World Bank aims to double private capital after record $112 billion

WASHINGTON, D.C.: The World Bank attracted a record US$112 billion in private capital for projects it facilitated in the fiscal year ended June, up from $69 billion a year earlier and more than three times the amount in fiscal 2022. The private capital, in addition to $123 billion from the bank's own resources, brought the combined total to $235 billion. World Bank President Ajay Banga said the institution is working to standardize and package loans to attract institutional investors, including pension funds, insurance companies and asset managers. The aim is to more than double private capital commitments to over $200 billion within two to three years. "That's where the large pools of money are, and they don't come for individual projects," Banga said, noting that BlackRock founder Larry Fink had urged him several years ago to develop an asset class capable of tapping larger pools of private-sector funds. Banga has made attracting private investment a priority as developing countries face large financing needs for energy transition, education, healthcare and agriculture while official development assistance declines. "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 market for managed institutional capital exceeds $280 trillion, but historically only 5 percent to 8 percent has gone to developing economies, according to data from the Glasgow Financial Alliance for Net Zero, Boston Consulting Group and British International Investment. Private companies have been reluctant to make large investments in developing countries because of regulatory uncertainty, political risk, and challenges related to local currencies. Banga said the increase in private capital resulted from several initiatives, including streamlining the World Bank's operations and assigning a single manager as the country's liaison, rather than requiring countries to work separately with managers from different bank units. The bank has also strengthened ties with development institutions and reduced average project approval times from a year or more to nine months, with simpler projects taking less time. Borrowing countries are increasingly seeking private investment rather than relying on external aid, Banga said. About 40 percent of World Bank lending last fiscal year went to infrastructure, while 26 percent went to projects focused on regulatory reform. "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 increased sharply to lower-middle-income and upper-middle-income countries and across Africa, while remaining steady for low-income countries. Among projects supported by the bank was Rio Tinto's greenfield lithium project in northwestern Argentina. The International Finance Corporation provided a $400 million loan, helping attract an additional $775 million from lenders. Including equity and debt, total commitments reached $2.5 billion. Another project involved Guatemala's largest lender, Banco Industrial, including a $100 million loan and another loan funded through a bond that attracted more than 190 global investors. The bond was 3.6 times oversubscribed and had recorded about $1.1 billion in cumulative secondary-market trading volume as of last week.