The International Finance Corporation (IFC) aims to raise US$5bn from global institutional investors to modernise infrastructure in emerging markets over the next five years.
The Washington DC-based was set up 60 years ago as the private sector arm of the World Bank Group, with the remit of funding for-profit and commercial projects with potential for reducing poverty and promoting development in developing countries. It hopes that the latest programme can open up a new stream of capital flows to improve power, water, transportation and telecoms systems.
The initiative, called Managed Co-Lending Portfolio Programme (MCPP) Infrastructure, builds on the success of IFC’s managed co-Lending portfolio programme, a loan-syndications initiative that enables third-party investors to participate passively in IFC’s senior loan portfolio.
In its first phase, the programme allocated US$3bn from the People’s Bank of China (PBOC) across 70 deals in less than two years. It “demonstrated how large investors can benefit from delegating the processes of deal origination and approvals to IFC,” commented IFC.
The first partnership under the programme was signed with global insurance group Allianz, which will invest US$500m towards IFC debt financing for infrastructure projects in emerging markets.
IFC is also in advanced discussions with Eastspring Investments, the Asian asset management business of Prudential, for a commitment of US$500m and also hopes for a similar amount from French insurance group Axa.
MCPP Infrastructure is designed for institutional investors seeking to increase their exposure to emerging markets infrastructure. IFC will originate, approve, and manage the portfolio of loans that will mirror its own portfolio in infrastructure. It will do so “in a manner agreed upfront with its partner investors, always subject to the overall governance of the platform.”
“Modern infrastructure is essential for economic growth and lasting prosperity,” said IFC executive vice president and chief executive officer (CEO Philippe Le Houérou. “Yet a huge investment gap exists in this sector – totalling trillions of dollars a year in emerging markets alone.
“MCPP Infrastructure marks a breakthrough in the search for large-scale financing solutions to the challenges of development. It is a key building block in the global effort to move from billions to trillions in development finance.”
With expected support from the Swedish International Development Cooperation Agency (Sida), IFC will provide a limited first-loss guarantee on the investments to meet the risk-reward profile that institutional investors require.
“We are in the process of finalizing a model where Sida’s guarantee instrument can catalyse private capital for sustainable infrastructure investments in developing countries,” said Marie Ottosson, Sida’s acting director-general. “This innovative partnership demonstrates how we can work together to reach the sustainable development goals (SDGs).”
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