Deep and efficient local capital markets are essential for lasting prosperity.
They drive growth, helping companies to expand and create more jobs. They help people buy homes, pay for college, and save for retirement. They help governments secure financing for roads, schools, and hospitals. They shield local economies against an array of financial hazards that can emerge from abroad.
Such markets, however, remain small in developing countries. Although they account for more than a third of the world’s economic output, developing countries represent just 10 percent of the capitalization of stock markets worldwide. These countries also constitute a disproportionately small share of the global market for corporate bonds.
IFC plays a vital role in strengthening local capital markets in developing countries. We do so by issuing local-currency bonds, which can protect companies from the dangers of foreign-currency fluctuations. We encourage a variety of global investors to participate in the bond offerings. We help developing countries draft policies and regulations for stronger capital markets. Often, we are the first international issuer of bonds in these countries.
Since 2013, our local-currency bond issuances have more than quadrupled, climbing from $183 million to close to $806 million issued in FY18. During this period, we provided more than $13 billion in local-currency financing in 74 different currencies — through loans, swaps, guarantees, risk-sharing facilities, and securitized products.
In Ukraine, we issued our first hryvnia-denominated loan, providing the equivalent of $15 million to Auchan Retail — one of the largest food retailers in the world — to finance its long-term investments in the country. Our investment will help create jobs while enabling low- and middle-income households to obtain better-quality foods and goods at affordable prices. In Uzbekistan, we launched the first sum-denominated bond to be issued in international markets, raising $10 million to expand lending for micro, small, and medium enterprises in the country.
We take a systematic and coordinated approach to developing capital markets. The Joint Capital Markets Program, launched in 2017 by IFC and the World Bank, leverages the collective expertise of World Bank Group institutions to accelerate capital markets development wherever it is needed most — beginning with Bangladesh, Kenya, Morocco, Peru, Vietnam, and the countries of the West African Economic and Monetary Union. The first joint capital markets diagnostic mission to Bangladesh took place in December 2017.
IFC’s Social Bond Program, launched in March 2017, continues to expand. IFC has issued 18 social bonds in public and private markets across six currencies, raising $980 million for more than 30 IFC projects that benefit women-owned enterprises and businesses that create opportunities for smallholder farmers and low-income people.