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Catalogue of the MDBs and the IMF Financing Solutions This document is a supplement to the joint discussion note, From Billions to Trillions: Transforming Development Finance prepared by the WBG, the MDBs and IMF in the lead up to the Third Financing for Development Conference in Addis Ababa, July 2015.

Development Financing Solutions

MDFIs have helped shepherd the growth of development financing solutions, including innovative finance, providing both intellectual and operational capacity. They are well placed to engage at the nexus of public and private financing for development, which is the focus of many innovative finance initiatives. They have provided advisory and design services to help interested parties understand the obstacles and assets that exist. MDFIs have financial expertise, on-the-ground operational knowledge, and the ability to work with clients and partners to structure cutting edge initiatives. This catalogue attempts to pull together development financing solutions that we use. It is also available at: www.worldbank.org/post2015

Development finance traditionally is delivered primarily in the form of concessional and market-rate loans, grants, and occasionally guarantees. The provision of financial support through means other than these fundamental instruments is often referred to as innovative finance. In this paper, we include the flexible concept of innovative finance for development in a more comprehensive grouping labelled Development Financing Solutions. The fundamental concept of innovative finance – instruments and initiatives that result in additional flows, greater financial efficiency or improved development effectiveness – remains a useful yardstick.

Development financing solutions enhance development impact in different ways. “Additional” finance provides more money for development, generating a distinctly new flow of funds for a development program or purpose. “Efficient” financial mechanisms are used to change the characteristics of cash flows to align them with program needs. For example, uncertainty and risk can be reduced by changing the currency of cash flows, the timing of receipts and payments, and/or the reliability of the cash flows. Financial mechanisms can be designed to be more “Effective” – providing more development impact for the money – with the incorporation of incentive structures that increase resources available or increase the purchasing power of funds.

Financing solutions are not always new, experimental, or game changing: many of the successful concepts deployed to date use an existing finance instrument in a novel way. For a foundation that extends grants, for example, innovative finance may mean the use of loans that elsewhere are considered the workhorse of development finance. Instruments that have been around for a long time can be applied to new circumstances and for new purposes, such as the application of a microscopic fee to an extremely high volume activity. Nor is innovative finance unique, as the same economic result – for example, establishing a floor price to try to build a carbon market – may in specific circumstances be achieved through a number of different financial instruments (e.g. put options, auctions, bonds).

A range of financing mechanisms and approaches help to address primary financial obstacles facing development financing.

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The financing solutions listed in this document are grouped in four broad categories as shows in the graph below:

You can find out more about specific instruments offered by the MDBs and the IMF under each category by visiting the following pages:

Adding, Pooling Enabling Instruments - Page 2 - 14 Debt-Based Right-Timing Instruments – Page 15 - 28 Risk Management Instruments – Page 29 - 44 Results-Based Financing Instruments – Page 45 - 50

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Adding, Pooling, Enabling Instruments:

This category of solutions covers new flows, such as taxes or fees, as well as policy-driven “flows” that are not traditional finance instruments/investments but do generate economic or financial value. Policy guidance and lending support the strengthening of the domestic policy, legal, tax, regulatory and institutional environment for many purposes: to increase a country’s available resources and creditworthiness; enhance development impact (more results for the money), and to encourage and attract private investment. Examples include:

Mechanism Description Examples Beneficiaries Scalability Co-investment Platforms/Pooled Vehicles

Funds from multiple investors that are aggregated for the purposes of investment are called pooled vehicles. Investors in pooled fund investments and co-investment platforms benefit from economies of scale, which allow for lower trading costs per dollar of investment, diversification and expertise.

Africa 50 Fund

Asset Management Company (AMC)

Climate Investment Funds (CIF)

Equity Participation Fund (EPF) and Loan Participation Fund (LPF)

European Energy Efficiency Fund (EEEF)

Global Infrastructure Facility (GIF)

G20 Global Agriculture and Food Security program (GAFSP)

Global Energy Efficiency and Renewable Energy Fund (GEEREF)

Managed Co-lending Portfolio Program (MCPP)

Mediterranean Solar Plan (MSP)

Prototype Carbon Fund

Small Island States Resilience Initiative (SISRI)

LICs, MICs, SIDS High

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Africa 50 Fund AfDB’s Africa50 Fund is to be structured as a developmentally-oriented yet commercially operated entity. It will be complementary to and legally independent of existing development finance bodies in Africa. Accordingly, the operational decisions will be made by a management team selected solely on technical merit and demonstrated managerial competence. Africa50 will establish two business segments, as follows: Project Development: The primary objective of this segment is to increase the number of bankable infrastructure projects in Africa. Project Finance: This segment will focus on delivering the financial instruments required to attract additional infrastructure financing to the continent. These will include, but will not be limited to: i) bridge equity, ii) senior secured loans, iii) refinancing/secondary transactions, as well as iv) credit enhancement and other risk mitigation measures geared at attracting non-traditional funders such as institutional investors and international investment banks. Africa50’s critical objective is to shorten the time between project idea and financial close –from a current average of 7 years to under 3 years, thereby delivering a critical mass of infrastructure in Africa in the short-to-medium term.

To deliver on Africa’s current infrastructure pipeline, including PIDA, Africa50 will need an equity investment of USD 10 billion, thereby attracting USD 100 billion worth of local and global capital. To begin operations, Africa50 targets raising USD 3bn in equity capital, to establish credibility with governments, private developers and financial markets. Depending on funding needs and the project pipeline, Africa50 will augment its financial capacity by raising debt in the international capital markets. In order to ensure reliable access to capital markets while also offering additional operational flexibility, Africa50 will target an investment grade rating of single A.

http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/africa50-infrastructure-fund/

LICs, FCS High

Asset Management Company (IFC AMC)

IFC’s Asset Management Company (AMC) offer significant mobilization and scale-up opportunities, using a strong governance structure and innovative business model to match commercial capital with development finance. As of December 2014, AMC had approximately USD 7.8 billion of assets under management in seven funds and had committed approximately USD 4.5 billion in 58 emerging market companies and six private equity funds. AMC’s investors include sovereign wealth funds, pension funds, bilateral and multilateral development finance institutions and other investors. AMC’s global Infrastructure Fund has raised $1.2 billion in equity commitments from commercial investors which will support an estimated $18 million of infrastructure projects in developing countries over the fund’s five-year investment period. AMC’s investors include sovereign wealth funds, pension funds, bilateral and multilateral development finance institutions and other investors. AMC will continue to build out its portfolio of regional, sectoral and specialist funds, bringing additional capital to developing countries in an effective, efficient and sustainable manner. http://www.ifcamc.org/

MICs Medium

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Climate Investment Funds (CIFs)

The climate investment funds are a unique set of financing instruments that give developing countries and urgently needed jump-start toward achieving climate-smart development. The Climate Investment Funds (CIF) include four key programs that help 63 developing countries pilot low-emissions and climate resilient development: Clean technology Fund (CTF), Forest Investment Program (FIP), Pilot program Climate Resilience (PPCR), Scaling up Renewable Energy program (SREP). CIF implementing MDBs include the Inter-American Development Bank, African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, and World Bank Group. https://www.climateinvestmentfunds.org/cif/

SIDs, MICs Medium

Equity Participation Fund (EPF) and Loan Participation Fund (LPF)

The EBRD is in the process of establishing an Equity Participation Fund (EPF) and a Loan Participation Fund (LPF). Under EPF, institutional investors will automatically co-invest in the EBRD’s direct equity investments. Under LPF, non-bank institutional investors will provide, alongside the EBRD, debt financing for difficult to syndicate long-term projects.

MICs Medium

European Energy Efficiency Fund (EEEF)

The European Energy Efficiency Fund (EEEF) is an innovative public-private partnership dedicated to mitigating climate change through energy efficiency measures and the use of renewable energy in the member states of the European Union. It focuses on financing energy efficiency, small-scale renewable energy, and clean urban transport projects (at market rates) targeting municipal, local and regional authorities and public and private entities acting on behalf of those authorities. It was initiated by the European Commission and the EIB.

The final beneficiaries of EEEF are municipal, local and regional authorities as well as public and private

entities acting on behalf of those authorities such as utilities, public transportation providers, social

housing associations, energy service companies etc. To reach its final beneficiaries, EEEF can pursue two

types of investments: (i) Direct Investments in energy efficiency and renewable energy projects in the

range of €5m to €25m and (ii) Investments into Financial Institutions including local commercial banks,

leasing companies and other selected financial institutions that either finance or are committed to

financing projects of the Final Beneficiaries meeting the eligibility criteria of EEEF. http://www.eeef.eu/

MICs Medium

Global Infrastructure Facility (GIF)

In October 2014, the WBG launched a pilot Global Infrastructure Facility (GIF), with multiple institutional investors and partners to help fill infrastructure gaps with quality projects in the developing world. Estimates point to USD 2-3 billion in total investments during its three-year pilot phase, which is projected to increase substantially over time. This will enable collaboration and collective action on complex projects that no single institution could realize alone. The GIF will provide support throughout the project cycle, drawing on its array of technical and advisory partners to bring to the market a strong

LICs, MICs Medium

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pipeline of bankable projects. Its unique collaborative approach has already gained the support of institutional investors, who are seeking diversification into long-term assets in faster growing economies. Investors have until now been constrained to a limited number of infrastructure investment opportunities that meet their required risk tolerance and investment profiles. http://www.worldbank.org/en/topic/publicprivatepartnerships/brief/global-infrastructure-facility-gif

G20 Global Agriculture and Food Security program (GAFSP)

GAFSP is an innovative mechanism that puts developing nations in the driver’s seat by supporting country-led strategies to expand agriculture and address hunger. GAFSP delivers targeted financing for the agriculture sector in low-income countries. It takes up where emergency and recovery assistance leaves off, targeting transformative and lasting long-term development. GASFP has received pledges amounting to $1.3 billion partners with funds going to countries that have strategic, innovative and credible plans already in place to improve agricultural productivity and food security. The United States has issued a funding challenge and agreed to provide an additional $1 to GAFSP for every $2 contributed by other donors, up to a total of $475 million. GAFSP’s public sector window assists strategic country-led or regional programs that result from sector-wide country or regional consultations and planning exercises such as CAADP in Africa. The private sector window is designed to provide long and short term loans, credit guarantees and equity to support private sector activities for improving agricultural development and food security. http://www.gafspfund.org/content/about-gafsp

LICs, MICs Medium

Global Energy Efficiency and Renewable Energy Fund (GEEREF)

Advised by the European Investment Bank Group, GEEREF is an innovative Fund-of-Funds catalyzing private sector capital into clean energy projects in developing countries and economies in transition. GEEREF invests in private equity funds which, in turn, invest in private sector projects, thereby further enhancing the leveraging effect of GEEREF's investments. It is estimated that, with € 200 million of funds under management, up to € 9.5 billion could be mobilized through the funds in which GEEREF participates and the final projects in which these funds invest. GEEREF's funds target attractive financial investments that also deliver a strong positive environmental and developmental impact. GEEREF had invested in 6 funds across Africa, Asia, Latin America and the Caribbean as of December 2014. http://geeref.com/about/what-geeref-is.html

LICs, MICs, SIDS Medium

Managed Co-Lending Portfolio Program (MCPP)

MCPP is IFC’s newest Syndications product that allows institutional investors to passively participate in IFC’s future loan portfolio, which can include investments across all regions and sectors in accordance with IFC’s strategy and processes. The first MCPP investor, The People's Bank of China, pledged USD 3 billion in September 2013 to be committed in the next six years. Through MCPP, IFC can expand its base of co-lending partners to include investors that do not have the capacity to invest on a “deal by deal” basis.

LICs, MICs Medium

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http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_Corporate_Site/IFC+Syndications/Overview_Benefits_Structure/Managed+Co-Lending+Portfolio+Program/

Mediterranean Solar Plan- Project Preparation Initiative (MSP-PPI)

EIB’s MSP-PPI aims to accelerate the implementation of renewable energy and energy efficiency projects in seven Mediterranean partner countries: Algeria, Egypt, Gaza/West Bank, Jordan, Lebanon, Morocco and Tunisia. This is an initiative of the EIB, together with the European Commission, AFD, KfW, AECID, EBRD and the Union for the Mediterranean. It is financed by the EU-funded Neighbourhood Investment Facility which is managed by the European Commission. http://www.eib.org/attachments/country/femip_msp_ppi_en.pdf

LICs, FCS, MICs Medium

The Prototype Carbon Fund (PCF)

A partnership between seventeen companies and six governments, and managed by the World Bank, the PCF became operational in April 2000. As the first carbon fund, its mission is to pioneer the market for project-based greenhouse gas emission reductions while promoting sustainable development and offering a learning-by-doing opportunity to its stakeholders. The Fund has a total capital of $180 million. https://wbcarbonfinance.org/Router.cfm?Page=PCF&FID=9707&

LICs, MICs, SIDS Medium

Small Island States Resilience Initiative (SISRI)

The WBG is developing a Small Island States Resilience Initiative (SISRI). The SISRI would be a US$ 500 million multi-year program that could work alongside IDA. It aims to facilitate and scale up existing programmatic assistance and aims to find ways to cut through the red tape SIDS currently experience in accessing technical and financial assistance. It will combine technical assistance with investment and focus on both disaster and climate risks. It will strengthen countries’ fiduciary and technical capacity to prepare them for direct access to financing. https://www.gfdrr.org/sites/gfdrr/files/4.%20SISRI%20Presentation%20at%20CG.pdf http://www.worldbank.org/en/news/press-release/2014/09/02/advancing-resilience-small-island-states-cutting-through-red-tape

SIDS Medium

Equity Investments

The private sector arms of the MDBs and EIB and EBRD were created to extend loans and equity investments to private firms in developing countries. MDBs equity investments take place direct or through MDBs-supported investment funds. MDBs investments provide:

A seal of approval for the investment proposal

Catalytic effect on fund raising

Promoting best practice in governance

An experienced investment team with private equity expertise

Asset Management Company (AMC)

Direct Investment Facility (DIF)

European Investment Fund (EIF)

Growth Finance Initiative (GFI)

Multilateral Investment Fund (MIF)

LICs, MICs Medium

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Extensive industry knowledge through our economics and engineering specialists

Early involvement

Ability to move fast

Asset Management Company (IFC AMC)

Please see above.

