IFC: Technology gains boost EM investments

Sectors that have benefited the most from tech include logistics, cold storage, consumer branding, healthcare and fintech, according to the IFC's global head and chief investment officer for private equity funds, Maria Kozloski.

More than half the gains in the International Finance Corporation’s portfolio are driven by gains in technology.

Speaking at the IFC’s 21st Annual Global Private Equity conference in Washington, DC on 14 May, global head and chief investment officer for private equity funds Maria Kozloski said the IFC has invested more than $6.4 billion in over 250 emerging markets funds since inception, and while investment sectors have not changed, the delivery of products and services has been significantly enhanced by technology.

Sectors that have benefited the most include logistics, cold storage, consumer branding, healthcare and fintech, she said.

Increasing digitisation is creating opportunities in the emerging markets, General Atlantic chief executive William Ford said during his keynote address. For instance, four billion people worldwide are now connected to the internet, compared with next to nil a decade ago; 800 million in China and 500 million in India are mobile users, while China has one billion social media users and India has 800 million.

Technology innovation has accelerated the penetration in these markets. In some cases, emerging markets are leading technology development, and some of their business models will become global in the next few years, Ford said.

For instance, China-headquartered mobile and online payment platform AliPay has one billion users – 800 million in China and 200 million internationally – and at least 10 countries have standardised processes on Alipay wallet.

The Chinese app TikTok, used on both iOS and Android platforms for creating and sharing short videos, has more than 600 million users outside China and is the number one downloaded app in India and China, Ford said.

But technology has also created a “missing middle”, according to Raghuram Rajan, professor of finance, University of Chicago Booth School of Business, another keynote speaker at the event.

“The same force that has allowed countries to prosper has also unleashed global competition that has eliminated jobs while rendering others more precarious,” Rajan said.

On average, technology has been a positive, but in distribution of impact it has been “quite devastating” to whole communities, especially in the US. These communities are triply damaged, he said – through loss of jobs, social disintegration and breakdown of institutions.

“Because this is an entirely new problem in a sense, national governments seem to be paralysed,” Rajan said. “And because no response is sufficient, there is little action taken.”