Development of Local Currency Bond Markets: The Indian Experience
International Finance Corporation · • 2011: local currency swap guarantee facility. $100 million...
Transcript of International Finance Corporation · • 2011: local currency swap guarantee facility. $100 million...
International Finance
Corporation
Olaf Schmidt Global Head - Tourism, Retail & Property
Manufacturing, Agribusiness & Services Department
Structured Finance Conference
November 15, 2012
IBRD International Bank
for Reconstruction
and Development
IDA International
Development
Association
MIGA Multilateral
Investment and
Guarantee Agency
To promote
institutional, legal and
regulatory reform
Governments of
poorest countries with
per capita income of
less than $1,025
Technical assistance
Interest Free Loans
Policy Advice
To reduce political
investment risk
Foreign investors in
member countries
Political Risk Insurance
Est. 1945 Est. 1960
IFC International
Finance Corporation
To promote private
sector development
Private companies in
member countries
Equity/Quasi-Equity
Long-term Loans
Risk Management
Advisory Services
Est. 1956 Est. 1988
To promote
institutional, legal and
regulatory reform
Governments of member
countries with per
capita income between
$1,025 and $6,055.
Technical assistance
Loans
Policy Advice
Shared Mission: To Promote Economic Development and Reduce Poverty
2
IFC is a Member of the World Bank Group
Role:
Clients:
Products:
3
Over US$100 billion Invested in Emerging Markets
since 1956
Shareholders 184 member countries
S&P & Moody’s Rating AAA/Aaa
Total Assets* US$76 billion
Portfolio* US$56 billion
Committed in FY12* US$20.3 billion
- Own Account - US$15.4 billion
- Mobilized - US$ 4.9 billion
# of Active Projects 1,737
# of Countries 129
# of Equity Investments 800
* As of 6/30/2012
Take market risk with no sovereign guarantees
Promoter of environmental, social, and corporate
governance standards
Focus on development impact
What we look for from clients:
Commitment to project (equity)
Successful track record & long-term strategy
Integrity
East Asia & the Pacific
17%
Europe & Central
Asia 19%
Latin America
&the Caribbean
24%
Middle East & North Africa 14%
South Asia 8%
Sub-Saharan Africa 18%
FY12 Commitments by Region
Largest global development institution
focused exclusively on the private sector in
developing countries
4
IFC’s Global Reach
Global Knowledge and Local access: more than 100 offices worldwide in 84 countries,
with over half of IFC’s 3,700 staff based in emerging markets
Owned by 184 member countries. Collaborate with the rest of the World Bank Group
Staff with specializations in financial services, industry, environment, corporate
governance, advisory services and more
Dakar
Nairobi
Johannesburg
Cairo
IFC HQ/Regional Hub
IFC Hub Offices
IFC Regional Operations Center
IFC Country Offices
World Bank Group Hub Office
Washington
Mexico City
Bogota
Buenos Aires
São Paulo
Santo Domingo
Moscow
Hong Kong
New Dehli
Almaty
Istanbul
Singapore
Infrastructure & Natural Resources
Financial Markets
Manufacturing, Agriculture & Services
• Power
• Renewables
• Transport
• Utilities
• Oil & Gas
• Mining
• Sub-national
Finance
• Banking
• Sustainability and
Climate Change
Finance
• Private Equity/
Funds
• Housing Finance
• Insurance
• Microfinance
• SME Banking
• Trade Finance
• Securities Markets
• Agribusiness
• Forestry
• Healthcare &
Life Sciences
• Education
• Manufacturing
Industries
• Energy Efficient
Machinery
• Chemicals
• Tourism, Retail &
Property
Leveraging Global Industry Knowledge for Clients
5
14%
64%
22%
Infra & Natural Resources
Financial Markets
Manufacturing, Agri & Services
Senior
Debt
On-lending
Liquidity management
Acquisition financing
Warehousing facilities
Syndicated loans
Local currency financing
Partial credit guarantees
Securitization
Bond underwriting
Mezzanine
Finance
Convertible debt
Subordinated debt
Other Tier II instruments
Private
Equity
Common shares
Preferred shares
Syndication via IFC Asset
Management Company
Trade Finance
Global trade supplier
finance (GTSF)
Distribution finance
Global trade finance
program (GTFP)