Direct Investment Facility (DIF)

EBRD’s DIF demonstrates the viability of smaller businesses based in countries and regions at an early stage in the transition to the market economy. Equity and limited debt financing may be available to attractive private sector businesses, especially those led by motivated and experienced local entrepreneurs. Investment range generally between EUR 500,000 and EUR 6 million. http://www.ebrd.com/work-with-us/project-finance/equity/direct-equity.html%20

LICs, MICs Medium

European Investment Fund (EIF)

EIB’s EIF supports Europe’s micro, small and medium sized businesses (SMEs) by improving their access to finance through a wide range of selected financial intermediaries across Europe. To this end, it primarily designs, promotes and implements equity and debt financial instruments which specifically target SMEs. In this role, it fosters EU objectives in support of entrepreneurship, growth, innovation, research and development, and employment. http://www.eif.org/

LICs, MICs Medium

Growth Finance Initiative (GFI)

The Growth Finance Initiative (GFI) provides loans of up to EUR 25 million to mid-cap companies focusing on industry sectors that heavily rely on research, development and innovation (RDI). The GFI is jointly established by the EIB and the European Commission under the Risk Sharing Finance Facility (RSFF). Set up by the EIB and financially supported by the EU, RSFF was launched in 2007 in order to foster additional investment in RDI as well as to address the markets’ failure in allocating sufficient resources to RDI. Within the new framework of the GFI, the EIB can provide direct financing to innovative mid-cap companies that outgrow the remit of venture capitalists but often face a systematic shortage of debt and equity financing for their RDI activities. Under the GFI, the EIB will provide direct loans of between EUR 7.5 million and EUR 25 million. http://www.eib.org/infocentre/press/releases/all/2013/2013-181-growth-finance-initiative-belgian-company-evs-first-beneficiary-under-new-pilot-scheme-by-european-investment-bank-and-eu-commission.htm

LICs, MICs Medium

Multilateral Investment Fund (MIF)

The IADB Group plays a catalytic role in supporting SMEs by providing equity and capacity building to

seed and venture capital funds which offer financing to early stage, dynamic enterprises. Since 1996, the IDB Group has committed over $323 million in financing to more than 65 Venture Capital (VC) and seed

LICs, MICs Medium

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funds. Including co-investments, the IADB Group has supported funds that total over $1.2 billion and reach SMEs in every sub-region of Latin America and the Caribbean. These funds not only provide long-term financing to SMEs, but introduce structural changes needed to support growth: adoption of good corporate governance, professionalization of management, and improvement of operational processes. The MIF, or FOMIN as the fund is known in Spanish, is one of the Latin America and Caribbean region’s biggest investors in microfinance and venture capital funds for small businesses. Funded by 39 donors, MIF, supports private sector-led development benefitting the poor and low-income households - their businesses, their farms, and their households. The aim is to give low-income populations the tools to boost their incomes: access to markets and the skills to compete in those markets, access to finance, and access to basic services, including green technology. http://www.fomin.org/

New Sources of Funds

A number of taxes have been proposed to deliver stable and predictable long-term funding to finance international development. Most tax proposals are designed to raise additional financing and, at the same time, produce a “double dividend” by offsetting a global public bad. Globally coordinated and nationally on a voluntary basis implemented taxes that direct their proceeds to development are often called “Solidarity Levies.”

Adaptation Fund

Currency Tax

Financial Transaction Tax

Solidarity Levy on Airline Taxes

MICs Medium

Adaptation Fund

The Adaptation Fund’s primary financing comes from a 2 percent share of proceeds of Certified Emission Reductions (CERs) issued by the Clean Development Mechanism (CDM) under the Kyoto Protocol. The Adaptation Fund’s financial base is precedent-setting: it is not a tax but tax-like contribution arising from an international treaty. The governance of the Adaptation Fund assigns ownership to developing countries. Its board comprises a 75 percent majority of developing countries, including the most-affected countries (small island developing states and least-developed countries), which can submit proposals directly to the Adaptation Fund Board. Income from the Adaptation Fund The World Bank serves as the interim trustee of the Adaptation Fund by invitation of the Parties to the Kyoto Protocol. On behalf of the Fund, the World Bank performs two core functions: it sells the Certified Emission Reduction certificates that help support the fund and manages the Adaptation Fund trust fund. Over the past three years, the fund has dedicated more than USD 265 million to increase climate resilience in 44 countries around the world. http://adaptation-fund.org/

LICs, LDCs, MICs, SIDs

Medium

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The Currency Tax /Tobin Tax

The currency tax (also known as currency transaction tax or Tobin Tax) is a levy on international foreign exchange transactions. There have been several concrete proposals for a currency tax. The first proposals addressed market instability; later proposals were seen as a source to finance the Millennium Development Goals and global public goods. Tobin Tax: Originally, a currency tax was proposed by the economist James Tobin not primarily for its potential revenues but for its ability to stabilize currency markets. It would do so by imposing a tax high enough to limit speculation on currency fluctuations. Regional proposals: Some proposals suggested starting to implement regional solutions in order to show the feasibility of the concept. The currency transaction tax would be implemented only for one country or within one region and only for one currency. A euro and a sterling tax have been proposed.1 Currency Transaction Tax/ Currency Transaction Levy: At the financing for development conference in Doha in November 2008 a currency transfer tax has been proposed.2 The tax could generate significant revenues of about US$30 to US$60 billion per year; proponents believe the proposed tax rate of 0.005 percent would be too small to distort or even influence the market for currency transactions. Implementation feasibility would rely on electronic market monitoring and computerized automatic tax collection. http://en.wikipedia.org/wiki/Currency_transaction_tax

MICs Medium

Financial Transaction Tax

Ten EU countries have agreed to establish a financial transaction tax on the purchase and sale of financial products, to go into effect January 2016. There are a number of proposals to structure it as a “Robin Hood Tax” and use at least a part of the proceeds to help fund global health and/or climate change initiatives. http://www.robinhoodtax.org/

MICs Medium

The Solidarity Levy on Airline Tickets

The Solidarity Levy on Airline Tickets was proposed and first established under the laws of France and adopted by a number of other countries. This levy is a voluntary tax on airline tickets for departing flights in the participating countries, with proceeds of the tax passed on a voluntary basis to development projects and intermediaries. Aa unit tax (a fixed amount, not a percentage) is added to the price of a ticket, with the amount dependent on destination and class of service. Other mandatory or voluntary

LICs, MICs Medium

1 Spratt 2006a, 2006b. 2http://www.globalpolicy.org/images/pdfs/0924currencytax.pdf

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taxes could raise funds from arms trading, carbon, or financial transactions such as currency trades, to name a few. http://www.brookings.edu/~/media/Projects/global-health/airline.PDF

Investment Climate/Regulatory Advice and Policy Lending

This is an area where the MDFIs leverage their

knowledge and resources to help countries unleash

the potential of their domestic resources by

strengthening the domestic and regional investment

climate.

Financial Sector Assessment Program (FSAP)

Financial Sector Reform and Strengthening (FIRST) Initiative

Public Service Delivery Quality

Revenue Administration Gap Analysis Program (RA-GAP)

Tax Administration Diagnostic Assessment Tool (TADAT)

Toolkit on Corporate Governance

LICs, MICs Medium

Financial Sector Assessment Program (FSAP)

The Financial Sector Assessment Program (FSAP) is a joint program of the International Monetary Fund and the World Bank. Launched in 1999 in the wake of the Asian financial crisis, the program brings together Bank and Fund expertise to help countries reduce the likelihood and severity of financial sector crises. The FSAP provides a comprehensive framework through which assessors and authorities in participating countries can identify financial system vulnerabilities and develop appropriate policy responses The program also helps bring financial sector analysis closer to the center of economic policy discussions within a country and with the Fund and the Bank. Participating in the program helps inform domestic policy-makers of the need for sequenced actions in areas requiring urgent attention and offers countries a comprehensive framework in which to take on financial sector reforms. It also provides countries with an opportunity to measure their compliance with financial sector standards and codes and, therefore, to benchmark their regulatory and supervisory systems against internationally-accepted practices. http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTFINANCIALSECTOR/0,,contentMDK:22142161~menuPK:6459396~pagePK:210058~piPK:210062~theSitePK:282885,00.html

LICs, MICs Medium

Financial Sector Reform and Strengthening (FIRST) Initiative

FIRST supports low- and middle-income countries in their efforts to strengthen their financial sector and ultimately achieve greater economic development and poverty alleviation. It offers small scale and short-term grants for Technical Assistance (TA) projects that contribute to more stable, more efficient and more inclusive financial systems. FIRST is a part of World Bank and follows bank's policies and procedures including anti-corruption policies.

LICs, MICs Medium

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It covers a wide range of sectors: Banking, Insurance, Capital Markets, Other Nonbank Financial Institutions (NBFIs), Pensions, Financial Architecture, Crisis Preparedness, Access to Finance, and Multisector/Others. Cross-cutting themes: Access to Finance, Crisis Preparedness, Strategic FSAP Implementation, and Legal Reform https://www.firstinitiative.org/

Public Service Delivery Quality Project

The WBG’s Public Service Delivery Quality project in Morocco has been piloting an innovative approach to measure the predictability of public services rendered to businesses. The project supports the design of solutions through advice, benchmarking, and peer-to-peer learning, and it helps track results on the ground. Morocco’s public-private dialogue mechanism, the National Committee for Business Climate, has been a key partner in this work, beginning with the identification of the first areas to be addressed and the definition of the indicators, and extending to the organization of public-private workshops to develop solutions. Three problem areas were identified as drags on business, particularly small and medium enterprises: public procurement payment delays, VAT reimbursement delays, and the time and cost to obtain construction permits. With the help of public and private sector involvement, the project developed comprehensive indicators for measuring the quality of service delivery on the ground. The indicators will now be used to support and track implementation on the ground of a new construction.

LICs, MICs Medium

Revenue Administration Gap Analysis Program (RA-GAP)

The IMF RA-GAP provides revenue administrations with a comprehensive and detailed estimate of the gap between current and potential VAT collections, as well as a review of current operational performance in a number of key functions. https://www.imf.org/external/np/seminars/eng/2014/asiatax/pdf/Kloeden%20(3).pdf

LICs, MICs Medium

The Tax Administration Diagnostic Assessment Tool (TADAT)

TADAT is a standardized country assessment framework that measures tax administration performance by nine high-level performance outcome areas, which drill down to 57 scored dimensions. The framework identifies options for a strengthened tax administration, enhanced revenue mobilization, improved services to taxpayers and better taxpayer compliance and discipline. http://www.tadat.org/

LICs, MICs High

Toolkit on Corporate Governance

The IFC Corporate Governance Methodology toolkit was launched to evaluate corporate governance risks and opportunities. IFC takes a comprehensive approach to promoting better corporate governance, implementing it into all aspects of investment and advisory activities. The Toolkit was launched as a result of extensive collaboration among the signatories of the Development Finance Institutions (DFI) Working Group on Corporate Governance. The purpose is to serve as a common basis for (i) assessing the corporate governance of investee companies, and (ii) progressing faster in the implementation of the Corporate Governance Development Framework. In addition,

LICs, MICs High

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signatory DFIs are encouraged to adapt the toolkit to their own requirements and the needs of their investee companies. The two main documents of the toolkit are (i) a Corporate Governance Questionnaire, and (ii) a Corporate Governance Progression Matrix. An Instruction Sheet on how to use the different components of the Toolkit, a list of key terms, and sample templates are also provided for further guidance. http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/corporate+governance/cg+development+framework/dfi+toolkit+on+corporate+governance

Domestic Capital Markets Building

The financial crisis underscored the importance of strong local currency bond markets, which can provide countries with a cushion to keep funds flowing, particularly during periods of reduced bank lending and limited liquidity. Countries with deeper and more active local bond markets can mobilize private funds from national savings and channel them to productive sectors of the economy in need of local currency financing. Inefficiencies in the institutional structure of these markets will not only leave most governments reliant on external debt, but will also severely limit private sector participation. MDBs and the IMF provide technical advice and lending on building and strengthening domestic capital markets.

