As emerging economies’ need for investment becomes even more critical in the face of the pandemic, the International Finance Corporation is looking to undertake more direct investments, as well as co-invest with private equity fund managers, into emerging markets.
“We want to mobilise more people to invest into emerging markets,” Chew Huai Fong, IFC’s regional lead for its East Asia and the Pacific fund, told DealStreetAsia in an interview.
IFC, the private sector investment arm of the World Bank Group, is cognisant that investments into such higher-risk markets likely require backing from a development bank such as itself. And, as fundraising is expected to be more challenging in a COVID-19-impaired environment, support from development banks such as IFC is set to become even more important.
“There are some funds which probably won’t take off if they don’t have development bank money,” Chew says.
According to the OECD, external private finance inflows to developing economies could plunge by $700 billion in 2020, compared to 2019. This is 60% worse than in the immediate aftermath of the Global Financial Crisis in 2008 and impedes development progress that leaves countries even more vulnerable to future crises.
With its development mandate, IFC has been actively deploying into funds that are investing in emerging markets in Asia.
Recent activity includes a proposed commitment of $25 million in Navis Capital Partners’ $150-million fund dedicated to Cambodia, Laos, Myanmar, and Vietnam. The fund, which will be co-invested alongside Navis Capital’s eighth Asia fund and its parallel funds.
There are also direct investments in both equity and debt. For instance, a disclosure in November stated that IFC was considering a $10 million investment in the form of a one-year, renewable senior loan to Card Bank, a microlender in the Philippines.
IFC undertakes a thorough “scoring” of potential investments to ensure that the use of its funds is optimised. This includes examining the role that IFC can play, apart from providing funds.
“There are really not that many investors which will look at regions we look at,” Chew explains. “We give [potential investments] a score internally, as to what it reaches in terms of impact.”
“At the same time, though many people forget, we also look at it through a commercial lens. We are not charity, so we do need to make risk-adjusted returns.”
Edited excerpts of the interview:-