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. Private Sector financing is seen as a natural adaptation enabling OFID to continue to serve as wide a range of countries as possible and remain relevant and responsive to the changing global environment. 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 looks to expand its operations 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. Selected projects 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 has been responding to evolving market conditions by expanding its outreach to new countries and considering new venues to achieve a more balanced portfolio and be more responsive to partner countries’ needs. These aims are well reflected in the Facility’s performance in 2016.
Activities in 2016
In response to the persistent challenges being faced in emerging markets, 2016 saw private sector approvals leap to a record high of US$417.1m, more than double the sum approved in 2015. Of the 23 transactions, the lion’s share went to operations in the energy (US$233.3m) and financial (US$97.8m) sectors, followed by health (US$36.9m), transport (US31.6m), industry (US$10m) and multisectoral (US$7.5m). A highlight in the energy sector was a US$15.8m term loan for the construction of a greenfield heavy fuel oil power plant in post-conflict Mali, where efforts are ongoing to rebuild the country’s economy. Also noteworthy—and among the seven transactions benefiting MSMEs—were subordinated debt facilities to banks in Honduras and Nicaragua, the first of their kind under the PSF. The facility continued to expand its outreach in 2016, with maiden projects in Turkey—for the construction of a training hospital—and in Madagascar, for transportation.