Global trade liquidity
program (GTLP)
Critical commodity
finance program (CCFP)
Advisory
Services
Sustainable Business
Advisory, including:
―Food safety
―Hospitality training
―Corporate governance
Access to finance,
including housing finance
Investment Climate
Public-Private
Partnerships
Sustainable
Finance
Carbon finance
Renewable energy
Green building & energy-
efficiency finance
Supply chain financing
Corporate governance
financing
6
IFC’s Products and Services
Structured
Finance
Global Industry
Expertise
Long-term
Competitive
Financing
Capital
Mobilization
Country Risk
Mitigation
Regional
Knowledge
― Global investment team dedicated to industry sectors in emerging markets
― Industry specialists on staff
― Green Building and energy efficient expertise and advisory services
― One-stop-shop for financing: equity, debt, structured finance, etc., based on
client needs
― Longer investment horizon and less cyclical than most financial investors:
up to 10-12 years, both equity and debt
― Reduced Political risk through government relations, preferred creditor
status, neutral broker role
― Withholding tax benefit
― Global and local presence in more than 80 countries with increase focus on
local presence and expertise
― Investment professionals in regional hubs and large country offices
― Advice on Environmental and Social Best Practices
― Equator Principles modeled after IFC Standards (60 international banks)
― Local Consultation and Disclosure
― Corporate Governance and Sustainability Toolkit
― IFC can mobilize funding: debt from commercial banks and other DFIs
(syndications), equity from investors (AMC), etc.
How IFC Differs from Other Partners
Environmental &
Social Risk
Management
7
8
IFC Has Established Several Innovative Special Initiatives
8
• Global Trade Liquidity Program - $5 bn from IFC and partners
• Global Trade Finance Program - $3 bn from participant banks in over 82 countries
IFC aims to support $50 bn of trade over 3 years
• IFC Capitalization Fund - $3 bn from JBIC & IFC
• Microfinance Enhancement Facility - $0.5 bn from EIB, FMO, SIDA, and others
• Infrastructure Crisis Facility - $4 bn from KfW, DEG, Proparco, EIB
• Debt & Asset Recovery Program – Target $4 bn to invest in NPL pools
Active Crisis
Response
Initiatives
• Global Agriculture and Food Security Program (GAFSP) – target of $1 bn for SMEs,
smallholders to improve productivity, and access to finance
• Education for Employment – as part of Arab World Initiative
• Export Credit Agency Initiative – ECAs & emerging market importer linkages
• SME Initiatives – to double IFC’s SME reach in 4 years
Initiatives
Under
Development
• Health For Africa – to expand affordable health care services in Africa, via research, technical
assistance and Access to Finance (new $100 m fund, $100 m risk sharing facilities, etc.)
• AMC’s ALAC Fund – Sovereign, pension funds to co-invest $1 bn with IFC in ALAC region
• Water – reach 100 mn people through projects to improve water access, quality & reduce waste
Linked
Initiatives
Business Opportunity at the Middle and Base of Pyramid
9
Most businesses focus on mature markets, while the huge markets of
6 billion living on less than $20,000/ year remain to be tapped
4 billion
2 billion
0.5 billion
Individual annual income (US$)
Mature markets: > $20,000
Emerging markets: $3,000 to $20,000 (Size: $12.5 trillion)
Survival markets: <$3,000
(Size: $5 trillion)
Population
Source: IFC, WRI
IFC Priority: Fighting Climate Change
• IFC invested $1.7 billion in energy
efficiency, renewable energy, and
other climate-friendly projects in FY11
By FY13, over 20% of IFC investments
will be in climate-friendly projects, up
from 14% last year
IFC launched the EUR150 million Post
2012 Carbon Facility in Feb 2012
• Along with investments, IFC also adds
value to clients through:
Advisory services
Concessional donor funds
10
11
EDGE: Excellence in Design for Greater Efficiencies
IFC developed a green buildings classification system
designed for emerging markets:
EDGE is a tool that reveals technical solutions for
going green and captures capital costs and
projected operational savings.