Efficient securities Markets institutional development (esMid) program

Global Emerging Markets Local Currency Bond Program (GEMLOC)

LICs, MICs Medium

Efficient securities Markets institutional development (esMid) program

The Swedish International Development Cooperation Agency (Sida), IFC and the World Bank are jointly working on a project to develop well-functioning securities markets in Africa. Under the Efficient Securities Markets Institutional Development (ESMID) program, the three institutions are providing support to emerging African capital markets. Sida has provided US$5.5 million to support program activities, which initially targets five countries, namely Rwanda, Kenya, Tanzania, Uganda, and Nigeria. Operations are carried out as a regional program in East Africa and as a country program in Nigeria. In these countries, ESMID is working with central banks, securities regulators, stock exchanges and other stakeholders to: simplify regulations and procedures for issuing, investing in, and trading bonds; establish

LICs, MICs Medium

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and strengthen market infrastructure; build capacity of market participants; facilitate the regionalization of securities markets; and support demonstration and replicable transactions. http://www.ifc.org/wps/wcm/connect/RegProjects_Ext_Content/IFC_External_Corporate_Site/ESMID_Home/

Global Emerging Markets Local Currency Bond Program (Gemloc)

Gemloc is a US$ 5 billion local currency bond for investment in up to 40 emerging bond markets,3 launched in October 2007 by the World Bank Group together with private partners. Gemloc supports the development of local currency bond markets in developing countries. The objective is that more institutional investment from local and global investors can flow into local currency bond markets. http://www.gemloc.org

LICs, MICs Medium

Public-Private Dialogue Platforms/Information Facilitation

MDBs work to improve the business enabling environment by providing platforms for effective dialogue between the business community and Government and facilitating information-sharing with potential investors and stakeholders.

Doing Business Report

Global Center for Infrastructure (GCI)

Inclusive Business Models Program

Sustainable Banking Network

Doing Business Report (DBR)

Doing Business, launched in 2007, is a flagship World Bank Group publication which measures regulations affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures labor market regulation, which is not included in this year’s ranking. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why. This year’s report introduces a notable expansion of several indicator sets and a change in the calculation of rankings. There are also a number of special reports and subnational studies. http://www.doingbusiness.org/reports/global-reports/doing-business-2015

LICs, MICs Medium

Global Center for Infrastructure (GCI)

Global Centre for Infrastructure (GCI) intends to facilitate effective knowledge dissemination. The GCI is a type of “knowledge platform” that is being designed to act as a means of disseminating best practice and lessons learned across the infrastructure sector

LICs, MICs Medium

The Infrastructure

ICA at the AfDB supports and promotes increased investment in infrastructure in Africa, from both public and private sources. Using its convening power, ICA acts as a catalyst – enhancing, accelerating and

LICs, MICs Medium

3 Grant 2007

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Consortium for Africa (ICA)

precipitating the development of Africa’s infrastructure. For example, in 2014 the ICA coordinated the launch of the (African) Project Preparation Facilities (“tunnel of funds”) Network. http://www.icafrica.org/en/about-ica/

Sustainable Banking Network

The Sustainable Banking Network -- an informal group of bank regulators and banking associations, led by IFC, -- will help regulators in emerging markets develop green-credit policies and environmental and social risk-management guidelines by sharing knowledge and technical resources. The Network will also support members in their efforts to develop standards, policies and guidelines for environmental and social best practices in their countries’ banking sectors. http://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/industries/financial+markets/news/ifc+launches+sustainable+banking+network+for+regulators+to+share+green-credit+expertise

LICs, MICs Medium

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Debt-based, Right Timing Instruments:

These help transform cash flows to provide a steady, predictable stream for development programs based on their liquidity needs and time horizons. Issuers and financial intermediaries, including the MDBs, have developed a range of new instruments targeted to specific markets and financing purposes, ranging from green bonds and vaccine bonds to the fast-growing Islamic Finance market. Different instruments have been designed to provide long-term flows, predictability, flexibility, or short-term bridging, to meet specific development finance needs.

Mechanism Description Examples Beneficiaries Scalability

Bond Issuance

Issuing bonds is one of the main mechanisms MDBs rely on. With their AAA rating and callable capital MDBs are able to issue a wide range of bonds to raise funds inexpensively in the financial markets for development finance.

Carbon Bonds

Diaspora Bonds

Eurobonds

Green Bonds

Inclusive Business Bonds

Infrastructure Bonds

Local Currency Bonds

Social Impact Bonds/Development Impact Bonds

Sukuk (Islamic) Bonds

MICs, Upper LICs High

Carbon Bonds The performance of carbon bonds or carbon-linked bonds (also called carbon-indexed bonds) depends on the development of the carbon markets. By purchasing these bonds, investors can indirectly participate in the market for GHG emission reductions. Investors will also be supporting demand for CERs generated from a specific UNFCCC-registered clean energy project. The market for CERs contributes to a reduction of global greenhouse gas emissions and the transition to a low carbon growth economy. Cool bonds are an example of carbon-linked bonds and are five-year, USD-denominated notes paying a coupon of 3 percent for an initial period, and a variable coupon amount for the remaining maturity of the note tied to Certified Emission Reductions (CERs) generated by specified greenhouse gas–reducing projects in China and Malaysia. IBRD counterparties hedging exposure to CERs contributes to expansion of carbon markets. Daiwa Securities and Mitsubishi UFJ Securities distributed the notes to Japanese investors. http://treasury.worldbank.org/cmd/htm/CO2LBond.html

MICs, Upper LICs Medium

Diaspora Bonds

A diaspora bond is a sovereign debt instrument to raise financing from a country’s overseas diaspora. Diaspora bonds can have two objectives: keep the diaspora affiliated with their original home country and offer

LICs, MICs, Upper LICs

Medium

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countries possibilities to raise funds that are partially concessional because a diaspora member is likely to accept under-market interest rates for patriotic reasons. MDBs have not issued diaspora bonds. Israel and India raised over $43 billion with diaspora bonds.4 Kenya and Ethiopia had limited success. Part of the problem has been a lack of awareness that the product existed within the targeted diaspora. But crucially people who have fled or emigrated from home due to war, poor economic circumstances, or mismanagement may hesitate to buy into a product sold by that very same country, even if the circumstances may have changed. The challenge may be overcome at the regional level; where countries might consider pooling their efforts and launching bonds through the MDBs.

Eurobonds A Eurobond is a bond issued in a currency other than the currency of the country or market in which it is issued. They give issuers the flexibility to choose the country in which to offer their bond according to the country's regulatory constraints. They may also denominate their eurobonds in their preferred currency. A eurodollar bond that is denominated in U.S. dollars and issued in Japan by an Australian company would be an example of a eurobond. EBRD issues both domestic bonds and Eurobonds in the case of fully convertible currencies. Since the local bond issue program began in 1994, the Bank has expanded the program to smaller currencies; in 2014 EBRD issued domestic bonds in Armenian Dram and Georgian Lari. Local currency issues by IFIs promote market liquidity as they are an attractive alternative to government bonds for institutional investors; they provide market price guidance that can encourage corporations to follow with their own issuances; and IFI local currency bonds are also popular collateral, which can promote liquidity in secured money market transactions

LICs, MICs, Upper LICs

Medium

Greenbonds Green bonds, sometimes known as climate bonds, are issued to finance environmentally beneficial projects. The primary issuers of green bonds have been multilateral development banks (MDBs). Approximately $32 billion in MDB green bonds have been issued to date, largely to fund climate change adaptation or mitigation projects. About $7.5 billion remains outstanding due to maturities. Climate Awareness Bonds (CABs) are bonds issued by the EIB whose proceeds are used exclusively to finance projects supporting climate action, in particular within the fields of renewable energy and energy efficiency. Since their launch in 2007 until 2011, EIB Climate Awareness Bonds have raised the equivalent of EUR 1.4bn. In 2013 alone they raised another EUR 1.4bn.

LICs, SIDS, MICs, Upper LICs

High

4 http://voices.mckinseyonsociety.com/diaspora-bonds-a-new-source-of-capital-for-emerging-markets/

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WBG is one of the world’s largest issuers of green bonds, financing climate-related projects - so far the WBG treasury has raised over USD 6.3 billion with 66 green bonds in 17 currencies, supporting 50 projects in 17 countries. IDB Green Bond Issuances in Mexico aims to finance small Energy Efficiency (“EE”) projects of Mexican companies by facilitating access to capital markets. Jointly IDB and three Mexican ESCOs will open a new channel for EE projects to obtain financing from institutional and impact investors. The recent launch of green bonds by the AfDB had reached favorable outcome– the inaugural USD 500 million offering in 2013 and two SEK 1 billion offerings – which enable investors increasingly take project-level exposure as they become comfortable with the asset class.

Inclusive Business Bonds

Inclusive Business Bonds are an innovative way to mobilize funding to improve lives, promote shared prosperity, and transform sustainable development outcomes in low-income communities around the globe. The distinction lies in the proceeds of the Inclusive Business Bond which are segregated in a special account to be disbursed solely to Inclusive Business projects that integrate low-income communities into companies' value chains. The IFC Inclusive Business Bonds raised over $100 million for investment in companies that actively integrate low-income communities into their value chain so they can participate in economic growth. The bonds were sold to Japanese retail and institutional investors and arranged and distributed by Daiwa Securities. They were fully subscribed during the offering period.

LICs, SIDS, MICs, Upper LICs

Medium

Infrastructure Bonds

Proceeds of these bonds are used to finance infrastructure projects across a country. These include installations, services, basic facilities and other projects that are needed for running a country or a community. The facilities could include transportation and communication systems, public buildings, public institutions, water and electricity lines. The investors putting their money in this kind of bonds not only benefit through returns but also contribute to the growth of the country. EIB’s The Europe 2020 Project Bond Initiative is a joint programme between the European Commission and the EIB that went live last year. It is designed to stimulate capital market financing for infrastructure in the transport, energy and information and communications technology sectors. A pilot phase activated in 2013 to test the project bond concept. The testing phase is funded by EUR 230m of EU budgetary resources from unused budget lines for existing programs. This should enable the EIB to provide finance to infrastructure projects worth more than EUR 4bn across three sectors. WBG is looking at structures to facilitate this source of funding in earlier in the project cycle. One option is a structured World Bank bond that bridges investors throughout the construction period to project refinancing. The investor buys the bond that mandatorily converts, at maturity, to a long-term project bond issued by the

LICs, SIDS, MICs, Upper LICs

High

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construction company if the underlying project achieves successful completion of the construction phase. In the project does not achieve completion, the investor will receive a small minimum coupon amount.

Local Currency Bonds

Through Local-currency bonds targeted to international investors, the MDBs have helped introduce international investors to local currency assets, facilitating their subsequent entry into the domestic markets once they have attained a degree of comfort with investments in the currency through the MDBs’ offshore AAA-rated bonds. Stronger local-currency markets can lower the costs of borrowing, thus supporting development. They reduce financing and investment mismatches and their associated risks. Between 1995 and 2008 development banks raised US$52 billion through local-currency bond issues, assisting local market development. Throughout its history in the capital markets, the MDBs has issued in more than 50 currencies, in many cases serving as a catalyst for the development of these markets. WBG has issued in domestic EM markets such as Colombia, Malaysia, Romania and Uruguay, although most of its EM currency funding has been in the international/offshore markets were it has issued over $40 billion in bonds in 25 Latin American, African, Asian and Eastern European currencies. Under its Local Currency and Capital Market Development Initiative, EBRD invests in local currency bonds, including as an anchor investor in local currency debt securities. Also undertakes derivative transactions to achieve demonstration effect or address temporary market failures – for example swap transactions with local banks to address currency mismatches. EBRD acted as anchor investor for the pilot corporate bond issue in som by the Kyrgyz Investment and Credit Bank (KICB), which allows banks to access local currency funds to on-lend to their clients. IADB’s IIC has financed operations in Mexican pesos, Brazilian reais, Peruvian soles, Colombian pesos and Argentine pesos, and is planning to expand local-currency lending activities over the next few years. The IIC will begin establishing local currency treasures, which allow ongoing financing without having to fully match assets and liabilities for each individual operation.

LICs, MICs, Upper LICs

Medium

Social Impact Bonds (SIBs)/Development Impact Bonds (DIBs)

The Social Impact Bond (SIB) converts intractable social problems into investible opportunities. Under the social impact bond model, impact investors – not governments – provide capital for NGOs and social enterprises to scale up programs that help poor and vulnerable populations. The ultimate payment to investors is based on the achievement of a set of predefined outcomes that are measured through an impact evaluation. If the outcomes are not achieved, the government is not required to repay investors, thereby transferring the performance risk to the private sector. DIBs are an adaptation of the SIBs intended to provide new sources of financing from private investors to improve development outcomes. DIBS provide upfront funding for development projects implemented by

MICs Medium

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socially motivate private investors, who are then reimbursed and paid a return by donors or host-country governments if programs achieve pre-agreed outcomes. Most SIBs and DIBs are in pilot phase. IADB’s The Multilateral Investment Fund (MIF) is analyzing how the social impact bond model could be relevant for Latin America. MIF hosted a panel on social impact bonds with experts from the UK Government, Social Finance and Instiglio to share their experiences in 2013. The MIF is also developing a Facility to channel technical assistance and investments to build the capacities of potential actors in an emerging social impact bond ecosystem. These funds will help develop a body of knowledge on the opportunities and challenges for social impact bonds in Latin America and the Caribbean, and test and evaluate the model through a portfolio of social impact bond pilots.

Sukuk (Islamic Bonds)

Sukuk commonly refers to the Islamic equivalent of bonds. However, as opposed to conventional bonds, which merely confer ownership of a debt, Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. WBG issued Sukuk (Islamic bonds) on 27 November 2014, raising US$500 million to accelerate the availability of funds for immunization programs and health system strengthening by Gavi, the Vaccine Alliance.

LICs, MICs, FCS High

Debt Conversions

Since World War II, industrialized countries have entered into debt rescheduling agreements. Later, through the Paris Club, they also agreed to provide concessional treatment (i.e., a treatment that implies a reduction in the Net Present Value of the consolidated debts) to debt owed by highly indebted countries. Debt relief instruments include debt swaps and debt buy-backs.

