The World Bank’s International Finance Corporation (IFC) is establishing an Infrastructure Crisis Facility to help bridge the gap in available financing for infrastructure development in emerging markets.
The IFC’s board of governors approved the creation of the fund earlier today at a board meeting in Washington DC. The IFC has committed $300 million to the facility and expects to raise an additional $1.2 billion to $10 billion from a mix of banks, World Bank member governments and other investors.
The Infrastructure Crisis Facility will be comprised of three different tiers of capital: a loan financing trust, an equity facility and an enhancement to the World Bank’s advisory facility. All three tiers will aim to provide short-to medium-term financing for “viable” infrastructure projects in the emerging markets, the IFC said in a statement. The IFC made its commitment to the facility’s equity tier.
“[The facility] will provide a much-needed source of financing for infrastructure investors and infrastructure sponsors which today is unavailable due to the credit crisis,” said Usha Rao-Monari, senior manager of infrastructure at the IFC.
The IFC estimates that as a result of the global financial crisis, roughly $110 billion worth of new projects risk delay or postponement and about $70 billion worth of existing projects face financing or refinancing risk. At the same time, emerging markets continue to see significant financing needs estimated at $21 trillion for 2008-2017 alone.
“The IFC would like to be involved in providing some sort of comprehensive response to the crisis in the markets in which we operate,” Rao-Monari said.
The facility will be open to private investors in infrastructure such as Macquarie, Rao-Monari said, and the IFC will seek to outsource the fund’s management to an external fund manager.
Established in 1956, the IFC is the largest multilateral investor for private sector projects in the developing world. It has been investing in infrastructure since 1992 and as of June 2008 had a total infrastructure portfolio of $8.13 billion across Africa, East, South and Central Asia, Middle East, Eastern and Southern Europe. It is based in Washington DC.