EDGE can be used by building professionals without
the need for expensive green building specialists.
Specifications
EDGE has contextual data of utility costs and
climate for different cities
EDGE uses building physic calculations to give
design-specific results
EDGE spells out the most effective technical
measures
EDGE provides an investment planning tool for
building owners and developers
IFC’s EDGE Tool
EDGE applied to Hotels
The EDGE Standard:
‘A greenfield building that has 20% less energy,
water and material consumption compared to an
equivalent local benchmark.’
Example of IFC’s Green Building Client: Artha Capital, Mexico
Key Features: • 80% of developments to be within 200 meters of public transportation options.
• 50% of all street lighting to use solar-powered LED lighting.
• 60,000 homes to be constructed with low-energy lighting (CFLs) and solar
water heaters.
Green Homes Artha Capital provides investments in
real estate developments for
integrated and sustainable
communities in Mexico.
IFC’s equity investment helped this
property fund to acquire land and
provide basic infrastructure for 60,000
homes with low-energy lighting and
solar water heaters. By taking an
approach that integrates industrial,
retail, tourism, and residential, Artha
Capital creates employment
opportunities in communities with
high environmental standards,
enabling people to live near their
place of work.
IFC Financing:
US$25 million equity
Significance: First example of a green
building element in a property fund.
Germany and IFC – Shared Goals and Values
• A history of collaboration with the Federal Foreign Office, Federal
Environment Ministry, Federal Ministry of Economic Cooperation and
Development, DEG and KfW
• IFC and DEG collaborated in developing the report – IFIs and Development
Through the Private Sector
• Germany and IFC share common interests particularly in the areas of IDA
countries and Africa, climate change and environment, agriculture and
food security, fragile and conflict-affected states, gender
13
IFC is increasing its cooperation with the German private
and public sectors to capture new opportunities for
growth and enhancing development impact
Select German Clients
• 2011: Financing of Bayer’s farming clients in Ukraine. IFC extended a
$70 million risk-sharing facility to Raffeisen Bank Ukraine.
• 2010: Refurbishment of cement operations in Sub-saharan Africa. IFC provided
$110 million equity, $70 million in debt, and IFC AMC provided $35 million
equity.
• 2010: Pulkovo St Peterburg airport. €170 million senior debt, including €100
million B-loan mobilization.
• 2008: Lima airport. $20 million equity investment from IFC.
• 2011: Modernization and expansion of metal water management operations in
the Balkans and Romania. IFC provided €46 million senior debt.
• 2009: VW’s auto plant in Pune, India. IFC extended €135 million in debt,
including €75 million B-loan.
14
IFC cooperation with select German Financial Institutions
15
• IFC has over $1 billion in co-investments with DEG and KfW (6/2011).
• In 2009, DEG and IFC signed a Master Cooperation Agreement.
• KFW and IFC are partners in the Microfinance Enhancement Facility and
the Infrastructure Crisis Facility.
• 2009 & 2010: Global Trade Liquidity Program GTLP. $75 million unfunded
risk-sharing facility on trade portfolio in Africa; $125 million funded risk-
sharing facility to global trade portfolio.
• As of June 2011: Commerzbank is the 3rd largest German B-loan
participant with US$80 million committed exposure.
• 2011: local currency swap guarantee facility. $100 million risk-sharing
facility to support banks with local currency hedging.
• 2011: Global Climate Partnership Fund. $75 million investment in DB-
managed climate fund.
• Since 2000, IFC has financed ProCredit’s network banks in the Balkans,
Ukraine, Romania, Georgia, El Salvador, Ecuador, Nicaragua, & Bolivia.
• IFC is an equity holder in Procredit Holding.
IFC Western Europa (Paris, London, Frankfurt, Brussels)
Role • Business development with Western European companies that invest in Emerging
Markets
• Mobilization of financing with commercial banks and other IFIs for IFC projects
as well as donor grants for IFC technical assistance
• Coordination mit European Governments and other relevant parties
Thank you
Olaf Schmidt
Global Head – Tourism, Retail & Property Investments
Manufacturing, Agribusiness & Services Department
Principal Investment Officer
+33 1 40693352
16