The funding strategists and traders at IFC have found many innovative ways to develop emerging capital markets as part of funding the organization's own operations. And the international capital markets are heralding this effort as some of the most groundbreaking work by a supranational in the capital markets of emerging economies.
Euromoney magazine named IFC the "Best Sovereign Supranational Agency Borrower in 2006" in its June 2006 edition. It noted that IFC is one of the bond issuers that have "taken the market by storm over the past 12 months" through its "pioneering work in developing local bond markets." And a few months ago, the International Financing Review also singled out IFC's unique role in opening new markets.
IFC's treasury raises funds from international markets to finance the Corporation's loans to clients in emerging markets as well as to the maintain organization's financial strength. IFC also issues bonds in the local currency markets to stimulate expansion of capital markets in developing countries. IFC currently has $15 billion in debt outstanding spread among 15 currencies.
Treasury operations are essential not only for funding IFC's private sector operations, but also have a significant developmental role in opening and deepening the local capital markets of emerging economies. The key beneficiaries are IFC's private sector clients.
In addition to IFC's annual global bond issue of $1 billion, the treasury team has opened domestic markets through such transactions as the recent "Panda Bond" in China. In October 2005, IFC became the first nonresident institution ever to launch an issue of renminbi-denominated bonds in China's domestic capital markets. Other landmark operations have included the opening of markets in Colombia, Morocco, and Peru, while in Malaysia IFC spearheaded the first domestic Islamic bond by a supranational.
IFC's top-rated securities have been issued in 34 different currencies since the Corporation started borrowing in its own name in the mid-1980s. Hence Euromoney declared that IFC has "unparalleled experience in opening new markets," noting that, "more than half of the currencies in which IFC has borrowed are from countries with developing bond markets. In many, IFC was the first nondomestic issuer or among the first." As Nina Shapiro, IFC's Vice President of Finance, told the magazine, "We take our mandate very seriously and want to help the evolution of local markets in a sustainable way."
Funding Development
Emerging capital markets have always been an important part of IFC's borrowing program. In many cases, when countries begin to open up their capital markets, they prefer to let supranational institutions be the first borrowers. Being an early borrower in a new market typically brings with it the added advantage of being able to generate favorable funding costs.
The Asia crisis of the late 1990s made clear that borrowers need to be able to issue bonds in their domestic currencies. Hence IFC's focus shifted from issuing in offshore markets to issuing in domestic markets. This helps accelerate market development and companies' ability to borrow in their local currencies.
IFC works with government regulators in its member countries to bring about responsible development of the financial capital markets and to focus the development in key areas, such as lengthening of issuance maturities. Because IFC swaps almost all of its bond issues into variable rate U.S. dollars, it also collaborates with the regulatory bodies in establishing or modifying rules and regulations for the derivatives markets.
Deepening Capital Markets
IFC has worked hard to establish its leadership in domestic market development.
| In the 1990s... |
- IFC was the first to issue bonds in Finnish markka, Spanish pesetas, Portuguese escudos, and Hong Kong dollars.
- IFC was also the first supranational to issue Hong Kong dollar bonds that matured beyond the 1997 handover date. In 1998, the Singaporean authorities chose IFC to be the first non-resident to issue.
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| More recently... |
- IFC has been able to open and help develop markets in Peruvian soles, Colombian pesos, Malaysian ringgit, Moroccan dirham, and Chinese renminbi.
- Other leadership initiatives include offshore issues and hybrid/international issues in Russian rubles, Philippine pesos, South African rand, Slovak koruna, Polish zloty, Czech koruna, Singapore dollars, and Greek drachmae.
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The ultimate beneficiaries of accelerated capital market development are private sector companies that can access local currency financing in their own capital markets. As Nina Shapiro said to the
International Financing Review, "When we have opened markets with our own bond issues, we have been able to introduce transparency and internal practices. In several countries, government officials have felt that we have accelerated the process by three to five years."
IFC continues to seek new markets and to create innovative financing solutions. Our treasury operations are showing how the funding of a multilateral institution's own operations can be an important part of achieving our mission, by helping develop the private sector in our client countries.
For more information contact:
Adriana Gomez
Communications Officer
Tel: 202-458-5204
E-mail:
Agomez@ifc.org 
