An estimated $4 trillion annual investment is required for developing countries to achieve the Sustainable Development Goals (SDGs) by 2030. In light of the investment requirement and the Maximizing Financing for Development (MFD) strategy – helping countries maximize their development resources by drawing on private sector financing – there is a greater need to develop and strengthen capital markets in order to mobilize commercial financing. The role that capital markets can have in financing strategic sectors such as infrastructure, corporate, and SMEs and the links with economic growth are increasingly being highlighted in the G20 agenda.
The Capital Markets product line assists countries in developing deep and resilient capital markets that contribute to the financing of government and companies, and therefore growth and financial stability. It also plays a key role in the provision of long-term financing for strategic sectors, and risk management tools for both financial sector participants and end users. It supports the development of the Private Equity (PE) & Venture Capital (VC) ecosystem, and strategies to establish Sovereign Wealth Funds (SWFs)/ Strategic Investment Funds (SIFs), including green SIFs, in client countries.
Well-functioning capital markets require incentive structures to “crowd in” commercial investors, an enabling policy and regulatory framework, and synchronization of robust regulatory framework with institutional capacity. We work on these building blocks for capital market development.
What We Do:
The World Bank Group is scaling up its overall commitment to emerging economies, which face staggering funding gaps especially in the areas of infrastructure, housing, SMEs and agriculture. We develop tailored, context-specific, capital markets solutions to finance these sectors.
We offer a range of products and services tailored to the specific development needs of our client countries:
• Capital Markets Development Advisory Services: We provide advisory services to countries in all regions and at different levels of development. This includes advising governments on regulatory and policy framework for overall capital markets development (government bond markets, corporate markets, institutional investors and funds).The scope of advisory services vary depending on each country’s “strategic country diagnostics” and client demand. It could cover one of more sectors of the capital markets – ranging from working on policy issues to help develop a specific segment of the market, to working on demonstration transactions in specific sectors (for example infrastructure finance or housing finance).
• Capital Markets Diagnostics: Through the Financial Sector Assessment Program (FSAP), we analyze the challenges and opportunities for capital markets development.
• Capital Markets Regulatory Assessments: Through the FSAP program we also analyze the robustness of the regulatory framework and supervisory program of specific countries with a view to assessing whether they contribute to investor protection, building liquid markets and promoting financial stability.
• Product Development: Innovative financial products are necessary to help countries meet development finance needs, leverage the private sector as financier, operator, or service provider in SDG related areas, and effectively manage risks. We collaborate with other practices and cross-cutting solution areas to devise strategies for product development and design innovative products that play a crucial role in the further development of capital markets.
• Joint Capital Markets Program (JCAP): LT Finance is the leading contributor from the World Bank in supporting JCAP. The World Bank and IFC launched the Joint Capital Markets program (“J-CAP”) initiative in mid-2017 to affirm their commitment to the development of local capital markets. The program builds on the Capital Markets Strengthening Facility, supported by SECO and implemented in five countries. J-CAP mobilizes experts across the World Bank Group to unlock synergies and create systemic impact in funding strategic sectors of the economy. J-CAP is initially focused on six target countries—Bangladesh, Kenya, Morocco, Peru, Vietnam, Indonesia —as well as the sub-region of the West African Economic & Monetary Union.
• Providing Technical Assistance on the Strategy of Establishing SIFs and SWFs: Analyzing the relationships with other entities within the PPP framework, conducting feasibility studies of SIFs, supporting the establishment of SIFs and/or strengthening the existing SIFs, and designing and implementing fund management advisory agreements with SIFs.
• Developing the Eco-System for PE/VC industry: Carrying out assessments of the PE/VC industry, supporting design and reform of legal and regulatory framework for PE/VC fund operations, and designing and following up on IBRD/IDA loans and credits to finance hybrid PE/VC fund programs. Peer Group Dialogues: Initially launched in 2009 focusing on government bond market development, the peer group dialogues have proven to be valuable with the potential to be expanded to many other areas based on client needs and interests. The objective of this service is to facilitate cross-country knowledge sharing on development challenges and opportunities among counties in select peer groups.
• Knowledge Management: We disseminate the knowledge acquired through project implementation and research through policy notes, thought-leadership analyses and country studies as well as through conferences, workshops, and internal & external training sessions.
• Global Engagements: The WB has a long-standing engagement with IOSCO, which seeks to ensure that the standards for securities markets regulation and supervision remain proportionate and can effectively be applied in emerging markets. We engage with the International Forum of Sovereign Wealth Funds (IFSWF). The WB has contributed to the G20 particularly in regard to the development of local currency bond markets (LCBM) where a diagnostic tool was developed and annual notes on trends in LCBMs are being delivered. The WBG also participates in the FSB, and in particular in the shadow banking work streams to ensure that capital markets develop under solid footing.
• Capital Markets Diagnostics: Through the Financial Sector Assessment Program (FSAP), we analyze the strength of economies’ capital markets to inform concrete actions to develop and build resilience into capital markets.
• Peer Group Dialogues: Initially launched in 2009 focusing on government bond market development, the peer group dialogues have proven to be valuable with the potential to be expanded to many other areas based on client needs and interests. The objective of this service is to facilitate cross-country knowledge sharing on development challenges and opportunities among countries in select peer groups.