The US$18m loan, which is structured as a Sharia-compliant 'sale and lease back' product, will allow Al Safi Danone Iraq to increase production at its plant near Erbil in the Kurdish region of Northern Iraq, said IFC, a member of the World Bank Group.
Al Safi Danone Iraq was established in 2012 by Saudi Arabian conglomerate Al Faisaliah, distributor Al Yasra, and Al Safi Danone, a Saudi Arabian joint venture between Danone and Al Faisaliah, to "partially replace the importation of processed dairy products from the Kingdom of Saudi Arabia (KSA) to Iraq through the company's local production."
Operations at Al Safi Danone Iraq's Erbil plant, which has a target capacity of 59,000 tonnes per year, began in April 2014.
It currently focuses on the production of spoonable and drinkable yogurt, UHT milk and cheese.
The US$18m loan is intended to increase production at the plant, improve food distribution standards, and create more than 250 jobs in the next two years, said IFC.
"Modern dairy enterprise"
"This investment will help us establish a modern dairy enterprise with the latest processing and packaging equipment and train our employees to international standards," said George Abi Najem, Al Safi Danone's general manager for Gulf Cooperation Council (GCC), Iraq and Levant.
"Thanks to this technology, the local market will enjoy higher quality dairy products at affordable prices."
"Al Safi Danone's new factory in northern Iraq is just the first sign of the group's commitment to Iraq, one of the most important markets in the region, despite its challenges."
IFC says its investment is part of a broader World Bank Group strategy to support the diversification of Iraq's oil-reliant economy.
Recent Islamic State (ISIS) attacks across the country have led to a fall in oil prices.
"Our development role in Iraq is more important than ever, especially in providing funding to competitive companies in the non-oil sector and facilitating investments from other countries within the region into Iraq," said Mouayed Makhlouf, director for the Middle East and North Africa, IFC.
"We hope our commitment to this project will encourage other international and domestic investors to invest in Iraq," Makhlouf added.