IFC’s Financing Instruments

IFC’s MissionIFC’s Mission

To promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.

IFC: Part of the World Bank GroupIFC: Part of the World Bank Group

IFC is owned by its 178 member countries, which collectively determine policies.

To assist private enterprise in developing countries, IFC:

•Provides loans and equity for viable projects

•Mobilizes capital from other sources

•Provides technical assistance and advisory services

IFC Products and ServicesIFC Products and Services

Financial Financial StrengthStrength

•Paid-in capitalPaid-in capital:: $2.4 billion

•Total capital (net worth)Total capital (net worth):: $11.1 billion

•Capital strengthCapital strength:: IFC’s capital resources currently stand at 54 percent of risk-weighted assets, well above the 30 percent minimum for this ratio required by the capital adequacy policy.

(As of June 30, 2006)(As of June 30, 2006)

Defining Characteristics of IFCDefining Characteristics of IFC

• Participates only in private sector ventures

• Shares same risks as other investors

• Invests in equity• Has market pricing policies• Does not accept government

guarantees• Is profit oriented

IFC’s Beneficial RoleIFC’s Beneficial Role

• IFC presence reassures Foreign investors Local partners Governments

• Reputation and standing to help negotiations

• Measure of political risk cover

• Catalyst for other investors and lenders

Services Offered by IFCServices Offered by IFCServices Offered by IFCServices Offered by IFC

• Financial productsFinancial products:: loans, equity, quasi-equity, guarantees, risk management products; includes transactions in many local currencies

• Resource mobilizationResource mobilization:: loan participations and structured finance

• Technical assistance and advisory servicesTechnical assistance and advisory services:: on environmental/social performance, links with small businesses, corporate governance, capacity building, investment climate—many other issues

Global Financial Markets Group 34.5%

Agribusiness 6.9%

Global Manufacturing and Services 21.7%

Health and Education 1.4%

Global information and Communication

Technologies 4.6%

Oil, Gas, Mining and Chemicals 10.6%

Municipal Fund 0.2% Infrastructure 15.6%

Private Equity and Investment Funds 4.4%

IFC Portfolio as of June 30, 2006 by IndustryIFC Portfolio as of June 30, 2006 by Industry

Total : $21.6 billion An additional $5.1 billion is held and managed

for participants.

IFC Investment GuidelinesIFC Investment Guidelines

A project must be :

• In the private sector

• Financially, economically, environmentally, and socially sound

• 25 percent maximum IFC's share of project cost

• Investment size $1 million to $100 million in standard projects

Investments in local financial institutions often support on-lending to small and medium enterprises

• Currency of choice

• Fixed or floating market-rate pricing

• Features Tailored to cash flow Long maturities, usually 7 to 12 years

Appropriate grace periods

IFC LoansIFC Loans

• Equity investments based on anticipated return

• IFC not normally the largest shareholder (not more than 35 percent)

• Passive investor• Often considered “local” shareholder• Long-term investor of 8 to 15 years• Public listing the preferred exit

mechanism

IFC Equity InvIFC Equity Invesestmentstments

IFC Quasi-IFC Quasi-Equity FinancingEquity FinancingIFC Quasi-IFC Quasi-Equity FinancingEquity Financing

• Convertible debentures• Subordinated loans• Income warrants• Other hybrid instruments• Appropriately priced

IFC Risk Management IFC Risk Management

• ProductsProducts:: swaps, options, forward contracts• PurposePurpose:: helps client companies

hedge interest rate, currency, or commodity price exposure—

improving their credit and profitability

Structured FinanceStructured Finance

• ProductsProducts:: partial credit guarantees and securitizations in local or foreign currency

• PurposePurpose:: allows clients to diversify funding, extend maturities, and obtain financing in their currency of choice; helps develop local capital markets

IFC’s Indirect FinancingFinancingIFC’s Indirect FinancingFinancing

• Credit and equity lines

• Venture capital

• Leasing

• Emphasis on investments in local financial institutions that on-lend to small and medium enterprises

IFC Loan SyndicationsIFC Loan Syndications

• Agreement with borrower: loan funded by IFC and participant banks

• Benefits: participant banks receive Reduced risk Exemption from country-risk provisioning Immunity from taxation Extensive emerging-market experience Detailed preinvestment appraisal Sound due diligence and ongoing supervision

IFC’s Technical AssistanceIFC’s Technical Assistanceand Advisory Servicesand Advisory Services

Business Enabling Environment

Value Addition to Firms

Environmental and Social Sustainability

Infrastructure

Access to Finance

•Diagnostic•Policy and legislation•Cross-border•Subnational•Industry-specific•Dispute resolution•Business advocacy

•Corporate governance•Entrepreneurship•Business service providers•Small business linkages (supply chain)•HIV/AIDS•Gender•Direct assistance to small and medium enterprises•Grassroots organizations

•Sustainable energy•Biodiversity•Cleaner technologies and production•Sustainable investing •Social responsibility

•Health and education•Infrastructure

•Banking•Nonbank financial institutions•Housing and property finance•Securities markets•Microfinance•Trade finance•Credit bureau•Insurance•Municipal finance•Sustainable finance

IFC Project IFC Project FinancingFinancing

0

200

400

600

800

FY02 FY03 FY04 FY05 FY06

IFC loans, equity, guarantees, risk mgt IFC syndications

Sub-Saharan AfricaSub-Saharan Africa

Commitments, US$millions

FY06 InvestmentsFY06 InvestmentsFY06 InvestmentsFY06 Investments

• Committed $700 million in financing for 38 projects* in 11 countries

• Project financing (for IFC’s own account):

Loans $393 million Equity & quasi-equity $72 million Guarantees and risk mgt. $235 million

• Loan syndications $0 million

*Includes regional share of selected global investments

Sub-Saharan AfricaSub-Saharan Africa

Regional PortfolioRegional Portfoliofor IFC’s account FY06for IFC’s account FY06

Sub-Saharan AfricaSub-Saharan Africa

Nigeria 544 South Africa 206 Cameroon 190 Kenya 152 Mozambique 121

• Largest Country Exposures (millions of U.S. dollars):

Total committed portfolio 2,201

Committed portfolio for IFC’s account 2,033

Committed portfolio held for others

(loan and guarantee participations)

168

(millions of U.S. dollars):