Strong capital markets are an important driver of economic growth. Businesses can tap into those markets as a source of long-term, local-currency finance. Governments can access them to finance roads, schools, and hospitals. But although developing countries account for more than one-third of the world’s economic output, they represent just 10 percent of global stock-market capitalization. These countries also make up a very small share of the global market for corporate bonds.
We issue local-currency bonds to finance projects in a manner that protects companies from foreign currency fluctuations and encourages global investors to participate in bond offerings. We also help governments draft policies and regulations that strengthen capital markets. We often support local institutions to issue and invest in local-currency bonds, a move that can attract global investors.
In addition, IFC provides tools that enable clients to swap foreign-currency obligations into local currency and to access capital markets through their own bond issuances, which are made more creditworthy with an IFC partial credit guarantee. We also help mobilize local bank lending into priority sectors through our risk-sharing facility product.
Our work in Kazakhstan illustrates our approach. We issued our first-ever Kazakhstani tenge bond, raising 8.6 billion tenges ($25 million) to help develop local capital markets. The bond’s proceeds have been invested in KazFoodProducts, a leading food processing group in the country, to support the group’s expansion plans and to boost the country’s agricultural sector.
In Costa Rica, we raised 5.7 billion colones ($10 million) through a triple-A rated bond issued in the domestic market. The proceeds will be used to boost housing finance for low- and middle-income families that lack access to mortgage loans.
IFC also joins initiatives that help countries develop thriving and sustainable capital markets — from regulation and policy to institution-building. One of them is the Joint Capital Markets Program (J-CAP), a World Bank Group-wide initiative. In FY19, J-CAP identified opportunities to expand private sector engagement to deliver capital-markets financing in areas such as climate, small and medium enterprises (SMEs), and infrastructure. In Kenya, J-CAP is now working with leading pension funds to establish a capital-market vehicle that will provide long-term financing for infrastructure and affordable housing projects. J-CAP is supported by IFC’s Creating Markets Advisory Window and development partners.