Debt Buy-back

Debt Swap

Debt Reduction Facility for IDA

LICs, FCS, SIDs Medium

Debt Buy-back

Debt buyback is the repurchase by a debtor of its own debt, discounted or at par. The World Bank’s Debt Reduction Facility (DRF) for IDA-Only Countries was established in July 1989. It provides grants to eligible countries to buy back at a deep discount their public and publicly guaranteed commercial external debt. As of April 2012, the DRF has supported 25 operations in 21 IDA-only countries, extinguishing about US$10.27 billion of external commercial debt principal and an estimated US$5.22 billion of associated interest arrears and penalties. The DRF has become one of the key instruments to facilitate the participation of commercial creditors in the delivery of HIPC Initiative debt relief.

LICS, FCS Medium

Debt Swap A debt swap (also called debt-for-development swaps) provides development financing “through the exchange of a foreign-currency-denominated debt for local currency, typically at a substantial discount. The process normally involves a foreign NGO that purchases the debt from the original creditor at a substantial discount

LICS, FCS, LLDCs Medium

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using its own foreign currency resources, and then resells it to the debtor country government for the local currency equivalent (resulting in a further discount). The NGO in turn spends the money on a development project, previously agreed upon with the debtor country government.”5 Debt2Health Initiative is a debt conversion scheme piloted by Germany, Indonesia, and the Global Fund to Fight AIDS, Tuberculosis and Malaria in 2007. In the first Debt2Health operation, Germany cancelled Indonesian debts of €50 million, Indonesia paid €25 million to the Global Fund, and the Global Fund in turn agreed to spend this contribution on projects in Indonesia. The novel aspect of this mechanism is that a multilateral organization can more ensure appropriate usage of funds received from debt conversion. Germany has enacted additional Debt2Health Initiatives with Pakistan, Egypt, Ethiopia, and Cote d’Ivoire.6 http://www.theglobalfund.org/en/funds_raised/innovative_financing/initiatives/debt2health/ In debt-for-nature swaps, a portion of a country’s foreign debt is forgiven in exchange for local investments in conservation measures. Usually, an international NGO purchases debt titles on the secondary market. The NGO transfers the debt title to the debtor country. In exchange the country agrees to either carry out environmental policies or endow a government bond with the aim of funding conservation programs.

Frontloading Frontloading mechanisms makes public funds available earlier for development via the issuance of bonds on international capital markets.

The International Finance Facility for Immunisation (IFFIm)

Pledge Guarantee for Health (PGH)

LICS,MICS, High

The International Finance Facility

The International Finance Facility (IFF) is a frontloading instrument of future development aid by the United Kingdom. The IFF relies on long-term ODA commitments as assets that underpin the issuance of bonds in the international capital markets and leverage immediate resources for development assistance. The International Finance Facility for Immunisation (IFFIm) is an IFF supported by long-term, legally binding grants from sovereign donors (France, Italy, Norway, South Africa, Spain, Sweden, and the United Kingdom). IFFIm was established as a new supranational in 2006, with some US$5 billion in assets paid over 20 years. IFFIm’s first triple-A rated US$1 billion bond issuance funded immunization programs of the GAVI Alliance. The World Bank is IFFIm’s Treasury Manager. http://www.iff-immunisation.org/

LICS, MICs, FCS High

Pledge Guarantee for Health (PGH)

Pledge Guarantee for Health (formerly pledge guarantee, and PG4Health) is a partnership designed to increase the availability and predictability of funding from international donors for health commodities. Recipients are empowered to use donor committed funding in advance of disbursement, resulting in increased buying power,

LICS, MICs, FCS High

5 OECD Glossary of Statistical Terms: http://www.imf.org/external/pubs/ft/eds/Eng/Guide/index.htm 6 http://www.theglobalfund.org/en/mediacenter/newsreleases/2013-01-24_Germany_Makes_EUR_1_Billion_Contribution_to_the_Global_Fund/

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greater value, accelerated procurement and delivery, and, ultimately, more lives saved..7. PGH arranges the short-term financing for the procurement of health commodities. http://www.rhsupplies.org/working-groups/systems-strengthening/the-pledge-guarantee-for-health.html

Islamic Finance

For many Muslims, financial services are not compatible with their religious beliefs, so they may choose not to make use of them. Islamic finance promotes financial inclusion by offering Muslims the choice of financial products that are structured to comply with the tenets of Islam. There are Islamic equivalents for all major financial products, including deposits, mortgages, mutual funds and insurance. The Islamic financial services industry globally has grown at an extremely rapid pace over the past two decades. Although it remains only about 1% of the size the conventional financial industry, it has grown at roughly 15% annually for the past twenty years and is continuing to expand at a similar rate.

Global Center for Islamic Finance

Sukuk (Islamic Bonds)

Takaful (Islamic Insurance)

LICs, FCS, MICs Medium

Global Center for Islamic Finance

The WBG recently opened a Global Center for Islamic Finance in Istanbul, together with several local partners. Islamic finance has grown 10 percent annually in recent years and global assets are now USD 1.5 trillion. Islamic finance can help close financing gaps for infrastructure, venture capital, and small- and medium-sized enterprises. Through the Center, the WBG aims to support regulatory solutions and provide technical assistance so Islamic finance can help create jobs and prosperity around the globe.

http://www.worldbank.org/en/news/press-release/2013/10/30/turkey-and-world-bank-group-reinforce-cooperation-on-improving-islamic-finance-and-the-country-investment-climate

LICs, MICs, FCS Medium

7 http://pledgeguarantee.org/

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Sukuk (Islamic Bonds)

Sukuk commonly refers to the Islamic equivalent of bonds. However, as opposed to conventional bonds, which merely confer ownership of a debt, Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. WBG issued Sukuk (Islamic bonds) on 27 November 2014, raising US$500 million to accelerate the availability of funds for immunisation programs and health system strengthening by Gavi, the Vaccine Alliance.

LICs, MICs, FCS Medium

Takaful (Islamic Insurance)

Takaful is commonly referred to as Islamic insurance; this is due to the apparent similarity between the contract of kafalah (guarantee) and that of insurance. However, takaful is founded on the cooperative principle and on the principle of separation between the funds and operations of shareholders, thus passing the ownership of the Takaful (Insurance) fund and operations to the policyholders. Muslim jurists conclude that insurance in Islam should be based on principles of mutuality and co-operation, encompassing the elements of shared responsibility, joint indemnity, common interest and solidarity. In takaful, the policyholders are joint investors with the insurance vendor (the takaful operator), who acts as a mudarib – a manager or an entrepreneurial agent for the policyholders. The policyholders share in the investment pool's profits as well as its losses. A positive return on policies is not legally guaranteed, as any fixed profit guarantee would be akin to receiving interest and offend the prohibition against riba.

Medium

Lines of Credit

A line of credit would provide automatic access to a line of credit at a predetermined interest rate. Whenever a country experiences liquidity problems it could draw from its line of credit. A line of credit would provide a country with flexible access to volatile and unpredictable demand for financing. Other than contingent loans, the access to funding through a line credit could also be linked to exogenous shocks and triggers.

Contingent Loans

Counter Cyclical Loans

Catastrophe Deferred Drawdown options

Crises Response Window

Women Entrepreneurs Opportunity Facility

IMF Exogenous Shocks Facility

LICS, LLDCs, SIDs, MICs

High

Contingent Loans

A contingent loan (or contingent credit) is a financing instrument through which funding for a specific previously defined event is provided after such event occurs. The World Bank offers contingent financing instruments for natural disasters for both IBRD countries (through the Catastrophe Deferred Drawdown Option or Cat DDO) and IDA countries (through the Crisis Response Window or CRW).

LICS, LLDCs, SIDs, MICs

High

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Contingent Credit Lines

Contingent credit facilities are a source counter-cyclical finance. Finance is earmarked for access for a country but has not yet been drawn down. In Sep 2012 the IADB announced the launch of two new contingent credit facilities for Latin America and the Caribbean worth of USD 8 billion. The first is the new Development Sustainability Contingent Credit Line (DSL), which will make USD 6bn available to 26 countries to help poorest citizens from sharp fluctuations in commodity prices, global liquidity crises and other exogenous factors. The contingent Credit Line for natural Disasters (CCLND) will make up to USD 2bn available to help countries cover urgent financing needs arising immediately after a natural disaster.

LICs, SIDs, MICs High

Counter Cyclical Loans (CCLs)

CCLs allow the deferment of debt service with no penalties in the face of exogenous shocks. In these debt contacts it is agreed ex ante that debt servicing will automatically be allowed to fall or become zero in periods when external shocks (measured in a particular way, such as a fall in the value of the exports) hit a particular country. They are a supplement to the existing international shock facilities. Currently Agence Francaise de Developpment (AFD) has been testing these loans in Africa. MDBs are looking into its implementation and possibilities of expansion.

LDCs, LICs, SIDs, MICs

High

Deferred Drawdown options

Deferred Drawdown Options on loans are an application of contingent loans. A catastrophe (CAT) DDO is a committed credit line for catastrophe risk by the World Bank. It acts as a source of bridge financing that may be disbursed partially or in full if the country declares a state of emergency as a result of a natural disaster. This will allow the country to maintain its development programs while mobilizing other sources of funding to address the emergency. http://treasury.worldbank.org/bdm/pdf/Handouts_Finance/DDO_Major_Terms_Conditions.pdf

LDCs, LICs, SIDs, MICs

High

Crisis Response Window

Financing from the CRW is part of a concerted international response and accessed as a last resort. Actual access to CRW resources is linked to country-specific circumstances (e.g., magnitude of crisis impact, access to alternative financing sources, etc.). Final decisions on CRW financing are made based on evidence of the severity of crises and absence of alternative support mechanisms. The primary objective of the WBG’s CRW is to provide IDA countries with additional resources that will help countries to respond to severe economic crises and major natural disasters and return to their long-term development paths. In case of natural disasters, the CRW targets events that are exceptionally severe. The additional CRW financing would complement UN efforts to provide emergency relief by supporting safety nets for affected populations and restoring basic physical assets that were destroyed by the disaster. In case of

LICs, FCS, LLDCs High

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economic crises, the CRW targets severe economic crises caused by exogenous shocks that affected a significant number of countries. The IDA CRW will continue for the IDA17 period (FY15-17). On September 16, 2014, the WBG Board of Executive Directors approved a US$105 million grant to finance Ebola-containment efforts underway in Guinea, Liberia, and Sierra Leone, help families and communities cope with the economic impact of the crisis, and rebuild and strengthen essential public health systems. http://www.worldbank.org/ida/crisis-response-window.html

Exogenous Shocks Facility

Exogenous Shocks Facility provides financing continent to exogenous macroeconomic shocks. “The IMF Exogenous Shocks Facility (ESF) provides policy support and financial assistance to low-income countries facing exogenous shocks.” After some modifications in September 2008, the ESF has two components: (i) “A rapid-access component under which a country can access fairly quickly, up to 25 percent of its quota for each exogenous shock;” and (ii) “a high-access component…with access up to 75 percent of quota for each arrangement in normal circumstances.” Access will be determined on a case-by-case basis and the conditionality is tailored to IMF members’ needs and circumstances.8 https://www.imf.org/external/np/exr/facts/esf.htm

LDCs, LICs, SIDs, MICs

High

Credit lines for Inclusiveness

These credit lines target underprivileged groups with the aim of reducing inequality

AfDB Private Sector Credit Enhancement Facility (PSF)

Women Entrepreneurs Opportunity Facility

SME Finance Facility

The European Progress Microfinance Facility

LDCs, LICs, SIDs, MICs

Medium

Green Credit Lines

These credit lines for green projects only. An important component of EBRD’s Sustainable Energy Initiative (SEI) is the Sustainable Energy Financing Facilities that extend credit lines to local financial institutions that seek to develop sustainable energy financing. Local financial institutions on-lend the fund to their clients, which include SMEs, corporate and residential borrowers, and renewable energy project developers. IADB’s Green credit lines help mitigate climate change or provide environmental benefits. To date, more than $1 billion in loans and guarantees have been provided throughout the region. Banco General in Panama -- 1st green credit line, $20 million loan to raise a green credit line portfolio of $65.95 million allocated to 14 projects, 9 that jointly have contributed to reduce carbon dioxide emissions by 68,000 tons. This initiative has

LDCs, LICs, SIDs, MICs

High

8 http://www.imf.org/external/np/exr/facts/esf.htm.

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been replicated in other countries in Central America, where four additional green credit lines totalling $62.5 million have been approved. http://www.iadb.org/en/indes/green-credit-lines-eligibility-criteria,6990.html

Long-term Finance

Long-term finance is widely needed by firms and households to plan and invest long-term, smoothen income, and benefit from higher returns on savings; but is in short supply in developing countries, particularly among poorer individuals and SMEs. MDBs can help governments put in place requisite conditions including policies that promote macroeconomic stability, laws that protect creditors and borrowers, local banking systems and capital markets.

Concessional loans

Non-Concessional loans

Equity Investments

Venture Capital

High

Concessional loans

These are loans that are extended on terms substantially more generous than market loans. The concessionality is achieved either through interest rates below those available on the market or by grace periods, or a combination of these. Concessional loans typically have long grace periods. WBG’s IDA lends money on concessional terms. This means that IDA charges little or no interest and repayments are stretched over 25 to 38 years, including a 5- to 10-year grace period. IDA also provides grants to countries at risk of debt distress. Since its inception, IDA has supported activities in 112 countries. Annual commitments have averaged about $18 billion over the last three years, with about 50 percent of that going to Africa. For the fiscal year ending on June 30, 2014, IDA commitments reached $22.2 billion spread over 242 new operations. 12 percent of the total was committed on grant terms.

