Japan and the World Bank will launch a $3 billion fund to recapitalise banks in poor nations struggling to cope with the global financial crisis, the multilateral lending institution said on Monday.
Hiroshi Watanabe, chief executive officer of the Japan Bank for International Cooperation, and Lars Thunell, CEO of International Finance Corp, signed the accord at JBIC headquarters in Tokyo.
JBIC will contribute $2 billion and IFC will provide $1 billion to the fund which will be used to boost bank lending activities and buoy emerging economies battered by the ongoing global financial crisis.
Japanese finance minister Shoichi Nakagawa and World Bank president Robert Zoellick struck a deal last November, when they met in Washington on the sidelines of a global financial summit.
The fund is expected to provide assistance to banks in Central and South America and the Caribbean region first and then to African and Asian banks. Japan also invited other countries to participate in the fund.
"Even countries where the management of banks is sound face various problems due to the negative impact from abroad in a globalised economy," Watanabe said.
"This facility is intended to provide funds to countries without sufficient fiscal capacity" to support their troubled financial institutions as the United States and European nations do, he added.
Speaking at the World Economic Forum annual meeting in Davos, Switzerlad, on 31 January, Japanese prime minister Taro Aso had pledged $17 billion in development aid to other Asian countries for infrastructure projects that will help boost growth.
Aso also repeated a pledge to lend $100 billion to the International Monetary Fund.