DUBAI, April 28 (Reuters) - International Finance Corporation (IFC) IFK.UL , the World Bank's private sector investment arm, said on Thursday it had arranged $375 million in financing for an Iraqi power company to provide electricity to millions of people in Kurdistan and Baghdad.

The company, Mass Global Energy Sulimaniya, will use the funds to add 500 megawatts of capacity to a 1,000-megawatt power plant in Kurdistan, providing power to 3 million people. It will also help complete a new power plant near Baghdad that will supply about half of the Iraqi capital's electricity requirements.

The debt and equity package, which includes $250 million from IFC and $125 million from Bank Audi AUDI.BY , Lebanon's biggest lender by assets, includes IFC's first Islamic syndicated loan.

The investment in Kurdistan will help boost infrastructure in a part of Iraq that is struggling following an inflow of more than 1 million internally displaced Iraqis and 250,000 Syrian refugees, IFC said in a statement.

"One of IFC's objectives is to promote investment in conflict-affected countries and Iraq is one of those countries as it faces security, migrant and power challenges," Dimitris Tsitsiragos, IFC's vice president of global client services, told Reuters in an interview.

Years of war and lack of investment have crippled Iraq's power infrastructure, causing frequent blackouts and stifling economic growth.

The financing is part of IFC efforts to support infrastructure development in Iraq, which needs to raise power generating capacity by an estimated 70 percent to meet current demand, the IFC said.

It has provided funding for around 10 projects to date in Iraq covering telecoms, industry, water and hotels among other sectors, and is looking at further investment opportunities in the power and manufacturing sectors, said Tsitsiragos.

(Reporting By Tom Arnold; Editing by Susan Fenton) ((Tom.Arnold@thomsonreuters.com; +97144536265; Reuters Messaging: tom.arnold.thomsonreuters.com@reuters.net))

Keywords: IFC IRAQ/POWER