The Enhanced Private Sector Assistance (EPSA) Initiative, a partnership of Japan and the AfDB, mobilizes long-term concessional resources that support AfDB’s non-sovereign operations.

LICs, FCS, Medium

Non-Concessional Loans

Non-concessional loans are provided with a market-based interest rate. Non-concessional loans are, depending on the MDB, extended to middle-income governments, some creditworthy low-income governments, and private sector firms in developing countries. Many multilateral organisations (IMF, World Bank and European, and regional development banks (African, Asian, Caribbean and Inter-American Development Banks) provide less and non-concessional loans to their more developed member states. For example, the World Bank, through the International Bank for

Upper LICs, MICs High

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Reconstruction and Development (IBRD), enables middle income countries to borrow on terms which are nonconcessional, but less expensive than commercial loans. The major regional development banks also have non-concessional financing facilities.

Equity Investments

The private sector arms of the MDBs and EIB and EBRD were created to extend loans and equity investments to private firms in developing countries. MDBs investments provide:

A seal of approval for the investment proposal

Catalytic effect on fund raising

Promoting best practice in governance

An experienced investment team with private equity expertise

Extensive industry knowledge through our economics and engineering specialists

Early involvement

Ability to move fast MDBs equity investments take place direct or through MDBs-supported investment funds. The EBRD's Direct Investment Facility (DIF) demonstrates the viability of smaller businesses based in countries and regions at an early stage in the transition to the market economy. Equity and limited debt financing may be available to attractive private sector businesses, especially those led by motivated and experienced local entrepreneurs. Investment range generally between €500,000 and €6 million. As of end-March 2015, AMC had approximately US$8.1 billion of assets under management in eight funds and had committed approximately US$4.6 billion in 59 companies and six private equity funds. For example, AMC’s Global Infrastructure Fund has raised $1.2 billion in equity commitments from commercial investors which will support an estimated $18 billion of infrastructure projects in developing countries over the fund’s five-year investment period.

Upper LICs, MICs High

Venture capital

Venture capital is financing provided by investors to startup firms and small businesses with perceived long-term growth potential. This is a very important source of funding for startups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. The IADB Group plays a catalytic role in supporting SMEs by providing equity and capacity building to seed and venture capital funds which offer financing to early stage, dynamic enterprises. By investing in funds, the IADB Group shares investment risk with other partners in the region and demonstrates that financial sustainability and positive social and environmental impact can be mutually attainable. Since 1996, the IDB Group has committed over $323 million in financing to more than 65 Venture Capital (VC) and seed funds. Including co-investments, the IADB Group has supported funds that total over $1.2 billion and reach SMEs in every sub-

Upper LICs, MICs High

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region of Latin America and the Caribbean (LAC). These funds not only provide long-term financing to SMEs, but introduce structural changes needed to support growth: the adoption of good corporate governance, the professionalization of management, and the improvement of operational processes.

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Financial Risk Management Instruments:

These are initiatives which leverage public funds to create investment incentives for the private sector, through mechanisms that correct market failures, reduce sovereign risk and/or macroeconomic and climate driven vulnerabilities. Various forms of risk management approaches, including guarantees, derivatives, blended finance, pooled vehicles, project preparations facilities, etc., provide insurance protection for risk sharing or full risk transfer.

Mechanism Description Examples Beneficiaries Scalability Blended Finance/PPPs

Blending finance is generally based on a combination of market loans and grants, which may take various forms, such as direct investment grants, interest rate subsidies, loan guarantees, technical assistance, risk mitigation and equity instruments. Blending arrangements, potentially increases the volume and impact of development finance. Blending loans and grants means adapting the level of concessionality of funding to the recipient’s needs, thereby using funds in the most careful and economical way. A Public-Private Partnership (PPP) involves the private sector in aspects of the provision of infrastructure and services that have traditionally been provided by the government. Private companies finance projects and provide expertise to ease fiscal constraints and increase efficiency. By engaging the private sector and giving it defined responsibilities, governments broaden their options for delivering better services.

Accelerated Co-financing Facility for Africa (ACFA)

Buy-downs

EU-Africa Infrastructure Trust Fund

Global Index Insurance Facility (GIIF)

MED 5P Initiative

Neighborhood Investment Facility (NIF)

Public-Private Infrastructure Advisory Facility (PPIAF)

Western Balkans Investment Framework (WBIF)

LICs, LDCs, FCS, MICs

High

Accelerated Cofinancing

The Accelerated Cofinancing Facility for Africa (ACFA) provides joint project financing with JICA on concessional terms. AfDB provides project appraisal and loan administration services for the whole project.

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Facility for Africa (ACFA)

http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/enhanced-private-sector-assistance-for-africa-epsa-initiative/

Buy-downs Buy downs (also called “credit buy-downs” or “loan buy-downs) are a combination of a loan to a developing country and a donor commits to buy down the loan, effectively transforming it to a grant. An IBRD-buy-down for a tuberculosis project in China piloted this tool in 2003. DFID grant funds were combined with IBRD into a single stream, which reduced the cost of borrowing to roughly 2 percent. This was followed by two additional buy-down arrangements in China, one for education and one for rural development. Results-based IDA buy-downs were initially piloted in Pakistan and Nigeria in projects supporting polio eradication, spurred by the global public good character of this initiative. A total of eight credits, including supplemental credits, are expected to include buy-downs with funding from the Gates Foundation, the United Nations Foundation, Rotary International, and the U.S. Centers for Disease Control. The total amount of support committed until 2012 under this mechanism, called the “World Bank Investment Partnership for Polio” is US$316 million.9 http://www.cgdev.org/publication/leveraging-world-bank-resources-poorest-ida-blended-financing-facility-proposal-working

LICs, LDCs, FCS Medium

EU-Africa Infrastructure Trust Fund

Established in 2007, the EU-Africa Infrastructure Trust Fund (EU-AITF) aims to increase investment in infrastructure in Sub-Saharan Africa by blending long term loans from participating financiers with grant resources. EU-AITF funding is available from two different envelopes: (1) The regional envelope promotes projects with a demonstrable regional impact. (2) The Sustainable Energy for all (SE4ALL) envelope supports regional, national and local projects targeting sustainability-related objectives. The AfDB has started using blending resources through the EU-Africa Infrastructure Trust Fund. As of mid-2014, the pipeline of projects that could potentially benefit from the fund amount to EUR 100 million of grant contributions. As at December 2014, the cumulative total of grant operations approved by the EU-AITF stood at EUR 557.1m – EUR 428.1m under the regional envelope (since 2007) and EUR 129m under the SE4ALL envelope (since July 2013). The cost of EU-AITF supported projects in their investment phase is currently estimated at EUR 6.2bn, which is 13.5 times the volume of EU-AITF grant support http://www.eib.org/infocentre/publications/all/eu-africa-infrastructure-trust-fund.htm

LICs, LDCs, FCS, MICs

High

The Global Index

The Global Index Insurance Facility (GIIF) is a multi-donor trust fund supporting the development and growth of local markets for weather and disaster index-based insurance in developing countries, primarily Sub-Saharan Africa, Latin America and the Caribbean and Asia Pacific. GIIF’s implementing partners

LICs, LDCs, FCS, MICs

High

9http://www.polioeradication.org/Portals/0/Document/AnnualReport/AR2011/GPEI_AR2011_A4_EN_WEB_Section_7.pdf

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Insurance Facility (GIIF)

have covered more than 600,000 farmers, pastoralists and micro-entrepreneurs to date with $119 million in sums insured and reached over one million with information and access to index insurance. Index insurance is a relatively new but innovative approach to insurance provision that pays out benefits on the basis of a pre-determined index (e.g. rainfall level, seismic activity, livestock mortality rates) for loss of assets and investments, primarily working capital, resulting from weather and catastrophic events, without requiring the traditional services of insurance claims assessors. GIIF works both with private sector and public sector partners in order to build index insurance markets. http://www.ifc.org/wps/wcm/connect/industry_ext_content/ifc_external_corporate_site/industries/financial+markets/retail+finance/insurance/global+index+insurance+facility

MED 5P Initiative

Led by EIB, in cooperation/coordination with AFD, EBRD, and KfW, and funded with EU budget resources, the MED 5P initiative supports the efforts of public authorities in Egypt, Jordan, Morocco, Tunisia and Lebanon to procure infrastructure services through public-private partnership (PPP) structures. MED 5P is meant to finance legal, financial and technical advisory services for the preparation, procurement and implementation of PPP projects in the transportation, water and wastewater, waste management, energy and renewable energy, social and urban infrastructure sectors. MED 5P will also foster PPP projects with a climate mitigation or adaptation component. http://www.eib.org/projects/regions/med/med5p/index.htm

Neighborhood Investment Facility (NIF)

The Neighbourhood Investment Facility (NIF) is financial mechanism aimed at mobilising additional funding to cover the investment needs of the EU Neighbouring region for infrastructures in sectors such as transport, energy, the environment and social issues (e.g. construction of schools or hospitals). The NIF also supports the private sector particularly through risk capital operations targeting Small and Medium-sized Enterprises. Facilities modelled after the NIF are the Investment Facility for Central Asia (IFCA), Latin America Investment Facility (LAIF), Asia Investment Facility (AIF), Caribbean Investment Facility (CIF), and Investment Facility for the Pacific (IFP). http://ec.europa.eu/europeaid/regions/eu-neighbourhood-region-and-russia/interregional-cooperation/neighbourhood-investment_en

LICs, MICs High

Public-Private Infrastructure Advisory Facility (PPIAF)

The Public-Private Infrastructure Advisory Facility (PPIAF) is a multi-donor trust fund that provides technical assistance to governments in developing countries in support of the enabling environment conducive to private investment, including the necessary policies, laws, regulations, institutions, and government capacity. It also supports governments to develop specific infrastructure projects with private sector participation.

LICs, MICs High

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PPIAF provides three types of technical assistance for governments of low- and middle-income countries. First, PPIAF assists governments to develop enabling environments that facilitate private investment in infrastructure. Second, PPIAF’s project cycle-related assistance addresses a lack of capacity to develop and transact “bankable” projects that can attract private sector investment. Third, capacity and awareness building activities help developing countries by sharing knowledge of key issues related to private infrastructure development. PPIAF identifies and disseminates knowledge by publishing best practices studied, developing toolkits, and conducting workshops and seminars. PPIAF also supports sub-sovereign authorities and utilities through its Sub-National Technical Assistance (SNTA) program. http://www.ppiaf.org/

Public Private Partnership Resource Centers

The AfDB is setting up a number of Public Private Partnership (PPP) Resource Centres in the African continent, in support of the efforts of African governments to accelerate the development of privately financed infrastructure. The AfDB-hosted Infrastructure Consortium for Africa (ICA) is coordinating a Project Preparation Financing Network (“tunnel of funds”). URL

LICs, LDCs, FCS, MICs

High

Western Balkans Investment Framework (WBIF)

The Western Balkans Investment Framework (WBIF) supports socio-economic development and EU accession across the Western Balkans through the provision of finance and technical assistance for strategic investments, particularly in infrastructure, energy efficiency and private sector development. It is a joint initiative of the EU, International Financial institutions, bilateral donors and the governments of the Western Balkans. The WBIF focuses on key sectors including energy, environment, transport, social issues and private sector development. The Western Balkans Investment Framework offers a new approach of addressing the region’s extensive and diverse investment needs. It consists of two key components: • Joint Grant Facility (JGF), which pools grants from the European Commission’s budget, CEB, EBRD, EIB and bilateral donors; • Joint Lending Facility (JLF), based on loans provided by CEB, EBRD and EIB and increased cooperation with other multilateral development and bilateral financial institutions. http://www.wbif.eu/

MICs Medium

Hedging/Derivatives/Swaps

MDBs’ stand-alone hedging products for risk management are available to help clients manage their financial risks. Using standard risk management techniques, these products can transform the risk characteristics of a borrower’s obligations without changing the terms negotiated in the loan agreements.

Catastrophe Swap

Currency conversion and swap

Commodity price swap

Exposure swap

Interest rate swap

Interest rate cap and collar

The Currency Exchange Fund (TCX)

LICs, SIDs, MICs High

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A derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often called the "underlying". Derivatives can be used for a number of purposes, including insuring against price movements (hedging), increasing exposure to price movements for speculation or getting access to otherwise hard-to-trade assets or markets Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as collateralized debt obligations, credit default swaps, and mortgage-backed securities. Traditionally, the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed.

Weather Derivatives

Catastrophe Swap

A catastrophe swap exchanges a fixed payment for a part of the difference between insurance premiums and the losses caused by insurance claims. The traditional re-insurers are the most active players in the market, and this market segment, which the WBG has accessed under a cat swap format, is the biggest and most mature. In swap form, the WBG has intermediated catastrophe swaps for the Caribbean Catastrophe Risk Insurance Facility (“CCRIF”) and the Pacific Catastrophe Risk Insurance Facility. http://www.ccrif.org/

LICs, SIDs, MICs High

Currency swap Currency swaps alter the currency terms of a loan obligation if risk management requirements have changed since the initial choice of loan currency. To access built-in conversion options simply request the desired type and terms of the conversion. Availability of currency hedging products presupposes a sufficiently liquid swap market in the desired currency. For WBG loans without embedded options or debt owed to creditors other than WBG, access swaps by signing a Master Derivatives Agreement. http://treasury.worldbank.org/bdm/htm/hedging_products.html

LICs, LDCs, SIDs, MICs

High

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Commodity price swap

This is a swap in which exchanged cash flows are dependent on the price of an underlying commodity. A commodity swap is usually used to hedge against the price of a commodity. One set of cash flows is

linked to the market price of a commodity or index. The other is a fixed cash flow or a cash flow based on a variable rate of interest. In this way, a commodity swap is a hybrid, spanning interest rate swap and commodity swap markets. Commodity price swaps link IBRD debt service payments to the prices of a particular commodity or commodities in order to reduce commodity price risk. IBRD commodity swaps are individually negotiated transactions provided on a case-by-case basis.

