The International Finance Corporation, which serves as the World Bank Group’s private sector division, has partnered with Citigroup to establish a substantial 1.6 billion rand financing arrangement worth approximately $98 million, both organizations announced Tuesday.
This new borrowing arrangement is intended to enhance the IFC’s capacity to offer rand-denominated loans to private companies in South Africa, representing part of a wider effort by development financing organizations to minimize currency risk exposure in developing nations.
Financing in domestic currency plays a vital role in emerging economies, where businesses and infrastructure projects generate income in local money but often find it difficult to secure long-term capital without accepting foreign currency exposure risks.
The newly created facility has already provided backing for the IFC’s primary investment in the Cape Water outcome-based bond that FirstRand Bank of South Africa issued.
“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.
Familiar explained that businesses generating income in domestic currency often encounter substantial difficulties when seeking loans denominated in foreign currency, which makes local currency funding a valuable tool for managing risk.
This agreement follows a comparable arrangement in Kenyan shillings that the IFC and Citigroup established during 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.”
According to Familiar, during the previous fiscal year, 30% of the World Bank’s direct lending operations utilized local currency, and he characterized the rand facility as part of the IFC’s comprehensive strategy to assist clients in managing currency exposure.
Throughout the past ten years, the IFC has provided over $33 billion in domestic currency financing across 71 different local currencies, according to their statement.
