SAFE provides $3 billion to IFC’s Managed Co-lending Portfolio Program (MCPP) to support 83 private sector projects

On September 17, 2013, Yi Gang, the Deputy Governor of the People's Bank of China (PBOC and the Administrator of the State Administration of Foreign Exchange (SAFE), and Jin-Yong Cai, International Finance Corporation (IFC) Executive Vice President and CEO, signed a series of agreements related to the Managed Co-lending Portfolio Program (MCPP). Under these agreements, SAFE agreed to provide $3 billion to the IFC — through a trust fund — over a period of 5 years (2013-2018) to support a portfolio of private sector investment projects. Under the terms of the trust fund agreement and a ‘blind pool’ approach, the IFC signed individual loan agreements (ILAs) with various borrowers for 83 projects spread across three regions: East Asia and Pacific, Sub-Saharan Africa, Latin America and the Caribbean, and Eastern and Central Europe. IFC signed these ILAs on its own account and on behalf of SAFE (as implementer of the MCPP). IFC and SAFE agreed in advance upon borrower eligibility criteria and IFC then deployed SAFE’s capital automatically over time alongside its own commitments (from its own balance sheet) to borrowers that met the eligibility criteria—without further review or approval by SAFE. According to an evaluation undertaken by the World Bank Group’s Independent Evaluation Group, the MCPP ‘leverages IFC’s project pipeline and due diligence skills to source opportunities for third-party investors to co-lend to projects or groups of projects alongside IFC on commercial terms. The MCPP gives IFC the ability to provide larger financing packages than it could provide from its own account and increases the pool of financing available for achieving development goals. The MCPP leverages a loan portfolio for an investor [SAFE] that mirrors the portfolio IFC is creating for its own account, similar to an index fund […].’ The evaluation also concluded that ‘[t]he program allowed strategic deployment of China’s foreign exchange reserves through the International Finance Corporation (IFC), generating returns, knowledge, and credit assessment insights for the Chinese sovereign-linked investor, primarily into East Asia and Pacific, Sub-Saharan Africa, and Latin America and the Caribbean. The MCPP-SAFE approach benefited from IFC’s presence across all emerging market and developing economy countries. The MCPP provided SAFE with unique opportunities and access to emerging markets, a footprint SAFE does not have. SAFE considers the MCPP one of the more innovative investments in its portfolio because it allows SAFE to review and analyze similar commercial projects on a deal-by-deal basis. Private capital mobilized from SAFE was disbursed widely by region and by country groups, and was concentrated on non–International Development Association, nonfragile countries, partly driven by the characteristics of the development projects in IFC’s pipeline. Most of these borrowers have the capacity to meet their financial commitments and are less vulnerable to nonpayment than other speculative projects.’ By the end of 2018, SAFE’s $3 billion allocation to the IFC had been fully utilized (invested). Illustrative projects supported by SAFE through the MCPP include the Castellana Wind Power Project in Argentina, the Skopje City Mall Project in Macedonia, the Delta City Podgorica Project in Montenegro, the Delta City Belgrade Project in Serbia, the Middle East Glass Manufacturing Company Project in Egypt, the Sonker Bunkering Company SAE Project in Egypt, the Banco Continental SME On-Lending Project in Paraguay, and the Indonesia Infrastructure Finance (IIF) Project.

Additional details

1. For an illustrative loan agreement between the IFC and a private sector borrower that committed IFC funds and SAFE funds, see the syndicated loan agreement with CP La Castellana S.A.U. for the Castellana Wind Power Project in Argentina: https://www.dropbox.com/s/j67g2c8j2af6hvn/Argentina%202017%20China%20SAFE%20Loan%20via%20IFC%20MCPP_COMMON_TERMS_AGREEMENT.pdf?dl=0 and https://www.dropbox.com/s/v00cn9qvf28lai6/Argentina%202017%20China%20SAFE%20Loan%20via%20IFC%20MCPP%20to%20CP%20LA%20CASTELLANA%20S.A.U..pdf?dl=0. 2. SAFE loans issued through the MCPP are syndicated loans. 3. The IFC's Syndicated Loans and Mobilization Department (CSL) is responsible for raising external funds for IFC clients through the B Loan program, Parallel Loans, Credit Insurance Policies (CIP), the Managed Co-Lending Portfolio Program (MCPP), and Debt Securities Syndications (DSS). 4. The IIF Project is described here: https://web.archive.org/web/20230711154211/https://webcache.googleusercontent.com/search?q=cache:giZob3_HEgAJ:https://www.globalcapital.com/article/lxvbr09b38vk/syndication-success-takes-iif-debut-to-250m%3FFreeTrial%3Dtrue&cd=13&hl=en&ct=clnk&gl=us.

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37