URL

LICs, MICs Medium

Exposure swap Exposure swaps allow for formally exchanging MDBs’ selected country exposures to reduce concentration risk and gain headroom capacity. MDBs are expanding the use of innovative exposure exchanges to enable increased financing for countries where lending is constrained. The WBG has already tested this solution between IBRD and MIGA for an exposure swap of up to USD 100 million of principal which allowed each organization to do more business in Brazil and Panama. This approach is being scaled amongst the MDBs through the MDBs Working Group. URL

LICs, LLDCs, FCS, MICs

High

Interest rate swap

Interest rate conversions and swaps Transform the interest rate basis of a loan obligation from a fixed to floating rate or vice versa. To access built-in conversion options simply request the desired type and terms of the conversion. For IBRD loans without embedded options or debt owed to creditors other than IBRD, access swaps by signing a Master Derivatives Agreement with IBRD. http://treasury.worldbank.org/bdm/htm/hedging_products.html

LICs, LLDCs, MICs High

Interest rate cap and collar

Interest rate caps and collars limit interest rate variability with a cap or a collar. Caps set an upper limit on the variable interest rate of the loan. Collars set an upper limit (a cap) and a lower limit (a floor) on the interest rate of the loan. Both require payment of an up-front premium to purchase the interest rate protection. For IBRD loans without embedded options or for debt owed to creditors other than IBRD, access caps and collars by signing a Master Derivatives Agreement with IBRD. http://treasury.worldbank.org/bdm/htm/hedging_products.html

LICs, LLDCs, MICs High

The Currency Exchange Fund (TCX)

TCX is a special purpose fund that provides OTC derivatives to hedge the currency and interest rate mismatch that is created in cross-border investments between international investors and local borrowers in frontier

LICs, MICs High

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and less liquid emerging markets. The goal is to promote long-term local currency financing, by contributing to a reduction in the market risks associated with currency mismatches.

To achieve this objective, TCX acts as a market-maker in currencies and maturities not covered by commercial banks or other providers, notably where there are no offshore markets, no long-term hedging, or, in extreme cases, no markets at all.

TCX’s investor base predominantly consists of development finance institutions and microfinance investment vehicles active in the long-term debt markets of emerging and frontier markets. TCX’s shareholders and approved counterparties include AfDB, EBRD, IADB, IFC, and other organizations. URL

Weather Derivatives

Weather derivatives are linked to an index that measures weather related risks such as low rainfall or drought. Unlike insurance, weather derivatives do not cover the loss from weather related events but the value of the derivative changes depending on movements of the underlying index. Weather derivatives may avoid moral hazard problems that come with insurance products because the value of the derivative solely depends on exogenous variables, for example rainfall. This market is newer and smaller, but is becoming an important source of risk capital transfer. WBG has intermediated weather-event related swaps for the government of Malawi and the Uruguayan state-owned electricity utility, UTE. http://treasury.worldbank.org/bdm/htm/risk_financing.html

LICs, SIDs, MICs High

Guarantees /Insurance

MDBs’ guarantees are seen by investors as a stabilizing factor in transactions with sovereign governments. By covering a government or government entity’s failure to meet specific contractual obligations to a private or public project, MDBs’ guarantees have helped attract direct private sector investment in oil, gas and mining, power, telecom, transport, and water projects; enhanced private sector participation in privatizations and public-private partnerships, and helped governments access international capital markets on more favorable terms. In addition to the leverage effect, guarantees have also played a valuable role in easing the entry of emerging economies into

Non-Honoring of Sovereign Financial Obligations

Partial credit guarantees

Partial risk guarantees

Political risk insurance (guarantees)

Private Equity Fund Insurance

Project-based guarantees

Policy-based guarantees

LICs, LDCs, FCS, MICs

High

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international capital markets by helping them acquire a track record of credible policy performance.

Non-Honoring of Financial Obligations

MIGA’s non-honoring of financial obligations (NHFO) coverage provides credit enhancement in transactions involving sovereign and subsovereign obligors, as well as state-owned enterprises. The primary beneficiaries of this cover are commercial lenders that provide loans to public sector entities for infrastructure and other productive investments. NHFO has the additional benefit of mobilizing financing from the private sector without using IBRD credit lines. In Turkey, MIGA’s NHFO coverage is supporting the expansion of Istanbul’s metro system, which will reduce traffic and congestion, provide better access to jobs, and improve the quality of life in the metropolis that is home to 18 percent of Turkey’s population.

http://www.miga.org/documents/NHFObrief.pdf

LDCs, MICs High

Partial Credit Guarantees (PCGs)

PCGs cover private lenders against all risks during a specific period of the financing term of debt for a public investment; they are designed to extend maturity and improve market terms AFDB, IADB, WBG (IBRD and IFC) offer PCGs. Partial credit guaranteed for education sector finance: The IADB is providing a partial credit guarantee of approximately US$7 million to support a Mexican finance company that provides loans to Mexican students to pursue higher education studies in Mexico. The partial credit guarantee will improve the rating of the company’s education bonds, making them more attractive to private investors. http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/structured+finance/products/partial+credit+guarantee

LICs, LDCs, FCS, MICs

High

Partial Risk Guarantees (PRGs)

PRGs ensure payment if a government or other public entity fails to perform its contractual

obligations with respect to a private-sector project. Partial risk guarantees cover political risk, particularly losses on equity/quasi-equity or other forms of direct investment. A Partial Risk Guarantee of the concessional arm of the African Development Bank Group has backed some obligations of the Kenyan government in the context of the financing of the Lake Turkana Wind Project. http://www.afdb.org/en/projects-and-operations/financial-products/african-development-fund/guarantees/

LICs, LDCs, FCS, MICs

High

Political Risk Insurance (Guarantees)

MIGA’s guarantees protect cross-border investments against noncommercial risks and can help investors obtain access to funding sources with improved financial terms and conditions. MIGA can cover equity investments, shareholder loans, and shareholder loan guaranties, provided the loans have a minimum maturity of more than one year. Non-shareholder loans can also be covered, as long as they relate to a

LICs, LDCs, FCS, MICs

High

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specific investment or project in which some other form of direct investment is present. Other forms of investment, such as capital market bond issuances, swap and hedging transactions, and leasing and turnkey contracts may also be eligible for coverage. MIGA guarantees covering equity investments and subordinated loans have recently supported private investment in the Henri Konan Bedie bridge of Cote d’Ivoire, by mitigating risks of transfer restriction, expropriation, war and civil disturbance, and breach of contract. http://www.miga.org/documents/IGGenglish.pdf

Policy-based guarantees

Policy-based guarantees cover debt service defaults, irrespective of the cause of such default, on a specified portion of commercial debt owed by Government and associated with the supported Government’s program of policy and institutional actions. In providing guarantee coverage, the MDBs assess the appropriateness of the Government undertakings, taking into account country, market and program circumstances. Policy-based guarantees do not support bilateral debt or debt extended by publicly owned entities that operate under public law for public policy purposes (e.g., bilateral financiers, government owned-policy banks and export/import agencies). http://web.worldbank.org/external/default/main?theSitePK=3985219&pagePK=64143534&contentMDK=20260696&menuPK=64143504&piPK=64143448

LICs, LDCs, FCS, MICs

High

Private equity fund insurance

Private equity funds are facing significant challenges as they seek to attract scarce capital for investments into emerging and frontier markets. Top-down investors may be uneasy with the macro environments of certain markets due to concerns about government stability, civil unrest, and fragile regulatory frameworks. These are risks that private markets find very difficult to hedge and present a specific challenge to emerging market private equity funds. MIGA offers a solution to these issues by providing its guarantee coverage to private equity funds that meet MIGA’s eligibility criteria and commit to MIGA’s environmental, social, and anti-corruption policies. MIGA has provided master contracts to several private equity funds investing in sub-Saharan Africa, especially in the agribusiness sector. MIGA recently collaborated with the Overseas Private Investment Corporation to offer reinsurance on a master contract that will support investments in 13 countries across sub-Saharan Africa. http://www.miga.org/investmentguarantees/index.cfm?stid=1803

LICs, LDCs, FCS, MICs

High

Project-based guarantees

Project-based guarantees support projects with defined development objectives, activities, and results. There are two types: loan guarantees and payment guarantees. Loan guarantees: they cover loan-related debt service defaults caused by Government failure to meet specific payment and/or performance obligations arising from contract, law or regulation, in relation to a

LICs, LDCs, FCS, MICs

High

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project. Loan guarantees include coverage for debt service defaults on: (i) commercial debt, normally for a private sector project where the cause of debt service default is specifically covered by the Bank’s guarantee; and (ii) a specified portion of commercial debt irrespective of the cause of such default, normally for a public sector project. Payment guarantees cover defaults on non-loan related Government payment obligations, to private entities and foreign public entities arising from contract, law or regulation. http://treasury.worldbank.org/bdm/htm/credit_enhancement.html

Indexed/Performance Based Bonds

Indexed bonds tie the performance (schedule or amount of payment of interest and/or of repayment of principal) to the performance of an index. The instrument allows debtors to hedge against risks deriving from fluctuations of the index. Common indices are inflation and GDP but also a carbon-indexed bond has been piloted by the World Bank in cooperation with a private sector partner.

Capital-at-risk bonds

Carbon-indexed Bonds

Commodity-indexed Bonds

GDP-indexed Bonds

Inflation-indexed Bonds

LICs, MICS, SIDs Medium

Capital-at-risk bonds

The Capital at Risk Notes program facilitates risk transfer solutions for the MDBs and their clients using the capital markets. Under this program, the MDB issues notes where some or all of the investors’ principal may be at risk, such as catastrophe bonds ('cat bonds'). Their benefits to investors include potential yield enhancement and opportunity to include new perils and regions to diversity portfolios. WBG Capital-at-Risk Notes program created in in early 2014 enable the Bank to streamline the delivery of cost effective and efficient risk management and funding tools to clients through the issuance of a special category of bonds. These bonds could be used for catastrophe hedges, longevity hedges, project financing and credit linked. Because of the nature of the embedded risks and the potential for capital at risk, these bonds may be rated less than triple-A. For this reason, and in order to clearly differentiate this new category of bonds from other bonds issued off the standard IBRD Global Debt Issuance Facility (“GDIF”) program, a separate Prospectus Supplement was prepared. The first capital-at-risk bond was issued in July 2014. The transaction was a three year issue linked to hurricane and earthquake risk in sixteen Caribbean countries. http://treasury.worldbank.org/cmd/htm/CapitalAtRiskNotesProgram.html

LICs, MICs Medium

Carbon-linked bonds

The performance of carbon-linked bonds (also called carbon-indexed bonds) depends on the development of the carbon markets. By purchasing this bond, investors can indirectly participate in the market for GHG emission reductions. Investors will also be supporting demand for CERs generated from a specific UNFCCC-registered clean

LICs, MICs Medium

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energy project. The market for CERs contributes to a reduction of global greenhouse gas emissions and the transition to a low carbon growth economy.”10 Cool bonds are an example of carbon-linked bonds and are five-year, USD-denominated notes paying a coupon of 3 percent for an initial period, and a variable coupon amount for the remaining maturity of the note tied to Certified Emission Reductions (CERs) generated by specified greenhouse gas–reducing projects in China and Malaysia. IBRD counterparties hedging exposure to CERs contributes to expansion of carbon markets. Daiwa Securities and Mitsubishi UFJ Securities distributed the notes to Japanese investors. http://treasury.worldbank.org/cmd/htm/CO2LBond.html

Catastrophe Bonds

Catastrophe or cat bonds are risk-linked securities that transfer a specified set of risks to investors. Cat bonds require the bondholders to forgive or defer some or all payments of principal or interest if actual catastrophe losses exceed a specified amount, or trigger. Catastrophe bonds have traditionally covered natural disasters. WBG has developed the MultiCat Program - a bond issuance platform - that transfers diversified risk to private investors. http://treasury.worldbank.org/bdm/htm/risk_financing.html

LICs, MICs Medium

GDP-linked bonds

A GDP-indexed bond is a sovereign bond whose interest rate and/or repayments vary with a country’s rate of economic growth. If economic growth is low, interest and/or principal payments are low; if it is high, interest payments are high. Therefore, countries with poor economic performance which are less likely to be able to service their debt face a lower burden from servicing GDP-indexed bonds. The instrument allows to hedge debt payments against economic recessions. The first GDP-indexed bond was issued by Bulgaria in 1994, followed by other countries. URL

LICs, MICs, SIDs Medium

Market Data/Benchmarks

The Financial Services Industry is known for its complexity in terms of vendors, products, user requirements, agreements and pricing structures. Availability of data and benchmarking reduces uncertainty and therefore risk for investors

Global Emerging Markets Local Currency Bond Index (GeMX)

Global Map of Environmental and Social Risks in Agro-Commodity Production (GMAP)

LICs, MICs Medium

Global Emerging Markets Local

The Markit iBoxx Global Emerging Market Index (GEMX) family is designed to reflect the performance of Emerging Market Local Currency denominated debt from countries qualifying for the World Bank Gemloc programme. The index rules aim to offer a broad coverage of the Emerging Markets bond universe, whilst upholding minimum standards of investability and liquidity. As of 01 April 2012, the index tracks 360 bonds

