are made possible thanks to close cooperation from multiple teams across IFC and IDA.