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Case studies Publication Date 1 January 2018 Published 1 Jan 2018

Catalysing private investment through the IFC's co-lending facility

IFC's Co-lending Facility

Context

  • The International Finance Corporation (IFC) has a mandate to mobilize private financing and is looking to do this through various syndicated products including: B Loans, Parallel Loans and A Loan Participations
  • At the same time, investors are experiencing low yields on investments in a period of ultra-low or even negative interest rates

Problem

  • The IFC, at the time, was limited in its ability to provide large financing packages, despite its strong loan origination capacity
  • Private sector investors lack the expertise and market knowledge to source for viable investment opportunities in emerging markets

Innovation

  • The IFC's Managed Co-Lending Portfolio Program (MCPP) allows investors to participate in deals originated by the IFC, co-lending alongside the IFC on similar commercial terms
  • Investors pledge capital upfront, and are allocated exposure to deals identified by the IFC based on an upfront agreement Investors can participate through trust funds, B Loans, and unfunded structures (credit mobilization)

Stakeholders Involved

  • IFC – Responsible for loan origination
  • China SAFE4 and Hong Kong Monetary Authority – Investors for trust funds
  • Allianz, AXA, Prudential – Investors for B Loans
  • Liberty Mutual Group, Munich Re, Swiss Reinsurance – Investors for unfunded structures

Results/Impact

  • The MCPP allows investors to increase exposure or gain first-time access to the asset class by leveraging the IFC's strong deal
    origination capabilities
  • As of April 2019, the IFC successfully raised USD 7.1B from eight global investors through the MCPP, USD 3.6B worth of funds have been approved for a total of 96 projects across 37 countries
  • MCPP’s contribution to Penonome, Panama, completed a financing package for the construction of the largest wind power plant in Central America

Key lessons learnt

  • Co-lending with strong institutions such as the IFC can help institutional players overcome investment barriers (e.g., lack of deal origination capabilities or market knowledge)
  • Flexibility in terms of investment product structures allows the MCPP to play to the needs of a variety of investors
  • The IFC's provision of a first-loss tranche of up to 10% of each investment partner’s loan portfolio helps reduce risk and increase investor appetite
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