In FY12, IFC invested $1.5 billion in 41 South-South projects.
Emerging economies need private capital. But it all can’t originate in developed countries, where economic uncertainty can squeeze banks’ ability—and willingness—to lend.
The movement of capital from one developing or middle-income country to another—South-South investment—is an increasingly important way to deepen financial markets, generate growth, and put new sources of funds to use.
It’s also a strategic priority for IFC. Over the past eight years, such investment has accounted for up to 20 percent of our projects and commitment volumes—increasingly in the poorest countries, in Africa, and in the Middle East. According to the Independent Evaluation Group, it has yielded strong development outcomes and helped raise environmental and social standards.
IFC is working with Chinese banks and companies to ensure that their growing investments in other parts of the world aren’t just profitable, but also sustainable. By adhering to robust environmental and social standards, these projects will be more successful in the long haul, with direct benefits for the poor.
In FY12, IFC invested $1.5 billion in 41 South-South projects. We arranged a $115 million financing package for Ghana Vodafone, including $72 million in parallel loans from China Development Bank and the Export-Import Bank of China. The deal, marking the first time Chinese banks have participated in an IFC mobilization in Africa, uses the banking sector to anchor environmental and social standards, a new avenue for our work. The transaction will have an impact on the poor—by making telecommunications services more reliable and affordable, and by spurring competition.
South-South investment doesn’t flow only out of China. We’re also helping private sector funds move into the country’s poor regions. IFC is working with XacBank, Mongolia’s fourth-largest bank and the country’s leading microfinance lender, and other investors to set up a microcredit company in Xinjiang, one of China’s poorest and most remote provinces. The project will create jobs and promote entrepreneurship by expanding access to finance for small and medium enterprises.
IFC also encourages African countries to invest across their borders, a trend that can help economies emerge from years of conflict and create an environment conducive to entrepreneurship.
In FY12, we provided $2.8 million to help Nigeria’s Vitafoam expand in Sierra Leone. The investment, IFC’s first manufacturing project in Sierra Leone since the country’s civil war ended a decade ago, demonstrates the significance of investment between African countries and sends a signal that Sierra Leone is open for business. Most crucially, the project will produce jobs and government revenues, and reduce Sierra Leone’s dependence on imports.