LICs, MICs Medium

10 http://treasury.worldbank.org/cmd/htm/CO2LBond.html

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Currency Bond Index (GeMX)

from 24 countries. The indices are an integral part of the global Markit iBoxx index families, which provide the marketplace with accurate and objective benchmarks by which to assess the performance of bond markets and investments. Below the GEMX Overall, the index family is split into three major regional indices: Global, EMEA (Europe, Middle East, Africa), Asia and Latin America. These are further broken down into sub-indices based on countries, bond types and maturities. These indices serve several purposes:

To act as a benchmark for portfolio management;

To act as an indicator of market performance and development;

To act as a basis on which market options & futures may be derived;

To act as a comparator for different markets

https://www.markit.com/assets/en/docs/products/data/indices/bond-indices/Markit_iBoxx_GEMX_index%20guide.pdf

Global Map of Environmental and Social Risks in Agro-Commodity Production (GMAP)

(GMAP) is a database which collects information on environmental & social (E&S) risks for 150 country-commodity combinations and assigns a color-coded risk score (green/yellow/red). This risk score provides a basis for more systematic E&S due diligence and decision-making on financing (go/no go) IFC is helping support agribusiness firms to do business in a sustainable way. For many, identifying and managing supply chain risks related to child and forced labor, conversion of natural and critical habitats, and loss of biodiversity represents a key challenge. IFC has developed a suite of new tools and resources, including the Global Map of Environmental and Social Risks in Agro-Commodity Production, that enhance our due diligence and ability to analyze potential risks. http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/our+strategy/agribusiness/gmap

LICs, SIDs, MICs Medium

Project Preparation Facilities (PPFs)

Project preparation facilities support project sponsors in preparing infrastructure projects. PPFs provide technical expertise in increasing the quality of the project pipeline as well as mobilize technical and financial resources to achieve greater leverage in implementing complex projects. Many MDBs are currently launching Project Preparation Facilities, including the WBG, EBRD, ADB, and AfDB

African Legal Support Facility

DevCo PIDG Facility

Global Center for Infrastructure

InfraFund

Infrastructure Project Preparation Facility

Investment Climate Facility for Africa

IADB Project Preparation Facility

PPP Advice Office

Public-Private Infrastructure Advisory Facility (PPIAF)

LICs, LDCs, FCS, MICs

Medium

African Legal Support Facility (ALSF)

ALSF, hosted by the AfDB, supports African governments in the negotiation of complex commercial transactions, including in the infrastructure sector. It provides assistance to African countries to strengthen their legal expertise and negotiating capacity in debt management and litigation, natural resources and extractive industries management and contracting, investment agreements, and related commercial and

LICs, LDCs, FCS, MICs

Medium

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business transactions. The ALSF also grants and advances funds to African countries for legal advice from top legal counsel in these areas. The ALSF’s goal is to ensure fair and balanced negotiations. http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/african-legal-support-facility/

DevCo PIDG Facility

DevCo – part of PIDG, the multi-donor Private Infrastructure Development Group – is managed by IFC and advises governments in poorer countries on structuring private sector participation in infrastructure projects. Other companies supported by PIDG provide additional assistance related to marketing, project development (e.g. Infraco) and financing (e.g. Emerging Africa Infrastructure Fund – EAIF and Guarantco). http://www.pidg.org/what-we-do/companies/devco

LICs, LDCs, FCS, MICs

Medium

Global Center for Infrastructure (GCI)

WBG’s GCI to facilitate effective knowledge dissemination. The GCI is a type of “knowledge platform” that is being designed to act as a means of disseminating best practice and lessons learned across the infrastructure sector. URL

LICs, LDCs, FCS, MICs

Medium

InfraFund IADB’s InfraFund is a fast-disbursing fund created to support the preparation of climate resilient and sustainable infrastructure projects. InfraFund is dedicated to assisting public, private and mixed-capital entities in Latin America and the Caribbean in the identification, development and preparation of bankable and sustainable infrastructure projects. http://www.iadb.org/en/topics/transportation/infrafund,1635.html

LICs, MICs Medium

Infrastructure Project Preparation Facility

EBRD’s Infrastructure Project Preparation Facility seeks to remedy the lack of creditworthy, well-structured projects in infrastructure in emerging markets by building a pipeline of finance-ready projects. It also aims to provide assistance to national/local governments in building solid regulatory frameworks to enable investments. It has three primary objectives: advocate for and build the environment for investment climate improvement; encourage business to response by improving investor perception on Africa. http://www.ebrd.com/news/2014/ebrd-launches-infrastructure-project-preparation-facility.html

LICs, MICs, Medium

Investment Climate facility for Africa (ICF)

ICF works to improve the climate for investment in Africa by removing barriers to doing business. ICF aims to work with receptive African governments to make the continent an even better place to do business, systematically focusing on areas where practical steps can be taken to remove identified constraints and problems. http://www.icfafrica.org/

LICs, LDCs, FCS, MICS

Medium

Project Preparation Facilities

The Inter-American Development Bank has several facilities that support project preparation: the Project Preparation Facility (PPF), the Project Preparation and Execution Facility (PROPEF), the Infrastructure Fund (InfraFund), the Fund for lntegration Infrastructure (FIRII), and the Fund for Financing Disaster Prevention (FDP).

LICs, MICs Medium

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The PPF provides up to $1.5 million in complementary financing to finalize preparation activities for projects in the Bank's pipeline. PPFs aim to strengthen and shorten the project preparation stage, facilitating loan approval and project execution.

The PROPEF facilitates a more seamless transition from preparation to execution by financing additional project start-up activities. PROPEFs make more funding available per project--up to $5 million--than traditional PPFs, as well.

The InfraFund, created with a $20 million contribution from the IDB, provides resources to assist public, private and mixed entities in the identification, development, and preparation of bankable and sustainable infrastructure projects.

The FIRII, also funded with a $20 million IDB contribution, provides technical cooperation resources for studies concerning regional physical integration and project preparation for cross-border infrastructure operations involving borrowing member countries.

The FDP provides technical cooperation resources for the preparation of disaster prevention projects and risk assessments in IDB borrowing member countries.

http://www.iadb.org/en/about-us/project-preparation-facilities,6010.html

Public-Private Partnership Advice Office

In September 2014, AsDB opened a new office to provide governments with independent advice on shaping PPPs. ADB seeks to become an active project developer and a resource mobilizer to raise financing from other development partners, including the private sector for PPP projects. These services will be distinct from PPP advocacy, support for development policy, legal and regulatory frameworks to promote PPPs, and coordination of financing. URL

LICs, LDCs, FCS, MICs

Medium

Public-Private Infrastructure Advisory Facility (PPIAF)

See above

Risk Sharing Facilities

A risk sharing facility (RSF) is a loss-sharing agreement between an MDB and an originator of assets in which the MDB reimburses the originator for a portion of the principal losses incurred on a portfolio of eligible assets.

The European Progress Microfinance Facility

Private Sector Credit Enhancement Facility (PSF)

Risk Sharing Facility

Risk Sharing Facility Direct

Risk Sharing Finance Facility (RSFF)

SME Finance Initiative

Sustainable Energy Financing Facilities (SEFFs)

Women Entrepreneurs Opportunity Facility

LICs, LDCs, FCS, MICS

Medium

The European Progress

The European Progress Microfinance Facility is a microfinance initiative for which EUR 205 million of funding has been made available from the European Commission and the European Investment Bank. Progress

MICs Medium

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Microfinance Facility)

Microfinance, an initiative targeting all EU Member States, aims at increasing access to finance for individuals who have lost or are at risk of losing their job or have difficulties entering or re-entering the labour market. It also targets disadvantaged individuals, including people at risk of social exclusion. In addition to individuals, Progress Microfinance also supports micro-enterprises, including those in the social economy providing jobs for the unemployed or the disadvantaged. http://www.eif.org/what_we_do/microfinance/progress/

Private Sector Credit Enhancement Facility (PSF)

Given the constraint of limited AfDB risk capital for Low Income Countries (LICs) and fragile states, the PSF with a seed capital of UA 165 million as an African Development Fund (ADF) grant was proposed to carry out more private sector projects in LICs. The PSF will provide guarantees to the African Development Bank (the Bank) on selected private sector operations in these countries and free up capital for the Bank and thereby increase its capacity to extend additional private sector loans in these countries. URL

LICs, LDCs, FCS, MICS

Medium

Risk Sharing Facility

The IFC risk sharing facility (RSF) allows a client to sell a portion of the risk associated with a pool of assets. The assets typically remain on the client’s balance sheet and the risk transfer comes from a partial guarantee provided by IFC. In general, the guarantee is available for new assets to be originated by the client using an agreed upon underwriting criteria, but in certain situations may also be used for assets that have been already originated. Typically, the client’s purpose in entering into a risk sharing facility with IFC is to help the client increase its capacity to originate new assets within an asset class in which IFC is interested in increasing its own exposure. For example, Kenya School Risk Sharing Facility with the IFC in the amount of USD 2.8 million on loans extended to eligible private schools to finance construction, purchase, of educational materials, and other capital expenditures. IFC’s support intended to augment the supply of medium-term lending available to the education sector. http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/structured+finance/products/portfolio+risk+sharing+facility

LICs, LDCs, FCS, MICS

Medium

Risk Sharing Facility Direct

The EBRD is considering increasing the size and expanding the geographic coverage of its risk-sharing and co-financing instruments with Partner Financial Institutions (PFIs) to support their loans to local companies. The Bank will create the “Risk Sharing Facility” (RSF) to share risk on these loans in the Bank’s countries of operations. The RSF will be modelled on the success of the “Medium-Sized Co-Financing Facility” which it will replace. http://www.ebrd.com/work-with-us/projects/psd/risk-sharing-facility-direct.html

MICs Medium

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Risk Sharing Finance Facility

The European Commission and the European Investment Bank have joined forces to set up the Risk Sharing Finance Facility (RSFF). RSFF is an innovative scheme to improve access to debt financing for private companies or public institutions promoting activities in the field of Research, Technological Development Demonstration and Innovation investments. RSFF is built on the principle of credit risk sharing between the European Community and the EIB, extending the ability of the Bank to provide loans or guarantees with a low and sub-investment grade risk profile. The scheme also provides a wealth of opportunities for new and innovative EIB financing solutions directed at the private sector and the research community as a whole. www.eib.org/rsff

MICs Medium

SME Finance Initiative

SME Finance Initiative supported by the UK Department for International Development, EIB and IFC, provides risk capital for banks to lend to SMEs, funding for technical advice and technological innovation and improved information on SME credit worthiness. URL

LICs, MICs Medium

Sustainable Energy Financing Facilities (SEFFs)

Through SEFFs, the EBRD extends credit lines to local financial institutions that seek to develop sustainable energy financing as a permanent area of business. Finance is provided for two key areas: energy efficiency and small-scale renewable energy. Local financial institutions on-lend the funds which they have received from the EBRD to their clients, which include small and medium-sized businesses, corporate and residential borrowers, and renewable energy project developers. Each SEFF establishes a Project Implementation Team, comprised of local and international experts who provide support to participating local financial institutions and their clients. http://www.ebrdseff.com/en/home.html

LICs, MICs Medium

Women Entrepreneurs Opportunity Facility

The Women Entrepreneurs Opportunity Facility, launched jointly by the IFC and Goldman Sachs Group, aims to raise $600 million, which will increase access to finance to as many as 100,000 women entrepreneurs in emerging markets. This is the first fund of this kind to be dedicated exclusively to financing women-owned small and medium businesses in developing countries. IFC will invest an initial $100 million and the Goldman Sachs Foundation will provide $32 million. IFC will manage the facility, which is expected to mobilize up to an additional $468 million from public and private investors. An estimated $300 billion credit gap exists for women-owned enterprises, according to IFC research. http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/46E12EAD05D0619B85257C9200595A41

LICs, MICs Medium

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Results-Based Financing Instruments:

Two benefits occur when funding is reserved until results are delivered. First, the risk of success/failure may be transferred in part or in

full to the entities conducting the work. This promotes accountability, ownership, improved management, and effectiveness of service

providers. Second, it may help crowd in additional funding toward the development objective. Results-based instruments include

conditional cash transfers, pull mechanisms, performance-based funding, and impact investment. Examples Include:

Mechanism Description Examples Beneficiaries Scalability Advance Market Commitments (AMC)

An Advance Market Commitment (AMC) was originally envisioned as a financial mechanism that aims to overcome the lack of research and development (R&D) for medical needs that primarily affect developing countries. AMCs give the private sector sound business incentives to engage in research, development, production, and distribution of products critically needed in developing countries, and ensure that the products are affordable. In that was AMC is also a pull mechanism.

