IFC hits lending goals; Diop plans more ‘aggressive’ targets next year

The International Finance Corporation lent just under $33 billion in its latest fiscal year, meeting many of its climate finance and other targets, IFC’s managing director said during the Devex World conference Tuesday.

Lending in fiscal 2022, which ended on June 30, was slightly higher than the $31.5 billion that the institution invested in the prior year, but allocations differed somewhat. About $9.7 billion of IFC’s investments in the most recent year went to trade finance, with 35% going to climate change — hitting the goal previously set. Investments in Africa were up in fiscal 2022 but just below the $10 billion annual target reported in February.

“We are planning to ramp up next year and to be much more aggressive,” IFC chief Makhtar Diop said during the Washington conference.

Diop touted deals on vaccine manufacturing in Africa, the so-called blue economy, and the removal of plastic pollution in Thailand, as well as a recently announced investment in a financial technology startup that aims to reduce fees for transferring funds to Africa.

One question he’s asking is: “Are we reaching the right demographics?”

The answer — along with global challenges like food security and the rising cost of capital — will help determine IFC’s path in the year ahead, said Diop.

In a bid to tackle food insecurity, IFC is analyzing how to better provide long-term financing for farmers and whether parts of fertilizer supply chains could be moved to the African continent, he told Devex.

But Diop also cautioned against sticking to tried-and-tested crops like wheat and maize, encouraging additional investment in the supply chains of “forgotten crops” such as millet, sorghum, and cassava.

He said he wants IFC to step up support for technology and innovation, and he is seeking board approval for two new funds in the tech space: one focused on Africa and one on the Middle East. But he’s also on a mission to bring in more African funders to “Afri-tech.”

“My goal is to have more billionaires from Africa invest in that ecosystem, because as we go we see that most of the funds investing in the startup innovation space are funded from the U.S. or from Europe,” said Diop, who took the helm of the institution in March 2021.

“So one message for those who are listening: Billionaires from Africa, invest in that sector. It’s important.”

A key challenge facing IFC and others in development finance is how to reach small and medium-sized enterprises, as well as the existing model that typically relies on asking banks to wholesale the investments “because they supposedly have more granularity” but have mixed results.

“We need to think about it more carefully and try to be more innovative,” he said, adding that digital fintech innovation, which could facilitate better SME credit risk assessments and provides another avenue to channel resources, will help.

While some experts criticize IFC for being risk-averse and push for it to improve its ability to mobilize private investments through deals, Diop said it is making progress.

“It’s not easy, particularly when you see outflows of capital from developing countries,” he said.

That is part of IFC’s motivation to focus on low-cost housing in Africa, where it is looking for ways to build local supply chains to replace imported construction materials, and help developers find long-term financing and build mortgage markets, Diop said.

If IFC can design the right products and hit the right buttons, particularly climate-friendly ones, he believes it can attract the necessary dollars, including from pension funds, he said.

IFC will need blended financing to crowd-in that capital, particularly in fragile or post-conflict countries, but Diop said it’s a good investment. For every $1 of concessional funding from bilaterals or foundations, IFC is able to mobilize $7, he said.