The World Bank Group’s private-sector arm, the International Finance Corporation, and US bank Citigroup have signed a new $98-million (R1.6-billion) borrowing facility aimed at expanding local-currency financing in South Africa, the IFC and Citigroup said on Tuesday evening.
The facility is designed to help the IFC provide rand funding to private-sector borrowers as part of a broader effort by development finance institutions to reduce currency mismatch risks in emerging markets.
Local-currency borrowing is often considered critical in developing economies, where companies and projects earn revenue in domestic currency but frequently struggle to access long-term funding without taking on foreign-exchange risk.
The new facility has already supported IFC’s anchor investment in the Cape Water outcome-based bond issued by South Africa’s FirstRand Bank.
Challenges when borrowing
“Local currency financing is extremely important in this day and age … we are living in a very volatile world,” said Jorge Familiar, vice-president and World Bank Group treasurer.
He said companies that earn revenue in local currency can face significant challenges when borrowing in hard currency, making local-currency funding an important risk-management tool.
The transaction builds on a similar facility in Kenyan shillings that IFC and Citi signed in 2024.
“You could call that [Kenya facility] the pilot,” Familiar said, calling this new facility “proof that something that we piloted and has worked well can be replicated elsewhere”.
Familiar said that last fiscal year, 30% of all of the IFC’s own-account lending was done in local currency, describing the rand facility as part of the IFC’s broader push to help its clients manage currency risk.
Over the last decade, IFC has committed more than $33-billion in local-currency financing across 71 local currencies, reads the statement.
- The International Finance Corporation (IFC) and US bank Citigroup have established a $98 million (R1.6 billion) borrowing facility to expand local-currency financing in South Africa.
- The facility aims to help IFC provide rand funding to private-sector borrowers, addressing currency mismatch risks common in emerging markets.
- Local-currency borrowing helps companies avoid foreign-exchange risks that arise when revenue is in domestic currency but borrowing is in hard currency.
- This new facility follows a successful pilot program in Kenyan shillings launched earlier in 2024, showcasing IFC and Citi's model replication.
- Over the past decade, IFC has committed over $33 billion in local-currency financing across 71 currencies, with 30% of its own lending last fiscal year conducted in local currency.
Local-currency borrowing is often considered critical in developing economies, where companies and projects earn revenue in domestic currency but frequently struggle to access long-term funding without taking on foreign-exchange risk.
"Local currency financing is extremely important in this day and age … we are living in a very volatile world," said Jorge Familiar, vice-president and World
He said companies that earn revenue in local currency can face significant challenges when borrowing in hard currency, making local-currency funding an important risk-management tool.
"You could call that [
Familiar said that last fiscal year, 30% of all of the IFC's own-account lending was done in local currency, describing the rand facility as part of the IFC's broader push to help its clients manage currency risk.
Over the last decade, IFC has committed more than $33-billion in local-currency financing across 71 local currencies, reads the statement.
