New Strategic Direction: IFC 3.0
Creating Markets
Japan-Africa Business Forum
Tokyo, July 25, 2017

Discussion Purposes Only

DEVELOPMENT CHALLENGESINFRASTRUCTUREFRAGILITY

1.2 billion people
lack access to electricity

46% of the global
poor will be infragile & conflictsituations by 2030

HEALTH &EDUCATION

CLIMATECHANGE

400 million people
do not have accessto essential healthservices. 121 million
children are notin school

26 million people
are pushed intopoverty each year
due to extremeweather.

SOARING
PRIVATE CAPITALFLOWS, FLAT ODA$ BILLIONSFOREIGNDIRECTINVESTMENTOFFICIALDEVELOPMENTALASSISTANCE

19902015LEVERAGING PRIVATE FINANCE
HOW MUCH IS OUT THERE?

US $2US $4.5

US $5US $100

TRILLION

TRILLIONTRILLION

TRILLIONASSETS HELDBY THEWORLD’S TENLARGESTPENSION FUNDSASSETS HELDBY THEWORLD’SLARGEST
INSURANCECOMPANIESASSETS HELDBY THE WORLD’SLARGESTSOVEREIGNWEALTH FUNDSGLOBALBOND
MARKETA NEW APROACH:THE CASCADE
Private sector first,
Public dollars last

SUSTAINABLE INFRASTRUCTURE FINANCE
THROUGH A CASCADE APPROACH

123COMMERCIALFINANCING

Can commercial financing be cost-effectively
mobilized for sustainable investment? If not…

UPSTREAM REFORMS& MARKET FAILURES

Can upstream reforms be put inplace to address market failures? Ifnot…

• Country and Sector Policies• Regulations and Pricing• Institutions and Capacity

PUBLIC AND CONCESSIONALRESOURCES FOR RISK INSTRUMENTS& CREDIT ENHANCEMENTS• Guarantees• First Loss

PUBLIC & CONCESSIONAL FINANCING,
INCLUDING SUB-SOVEREIGN

4Can risk instruments & credit
enhancements cost-effectively
cover remaining risks? If not…

• Public finance (incl. national development banks and domestic SWF)
• MDBs and DFIs

Can development
objectives be resolved
with scarce publicfinancing?

What is thePrivate Sector Window?

The Private Sector Window introduces a new way of supporting private
sector development towards the Sustainable Development Goals in thepoorest countries, recognizing the fundamental role of the private sector
in strengthening economies and creating jobs.

What will the PSW do?

Leverage IDA resources to expand private investment and create markets

4 Goals

Support the scale-up of IFC and MIGA
investments in IDA-only/fragile andconflict-affected countries

1

Offset risks and other impediments toinvestment

2

Encourage high-impact, pioneering
investments, and create markets

3
4

Support IDA18 goals and thematic
priorities

4 Facilities
1Risk Mitigation Facility
Blended Finance
Facility

2

MIGA Guarantee
Facility

3
4

Local Currency Facility

THE PSW WILL take on
CONSTRAINTS
to development and investment

INFRASTRUCTURE
Gaps estimated at$100B a year

JOBS
Grow SMEs
to spur job
creation

LOCAL CURRENCY
Lack of long-term
local currency
financing

RISKS
Early movers
take brunt ofrisk,impedes
pioneering
investments

REINSURANCE
Opportunity togrow
reinsurance infragile markets,
smalltransactions

9AT THE TRANSACTION LEVEL, THE PSW WILL

transfer a portion of risk from private sector
participants to IDA

POLITICAL & OFFTAKE
RISK
non-commercial risks
such as expropriation,
currency transfer
restriction andinconvertibility, war andcivil disturbance, andbreach of contract(MGF, RMF) andgovernment/SOE offtake contract risk (RMF)

CURRENCY RISK
Early movers
take brunt ofrisk, impedes
pioneering
investments(LCF)

DE-RISKING/ REWARDINGPIONEERING INVESTMENTS
through blending ofconcessional funds,including in debt, equity
and guarantee instruments(BFF) and liquidity
products (RMF)