AMC for Vaccines

Pledge Guarantee for health (PGI)

LICS, LLDCs, SIDs, FCS, MICs

Medium

AMC for Vaccines

Advance Market Commitment for Vaccines: The World Bank helped design, negotiate, and implement the pilot AMC, which was launched in 2009 to support the R&D, manufacture, and distribution of vaccines against pneumococcal disease and accelerate the creation of a viable market. Six donors (Italy, the UK, Canada, Russia, Norway, and the Bill & Melinda Gates Foundation) have committed US$1.5 billion to the pilot. The AMC finances the purchase, up to a pre-determined price, of new vaccines needed in developing countries. IBRD effectively guaranteed the US$1.5 billion donor subsidy by placing it on its balance sheet.

http://www.vaccineamc.org

Thanks to the pneumococcal AMC, children in over 25 Gavi-eligible countries are being immunized against the main cause of pneumonia today. The current pneumococcal vaccine is sold at over US$60 per dose in developed countries, and over $80 per dose when the AMC took effect. Owing to the AMC, the long-term price for the vaccine in IDA countries will be just US$3.50 per dose. Health experts estimate that by 2020, AMC funds will have helped immunize nearly 700 million children against pneumococcal disease and directly prevented about 2.8 million deaths. Effects from the acceleration of the vaccine could prevent another 4.9 million deaths.

http://www.gavi.org/funding/pneumococcal-amc/

LICS, LLDCs, SIDs, FCS, MICs

Medium

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Pledge Guarantee for Health (PGH)

Pledge Guarantee for Health (formerly pledge guarantee, and PG4Health) is a partnership designed to increase the availability and predictability of funding from international donors for health commodities. Recipients are empowered to use donor committed funding in advance of disbursement, resulting in increased buying power, greater value, accelerated procurement and delivery, and, ultimately, more lives saved..11. PGH arranges the short-term financing for the procurement of health commodities. http://www.rhsupplies.org/working-groups/systems-strengthening/the-pledge-guarantee-for-health.html

LICS, MICs, FCS High

Buy-Downs Results based Buy-downs (also called “credit buy-downs” or “loan buy-downs) are a combination of a loan to a developing country and a donor committing to buy down the loan, effectively transforming it to a grant when the predefined results that have to be achieved. The developing country receives funds up front and has the insurance that, with successful implementation, a donor will cancel the debt. Buy-downs mobilize loans that can ultimately become grant money for causes that benefit entire regions or the global good. Experience with the pilot buy-downs suggests that the tool can also help governments achieve purely national targets, creating internal incentives for improved monitoring and evaluation and more clearly defined accountability.

Results Based IDA Buy Downs LICS, LLDCs, SIDs, FCS, MICs

Medium

Results based IDA Buy Downs

Results-based IDA buy-downs were initially piloted in Pakistan and Nigeria in projects supporting polio eradication, spurred by the global public good character of this initiative. A total of eight credits, including supplemental credits, are expected to include buy-downs with funding from the Gates Foundation, the United Nations Foundation, Rotary International, and the U.S. Centers for Disease Control. The total amount of support committed until 2012 under this mechanism, called the “World Bank Investment Partnership for Polio” is US$316 million. http://www.rbfhealth.org

Pull mechanisms

One of the biggest barriers to private-sector engagement in developing new global health technologies can be the perception of an insufficient market for these products. Often this is a bigger hurdle than the actual costs of

Advanced Market Commitments (AMC)

AgResults

LICS, LLDCs, SIDs, FCS, MICs

Medium

11 http://pledgeguarantee.org/

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conducting research and development. Pull mechanisms help overcome this barrier by creating or securing a market. These mechanisms entice sponsors to invest their own resources or energies for the delivery of health technology products using the guarantee of a market

offered by donors. Advanced Market Commitments

See AMC above.

AgResults AgResults is an initiative to enhance smallholder welfare and improve food security for the poor and vulnerable through the use of "pull mechanisms" in agriculture. Pull mechanisms are results-based financial incentives that reward successful innovations and their adoption. Through AgResults, these incentives are being utilized to overcome market failures in agriculture by encouraging private and public sector innovators to develop products and services that they would not otherwise bring to the market. In this way, the private sector is also engaged in creating sustainable markets. http://agresults.org/

Medium

Performance-based Funding/ Payment for Results

Results-Based Financing (RBF) refers to a range of mechanisms designed to enhance the performance of aid through incentive-based payments. RBF has been used most extensively in the area of health systems. RBF is an umbrella term that includes Output-Based Aid, provider payment incentives, performance-based inter-fiscal transfers, and incentives to households for adopt health-promoting behaviors. What these mechanisms have in common is that a principal entity provides a financial or in-kind reward, conditional on the recipient undertaking a set of predetermined actions or achieving a predetermined performance goal.12

GAVI Alliance

Global Financing Facility (GFF) in Support of Every Women Every Child

Health Results Innovation Trust Fund (HRITF)

Output-based Community Development Carbon Fund

Global Partnership on Output-Based Aid (GPOBA)

Pandemic Emergency Facility (PEF)

Program-for-Results (PforR)

Social Impact (pay for success) Bonds

GAVI Alliance GAVI Immunisation Services Support (GAVI ISS) is a flexible program that countries can use to improve their immunization performance. After an initial two year investment phase, countries receive

LICS, FCS, SIDS, LLDCs, MICs

High

12 http://go.worldbank.org/04UNXY1MS0

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funding based on the additional number of children receiving immunization: approximately US$20 for each additional child US$20 for each additional child they reach with three doses of diphtheria-tetanus-pertussis (DTP3) vaccine, as compared to the previous year’s target. The program is also flexible so that that countries and governments have complete control over how and when to use their ISS funding on the condition of rising coverage rates. In this way, governments can utilize extra funding to plug gaps or support underfunded areas.13 http://www.gavi.org/

Global Financing Facility in Support of Every Women Every Child

The Global Financing Facility (GFF) in Support of Every Woman Every Child will mobilize and channel additional international and domestic resources required to scale up and sustain efficient and equitable delivery of quality Reproductive, Maternal, Newborn, Child, Adolescent Health (RMNCAH) services. It will also support the transition to long-term sustainable domestic financing. A special area of focus will be to support the scaling-up of civil registration and vital statistics systems. The GFF will facilitate a clear strategy for RMNCAH services in countries, which will be linked to national strategies for health and other sectors. It will build on the existing Health Results Innovation Trust Fund of the WBG that offers leverage of IDA and IBRD resources. It is estimated that an accelerated investment scenario would help prevent a total of 4 million maternal deaths, 107 million child deaths, and 22 million stillbirths between 2015 and 2030 in 74 high-burden countries. http://rbfhealth.org/resource/global-financing-facility-support-every-woman-every-child

LICS, FCS, SIDS, LLDCs, MICs

High

Health Results Innovation Trust Fund (HRITF)

The Health Results Innovation Trust Fund (HRITF) was created in 2007 to support results-based financing (RBF) approaches in the health sector. Through RBF, the HRITF aims to improve maternal and child health around the world. The HRITF exists to:

Support design, implementation, monitoring and evaluation of RBF mechanisms

Develop and disseminate the evidence base for implementing successful RBF mechanisms

Build country institutional capacity to scale up and sustain the RBF mechanisms, with the national health strategy and system

Attract additional financing to the health sector With this mission, the HRITF has grown its portfolio to 32 countries in which RBF approaches are being implemented to improve access to and quality of health for women and children. http://www.hritfreport.org/

LICS, FCS, SIDS, LLDCs, MICs

High

Output-based Community

OBA targets individuals who lack the financial means to pay for basic services. It is specifically targeted for individuals in developing countries. The service provider will receive subsidies to replace costs associated with providing the service to people, such as user fees. Individual agents will verify

LICS, FCS, SIDS, LLDCs, MICs

13 http://www.gavialliance.org/support/iss/#sthash.bAmuSBUr.dpuf

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Development Carbon Fund

that the service is being delivered and based on the performance of the service-provider, a subsidy will be granted. That is how it is "performance-based". OBA generally works through a private firm, or another third party, acting as the service provider. The service provider is responsible for the initial financing of the project and, only after results have been verified, will the firm receive subsidies from a donor. In such schemes, it is the provider who bears the risk of loss, rather than the aid donor, and output-based schemes allow for the tracking of results because of the way they function.

The Community Development Carbon Fund (CDCF), which leverages output-based aid to help implement carbon-finance projects with specific community and poverty-reduction outcomes. Since its creation in 2003, CDCF pioneers small-scale projects that both mitigate climate change and benefit communities with a focus on poor countries. The Fund, a public/private initiative administered by the World Bank, aims to contribute to a more equitable regional distribution of carbon finance resources by focusing mostly on the poorest countries of the world. https://wbcarbonfinance.org/Router.cfm?Page=CDCF&ft=About

Global Partnership on Output-Based Aid (GPOBA)

GPOBA is a multi-donor trust fund established in 2003 to develop output based aid (OBA) approaches across a variety of sectors including infrastructure, health and education. OBA subsidies are performance based and are designed to create incentives for efficiency and the long term success of development projects. GPOBA’s current donors are DFID, IFC, the Directorate-General for International Cooperation of the Dutch Ministry of Foreign Affairs (DGIS) and AusAid of Australia. https://www.gpoba.org/

LICS, FCS, SIDS, LLDCs, MICs

Pandemic Emergency Facility (PEF)*

The WBG is working with a number of governments, donors, private investors and other development partners to develop a Pandemic Emergency Facility (PEF) to finance the response to pandemics in developing countries. The creation of PEF would enhance the preparedness of countries on the global system for outbreaks of transmittable diseases. It would build on and complement the existing crisis response tools, within and outside the WBG, including market insurance mechanisms and contingent public financing. The facility would create an incentive for countries to be better prepared by making the development of a disease risk management plan a prerequisite for eligibility. PEF would build on, and complement, the existing suite of crisis response tools, within and outside the WBG, including market insurance mechanisms and contingent public financing. http://www.worldbank.org/en/topic/pandemics/brief/pandemic-emergency-facility-frequently-asked-questions

LICS, FCS, SIDS, LLDCs, MICs

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Program-for-Results (PforR)

In January 2012, the World Bank introduced a new lending instrument, Program-for-Results (PforR). PforR supports government programs and links the disbursement of funds directly to the delivery of defined results with a special focus on strengthening institutions. This helps build capacity within the country, enhances effectiveness and efficiency and leads to achievement of tangible, sustainable program results. PforR also supports government programs and helps leverage World Bank development assistance by fostering partnerships and aligning development partner goals and results that can lead to greater development effectiveness. http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,contentMDK:23215867~pagePK:41367~piPK:51533~theSitePK:40941,00.html

LICS, FCS, SIDS, LLDCs, MICs

High

Social Impact (pay for success) Bonds

The Social Impact Bond, converts intractable social problems into investible opportunities. Under the social impact bond model, impact investors – not governments – provide capital for NGOs and social enterprises to scale up programs that help poor and vulnerable populations. The ultimate payment to investors is based on the achievement of a set of predefined outcomes that are measured through an impact evaluation. If the outcomes are not achieved, the government is not required to repay investors, thereby transferring the performance risk to the private sector. IADB’s The Multilateral Investment Fund (MIF) is analyzing how the social impact bond model could be relevant for Latin America. MIF hosted a panel on social impact bonds with experts from the UK Government, Social Finance and Instiglio to share their experiences in 2013. The MIF is also developing a Facility to channel technical assistance and investments to build the capacities of potential actors in an emerging social impact bond ecosystem. These funds will help develop a body of knowledge on the opportunities and challenges for social impact bonds in Latin America and the Caribbean, and test and evaluate the model through a portfolio of social impact bond pilots. URL

MICs Medium

Prizes/Competitions

Prizes are an incentive to stimulate investment in research and development to meet a specified scientific or technological challenge. Prizes are awarded to an individual or organization that makes a predefined scientific discovery or develop a new technology. In the area of development financing and financing global public good initiatives, such as the Bill and Melinda Gates Foundation’s “Grand Challenges in Global Health” and the European Union’s “Renewable Energy Partnerships” promise prizes of technological achievements.

Development Market Place

Ideas for Action Competition

Innovation Competition

Youth Innovation Fund

LICS, FCS, SIDS, LLDCs, MICs

Medium

Development Market Place

The Development Marketplace (DM) is a competitive grant program that identifies and funds innovative, early stage development projects that are scalable and/or replicable, while also having

LICS, FCS, SIDS, LLDCs, MICs

Medium

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high potential for development impact. The grant beneficiaries are social entrepreneurs with projects that aim to create jobs and/or deliver a range of social and public services to low income groups. We also serve as an intermediary and broker to connect our grantees to advisory services and follow-on funding. Though it is a global program, their current focus is on countries in East Africa, the Middle East and South Asia. Since its inception in 1998, the DM program — housed in the World Bank and administered by the World Bank Institute — has awarded more than $60 million in grants to more than 1,200 innovative projects. All of these projects have been identified through country, regional and global DM competitions. Using DM funding as a launch pad, many projects have gone on to secure additional funding support from other donors, foundations, governments, impact and CSR investors. http://wbi.worldbank.org/developmentmarketplace/about

Ideas for Action Competition

Today’s youth will be responsible for delivering the post-2015 development agenda, also known as the Sustainable Development Goals (SDGs), which will replace the Millennium Development Goals (MDGs) when they expire at the end of 2015. Youth engagement throughout the design and implementation process is critical for success. Organized by the World Bank Group and the Wharton Business School the Ideas for Action (I4A) competition engages young people around the world to encourage them to develop and share their ideas for financing solutions to deliver the post-2015 development agenda. http://www.zicklincenter.org/#!ideascompetition/ccl3

LICS, FCS, SIDS, LLDCs

Medium

Open innovation/The Challenge Platform

The World Bank Institute's (WBI) Open Innovation team is dedicated to providing tools and services that amplify the development conversation, accelerating the identification of ideas and approaches with game-changing potential. The team creates and manages challenges and competitions that are designed to crowdsource the best thinking and innovative solutions from traditional and non-traditional entities. By providing recognition or cash prize incentives, the team encourages citizens and non-traditional actors to apply their talents and energy to generate breakthrough ideas. The team has designed two global apps competitions which invite software developers to create apps using data curated by the World Bank. http://wbi.worldbank.org/wbi/content/open-innovation https://wbchallenge.imaginatik.com/

LICS, FCS, SIDS, LLDCs, MICs

High