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Financial instruments 2. When put options do not work: Put options are not effective with small enterprises which cannot generate enough cash to redeem the shares, or where sponsors do not have assets other than their shares in the company itself. (They also do not work in the mining industry, when the put option is exercisable at book value, if the company's main assets - e.g. ore reserves - are not reflected on the balance sheet). 3. Agency lines: The agency line as an instrument has proven in more than one case not to be effective and to be unprofitable for IFC. This instrument has therefore rightly been largely abandoned, and the use of credit lines is being and should continue to be encouraged instead. However, if an agency line is to be used, all aspects of it should be well articulated to the agent, and be kept as simple as possible. 4. Developmental role: Innovative financial instruments can enhance IFC's developmental role by strengthening a client's access to other funding sources. IFC can be helpful to a company by diversifying its funding sources and familiarizing the company with raising capital in the global market. 5. Quasi equity: In order to benefit from a project's upside, IFC should consider quasi-equity or income participation. However, clear formulae for converting the quasi equity into equity should be spelt out from the start; otherwise exit values can become compromised.
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