What is Concessionality and How is it Calculated?

Share this page
Share this page

Concessionality figures are based on the difference between (i) a “reference price” (which can be a market price, if available; the price calculated using IFC’s pricing model, which comprises three main elements of risk, cost and net profit; or a negotiated price with the client) and (ii) the “concessional price” being charged by the blended concessional finance co-investment.

Total project cost refers to the amount it will take to construct or expand a plant, facility or building or the operations of a company—including equity financing and debt. In transactions with financial institutions, total project cost or value refers to the size of the loan or the amount of investment in a capital markets issuance. To ensure clarity, the disclosure language will also provide the total project cost figure.

Transparency and Governance

For blended concessional finance projects mandated on or after October 1, 2019, IFC has agreed to include in its public disclosure document (the summary of investment information) the level of concessionality provided as a percentage of total project cost.

In addition to public disclosure, IFC has three layers of internal review that provide checks and balances for the achievement of minimum concessionality:

  • When IFC project teams request support from blended finance facilities implemented by IFC, an independent department undertakes an initial review. Staff in this department review the needs of the project, including relevant benchmarks related to debt-service coverage ratios, available security coverage ratios, commercial market pricing, risk-adjusted rate of returns for lenders and expected returns for sponsors. This results in a financial structure and proposed pricing for the blended concessional finance co-investment.

  • The proposed blended concessional finance terms are then reviewed by the department’s management and approved by the director or by a sub-committee of IFC’s senior management (known as the Blended Finance Committee). The Blended Finance Committee members are not in charge of approving IFC’s own-account investment.

  • For projects using the IDA Private Sector Window, IDA Representatives also participate in the decision-making process to bring IDA’s perspective at the country level. In addition to ensuring minimum concessionality, this review/approval process also ensures that every blended concessional finance project meets all other DFI Enhanced Principles for Blended Concessional Finance.

The table below provides historical information on the average concessional levels in a sample of IFC’s blended concessional finance portfolio (FY10-FY19). The figures below (as of October 2019) may not be reflective of future trends as they are based on a limited sample size, and likely to change as IFC introduces new products to expand the portfolio in low income, fragile and conflict affected countries, where blended concessional finance resources have become available at scale only in the last couple of years. These historical figures will be updated yearly to include data points for the most recent fiscal year ended and to reflect any refinements to the calculation approach and methodology.

Average concessional level as a
percentage of total project cost
Overall 3.6%
By Product
Senior Debt 3.0%
Sub Debt 2.5%
Guarantee 4.5%
Equity 1.9%
Performance Incentive 2.0%
Local Currency 9.4%
By Industry
Manufacturing, Agriculture and Services 3.9%
Financial Institution Group 4.0%
Infrastructure and Natural Resources 3.0%
Disruptive Technology and Funds 0.8%
By Blended Finance Facility Theme
Agriculture 4.3%
Climate 3.0%
SME finance 1.9%
Gender finance 1.1%
Low income & fragile and conflict affected states 5.9%