The World Bank’s corporate lending arm, the International Finance Corporation (IFC), plans to regularly sell slices of its loans to private investors, after successfully packaging $500 million of debt in its first securitisation, the Financial Times reports.
Ajay Banga, World Bank president, said the initiative aims to attract large pools of private capital, including pension funds and insurers, into emerging markets. “I have every intention of doing this on a regular cadence,” Banga told the Financial Times, though he did not specify the potential scale of future deals.
The move comes as major World Bank shareholders, including the US and UK, have reduced aid funding, putting pressure on the bank to stretch its balance sheet before seeking additional donor contributions. Banga, a former Mastercard chief executive, said the IFC’s first collateralised loan obligation (CLO) is part of a broader effort to mobilise private investment, alongside measures such as increasing local currency lending and offering guarantees on projects.
“The greater part of the purpose is to encourage further private sector participation in these markets… the amount of private capital flowing into emerging markets has not shown the promise of billions to trillions that people said years ago,” he said.
The initial IFC transaction included 57 borrowers across countries including Turkey, Mexico, Brazil, Bangladesh, and Egypt, which made up just under 42% of the portfolio. Senior tranches offered a coupon of 1.3 percentage points above the three-month Secured Overnight Financing Rate and attracted interest from banks, asset managers, and insurers.
Securitisation of development bank lending remains relatively rare, as loans to governments are typically seen as difficult to tranche for private investors without compromising preferred creditor status. Banga noted that while securitising public-sector loans would be more challenging, future collaborations with other development banks could make such deals feasible.
The World Bank emphasises that this strategy complements, rather than replaces, traditional fundraising: the International Development Association raised $24 billion in donor commitments last year. Banga highlighted the need for practical approaches in a context of competing demands on Western budgets, saying: “I’m not shy of asking for more capital, but I am not someone who believes hope is a strategy.”
