Infrastructure development lies at the nexus of economic growth, productive investment, job creation, and poverty reduction. Financing the huge investment gaps in Emerging Market Economies (EMEs) – an estimated $1.3 trillion per year – is paramount to attaining the SDGs. This priority keeps being stressed by the G20, along with an explicit mandate for the MDBs. In the past, government budgets, banks and international donors were the traditional funding sources in most EMEs (although not always banks in some LICs).
On the one hand, the infrastructure needs exceed sources of traditional funding. On the other hand, the traditional sources may even contract due to reduced fiscal and donor resources as well as tighter international banking regulations. The international development community acknowledges the increasing need for enhanced participation of the private sector, especially as long-term financier, in infrastructure projects. Furthermore, with green- and resilience infrastructure needed, this adds a dimension of green-financing that will be critical to meet both infrastructure needs and climate goals. In light of the World Bank Group’s (WBG) adoption of a definition of private capital mobilization (PCM), jointly agreed with other MDBs and Development Finance Institutions (DFIs). - the goal is to deliver infrastructure projects by the most efficient use of concessional and public funding– to best mobilizing of the greatest amount of commercial financing. Also, with the role of the WBG in the infrastructure-finance approach, environmental, social, and governance compliance requirements and monitoring systems to ensure greater quality of outputs and outcomes from this infrastructure projects are ensured.
Our Infrastructure Finance business line works on expanding infrastructure finance markets across economies, using a blend of concessional and public capital to leverage private funding from institutional investors and reducing the rising infrastructure finance gaps in EMEs.
What We Do
We assist client countries in addressing the rising demand for infrastructure through various levels of intervention. First, providing advisory services on policies, regulations and financial market reforms supportive of infrastructure financing (linking our advisory services, when appropriate, to WBG lending, guarantees and treasury operations to catalyze private sector-led infrastructure development). Second partnering with national development banks and infrastructure agencies to strengthen institutional capacity and develop investment vehicles and credit enhancement instruments to crowd in commercial investors. Last but not least, working across different WBG global practices and the infrastructure vice-presidency that mobilize both advisory and financing services across different infrastructure sectors along the different phases of the infrastructure project cycle.
We offer a range of products and services to our client countries:
- Upstream Technical Advisory Services: In collaboration with the infrastructure vice-presidency and other sector-specific general practices, we provide technical advisory services on the following areas: PPP regulatory and institutional frameworks to ensure project bankability and fiscal sustainability, effective risk-allocation policies, early bankability review, prioritization of project pipeline, and government transaction advisory. This also includes ensuring that upstream projects are considered through a lens of environmental, social and governance (ESG) and with the intention to reduce carbon as much as possible, which can be emedded in the framework and process.
- Downstream Technical Assistance and Financial Intervention Instruments, including:
- Capital markets solutions: Capital markets framework for long-term finance, financial innovations and regulations to mobilize institutional investors (including credit enhancement and other risk-sharing instruments) both through debt and equity markets , including the development of products through pilot transactions, capacity building of relevant stakeholders and the establishment of partnerships with international and domestic investors;
- Banking solutions: Banking sector policies and prudential regulations, role of development banks in crowding in the private sector, risk management & hedging instruments, and use of Islamic finance;
- Guarantee programs/facilities: Capacity development of national development banks for catalytic role and/or supporting design and implementation of standalone facilities;
- Tailored financing solutions and instruments: Optimization of blended financing and credit enhancements to crowd in private investments; including design and introduction of new instruments and vehicles tailor made to the structure of the market.
- WBG loans and guarantees: Leveraging on WBG credit-lines, supporting interventions that leverage commercial investors: credit enhancements for obligators, offtakers and issuers; risk-sharing-facilties, refinancing, pooled financing vehicles, investment funds, green finance schemes, and so on.
- Country Diagnostics and Other Building Blocks of Infrastructure Finance: We work on country diagnostics (including through FSAPs and Infrasaps), research activity, elaboration of strategic roadmaps and action plans, and development of Monitoring & Evaluation (M&E) frameworks, among others.