PSW facilities at-a-glance
Risk Mitigation Facility*

Blended Finance Facility*

MIGA Guarantee Facility

Local Currency Facility*

Local currency denominatedloans to private sector
clients who operate inmarkets where there arelimited currency hedging
capabilities

Instruments

Project-based guarantees
without sovereign indemnity

Loans, subordinated debt,
equity, guarantees and risk
sharing

MIGA Political Risk
Insurance (PRI) products toprivate sector

Types ofinterventions
supported

Large infrastructure, publicprivate partnerships

High-impact, pioneering

Investments in markets
currently underserved by
PRI and reinsurers

High impact investmentswith currency risk

Sectors

Infrastructure & PPPs

Multiple sectors

Infrastructure, agribusiness,
manufacturing and services,financial markets & PPPs

Sectors determined byunderlying loans* IFC-led PSW Facilities

11

PSW-eligible countries: Sub-Saharan Africa
Benin
Burkina Faso
BurundiCameroon
Central African
Republic
ChadComoros
Congo, Dem. Rep.
Congo, Rep.
Cote d'Ivoire
Djibouti
Ethiopia
GambiaGuineaGuinea-Bissau
Kenya (subnational areasonly)2
Liberia
Madagascar
MalawiMali
Mauritania
Mozambique
Niger
Nigeria (sub-national areasonly)2
Rwanda
Sao Tome and Principe

SenegalSierra Leone
South Sudan
Tanzania
Togo
Uganda1212

Case Study:

Power Sector inPacific Island
Countries

The Challenge
 Electricity expensive for consumers
 Viable projects too costly for investors
 Unable to find a financial solution

Case Study:
Power Sector inPacific IslandCountries

The Solution
 Create a risk-sharing facility
 IFC would cover 50% of credit risk
 PSW’s Blended Finance Facility would cover a first loss of 20% of IFC’s
maximum risk amount14

Case Study:
Solar Power ina West African
Country

The Challenge Small grids, low generation capacity
 Heavy reliance on imports and fuel oil-based generation

Case Study:
Solar Power ina West African
Country Solar power presents opportunity to increase supply at competitive prices, bringenergy security
 Financial fragility of off-taker and absence of payment track record discourage
private investment

The Solution
 IFC seeking to finance the country’s first solar Independent Power Product (IPP) Provide support via the Risk Mitigation Facility
 Liquidity Support Guarantee to help mitigate nonpayment risk by the off-taker Political Risk Insurance (PRI) to help mitigate breach of contract and termination risk

16

Case Study:

Health Sector inan Asian Country

The Challenge Hospital wants to improve standards and access to quality healthcare Long-term local currency financing not available and client susceptible tohigh FX risks

Case Study:
Health Sector inan AsianCountry Difficult for IFC to manage currency risk until project disbursement occurs

The Solution
 Proceeds of IFC local currency-denominated bond would be invested ingovernment/corporate paper until needed By bearing credit and market risks, local currency facility would facilitate:
 local currency financing to a health care client IFC local currency bond issuance18

Case Study:

Large-Scale,Long-Term
Energy in an SSACountry

The Challenge Hydropower project with tremendous potential would offer 5,000
MW of new capacity
 MIGA in need of additional guarantee capacity

Case Study:
Large-Scale,Long-TermEnergy Project in
SSA Country

The Solution• MIGA seeking to provide coverage for risk of Breach of Contract• PSW would: offer additional guarantees and significantly enhance ability to support big transformational
projects in low-income, fragile/conflict-affected IDA countries

20

Case Study:

Competitiveness ina Coffee Market
in an AfricanCountry

The Challenge An African country has potential to increase global coffee market share andprofits by improving quality of coffee

Case Study:
Competitiveness ina Coffee Market in
an African Country The nation’s primary coffee exporter is struggling to maintain financing due
to investor concerns about political instabilityThe Solution• With the IDA PSW allocation, MIGA would provide guarantees to coffee
operating companies against non-commercial risks of Transfer Restriction,Expropriation, War and Civil Disturbance and Temporary Business
Interruption

22