The World Bank on Thursday said it attracted US$112 billion (RM459 billion) in private capital in the year ended June versus US$69 billion a year earlier, and more than triple the amount in fiscal 2022 before former Mastercard CEO Ajay Banga became president.
The bank said the record figure committed for projects it facilitates is in addition to the US$123 billion from its own resources for that year, for a combined US$235 billion.
It is working to standardise and package loans to appeal to institutional investors such as pension funds, insurance companies and asset managers like BlackRock, with the aim of more than doubling private capital to over US$200 billion within two to three years, Banga said in an interview.
“That’s where the large pools of money are, and they don’t come for individual projects,” he said, noting that BlackRock founder Larry Fink urged him several years ago to build an asset class that could tap larger funds present in the private sector.
Banga has made attracting private capital a priority given the vast financial needs facing developing countries to pay for energy transition, education, healthcare and agriculture at a time when official development assistance is dropping.
“There aren’t trillions in the system with governments or us, or even philanthropy. So what you need to do is to find a way to get private capital, of which there is plenty, which is looking for good investment opportunities and a good return,” Banga said.
The size of the market for managed institutional capital is more than US$280 trillion, of which just 5% to 8% historically goes to developing economies, according to data from the Glasgow Financial Alliance for Net Zero, Boston Consulting Group and British International Investment.
Private firms have shied away from large investments in developing countries given regulatory uncertainty, political risk and challenges with local currencies.
Banga convened a Private Sector Investment Lab after becoming bank president in June 2023, tapping experts including Fink to brainstorm ways to tackle those concerns, and has taken steps across the bank and its subsidiaries to address them.
He said the US$112 billion mobilised in fiscal 2026 was the result of a number of initiatives.
Those include streamlining the bank’s work and assigning a single manager as country liaison, instead of countries having to work with separate managers from the World Bank, the International Finance Corp (IFC) and other bank units.
The World Bank has also tightened ties with development institutions and cut average project approval times from a year or more to nine months, or shorter for simple projects, Banga said.
Borrowing countries are also increasingly keen to attract private investment instead of depending on external aid, Banga said, adding that countries need to work on improving infrastructure, raising revenue and enacting regulatory reform.
About 40% of World Bank lending last fiscal year went into infrastructure, while 26% went to projects focused on regulatory reform, Banga said.
“It’s a complex web of things, but it starts from making the bank more capable of being the right partner, one structure, quicker to react, understanding of its clients and catering to their needs,” he said.
Private capital flows rose sharply to lower-middle-income countries, upper-middle-income countries and across Africa, while remaining steady for low-income countries.
The bank’s efforts helped fund a Rio Tinto greenfield lithium project in northwestern Argentina, Banga said. IFC provided a US$400 million loan, which helped attract US$775 million from other lenders. Combined with equity and debt, the total committed reached US$2.5 billion.
Rio Tinto wanted to invest but needed regulatory certainty, more local currency financing and investment in roads and ports. The bank was able to facilitate that, enabling job growth and revenue that will continue for decades, Banga said.
Another successful project involved Guatemala’s largest lender, Banco Industrial, World Bank officials said.
The project included a US$100 million loan and a second loan funded through a bond that attracted more than 190 global investors, including asset managers such as Pimco. The bond was 3.6 times oversubscribed, with cumulative secondary market trading volume reaching about US$1.1 billion as of last week.
The bond raised the international profile of Banco Industrial, which had only done smaller placements, and generated proceeds to support job creation in Guatemala.
Source: Theedgemalaysia