Long-term Finance
OUR APPROACH TO LONG-TERM FINANCE
Long-term finance mobilizes savings from investors such as banks, pension funds, insurance companies, retail investors and foreign investors through the capital markets to strategic sectors, such as infrastructure, housing, agriculture and small businesses.
We help strengthen the enabling environment for long-term finance, by supporting relevant policies, laws and regulations, for capital markets, capital markets instruments and institutional investors, as well as for the development of key components of the ecosystem, including the government bond markets.
We help build the capacity of a wide range of public stakeholders, such as staff from ministries of finance, financial supervisors, and infrastructure, housing and SME agencies, to enhance their understanding of capital markets and long-term financing, and for supervisors to build supervisory capabilities.
We help develop innovative financing instruments to mobilize private capital, focusing on outcome-oriented instruments such as green bonds and sustainability linked bonds, and other de-risking/blended finance instruments, such as credit guarantees, equity and first-loss structures, to align with the risk-return appetite of private investors.
The World Bank Group’s Joint Capital Markets Programs (JCAP) offers advice and lending to capital markets to mobilize financing to strategic sectors. The Financial Sector Assessment Programs (FSAP), and InfraSAPs, gives assessments of the quality of regulation and supervision of capital markets, insurance and pension funds; and on capital markets development; institutional investors; and mobilization of finance to strategic sectors.
AREAS OF FOCUS IN LONG-TERM FINANCE
Meeting a 70% rise in food demand by 2050 will require $80 billion in annual investment.
Estimates suggest that global food demand will increase by 70% by 2050 and at least $80 billion in annual investments will be required in response. Most of this investment needs to come from the private sector, due to limited public resources, large-scale mechanization, climate smart technologies, processing, and agri-food logistics. Smaller investments are also needed for farmers and agricultural micro, small and medium enterprises to increase their productivity, while reducing the environmental impact.
Financial systems in most developing countries are ill-prepared to finance the shift to sustainable agriculture and food industries. Banks, microfinance institutions, and institutional investors have traditionally been providing very limited resources. Agriculture loans and investments portfolios are low compared to the agriculture sector’s share of most economies. The World Bank Group helps countries overcome challenges for financial markets, including managing unique risks in agriculture, high transaction costs in dealing with large number of small farmers, and micro, small and medium enterprises (MSMEs) along the agriculture value chains. There is often a lack of expertise at financial institutions in managing agricultural loan portfolios.
An estimated 3 billion people will need new housing and basic urban infrastructure by 2030.
Housing is a key financial asset for poor households in most developing countries. The UN estimates that the global population will reach 8.5 billion by 2030, with almost 60% of the population living in urban centers.
The World Bank Group assists client countries in developing housing finance markets that are accessible to the lower & informal income and middle-income households. This requires managing risks and regulating the lending industry, as well as implementing targeted and fiscally responsible policies.
Home construction provides economic stimulus across the economy – boosting growth, investment, and jobs. Housing finance is also a critical component of the financial markets deepening process with complex capital markets products, and linkages to the domestic and global institutional investor base.
Nearly 60% of EMDE banks allocate 5% or less of lending to climate finance and 28% provide none.
Sustainable finance takes account of environmental, social and governance considerations when making investment decisions in the financial sector, leading to increased longer-term investments in sustainable economic activities and projects. The World Bank Group has been at the forefront of promoting Sustainable Finance globally – though data provision, analytical work, instrument design and technical assistance to support regulators and investors in our client countries to green their financial systems.
OUR PARTNERS IN LONG-TERM FINANCE
Financial Sector
Sound financial systems underpin economic growth and are crucial to the World Bank Group’s mission of alleviating poverty.