The Private Sector Facility (PSF) represents an additional, complementary means through which OFID can fulfill its core mission of assisting its partner countries in their socioeconomic development. By extending loans and equity investments, quasi-equity instruments and guarantees, the PSF seeks to encourage the growth of productive private enterprise and local capital markets.
The PSF manages risk by partnering with other DFIs and commercial banks to support commercially viable, privately-owned enterprises. State-owned institutions may also be eligible, if they are commercially managed as autonomous enterprises or act as a channel of support for local private enterprises. In addition, public-private partnership projects are supported when operated on private enterprise principles. Projects selected are required to have a high developmental value, by promoting productivity, enhancing GDP growth, and supporting job creation and poverty alleviation.
By providing loans to financial intermediaries, the Facility prioritizes support for MSMEs, whose activities drive economic growth and play a key role in employment generation and poverty alleviation. Around half of the Facility’s portfolio supports real economy sectors, such as agribusiness, telecoms and transport. Energy, including renewables, is a key strategic focus. The Facility is expanding its outreach and introducing new instruments to achieve a more balanced portfolio and be more responsive to partner countries’ needs.
Activities in 2014
In 2014, private sector approvals comprised 25 transactions with a combined value of US$321m in support of operations primarily in the financial (US$125m) and energy (US$108m) sectors.
Funding for MSMEs continued strong, with US$120m earmarked for delivery through financial institutions in Armenia, Bangladesh, Cambodia, Kenya, Nicaragua, Sri Lanka and Tajikistan, as well as through the global Microfinance Enhancement Facility.
A highlight of the year was the PSF’s intensified focus on renewable energies, with ground-breaking solar projects in Honduras (See OFID Quarterly article:Honduras pursues solar energy agenda) and Jordan and a first hydro project in Nepal.
Both Nepal and Tajikistan (See OFID Quarterly article: OFID makes first private sector investment in Tajikistan) —where funds were channeled to support microfinance—were new countries of operation under the Facility in 2104.
Milestones and awards
In another landmark development, OFID approved its first unfunded risk-sharing operation in the SME sector: a US$150m contribution to the Global SME Facility.
Two PSF-supported energy projects received awards in 2014: the umbrella “Seven Sisters” project for the Solar One and Falcon Ma’an solar initiatives in Jordan, and the Cenpower thermal power plant in Ghana.