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L E S S O N S O F E X P E R I E N C E

NUNABER

FINANCIALI- N STITUTIONS

4-

.~~~~ w

* - ~~INTER-NATIONAL FINANCE CORPORATION~~~~~ ~~~Member of the World Bank Grou_p

WASHINGTON, D.C.

Principal author: Teresa Barger, Senior Manager, IFC Central Capital Markets Department.

Copyright (© 1998International Finance Corporation1818 H Street, N.W.Washington, D.C. 20433, U.S.A.

All rights reservedManufactured in the United States of AmericaFirst printing September 1998

The International Finance Corporation (IFC), an affiliate of the World Bank, promotes the economic development of its member coun-tries through investment in the private sector. It is the world's largest multilateral organization providing financial assistance directly inthe form of loans and equity to private enterprises in developing countries.

This volume is a product of the staff of the International Investment Corporation. The conclusions and the judgments contained hereinshould not be attributed to, and do not necessarily reflect the views of, IFC or its Board of Directors, or the World Bank or its ExecutiveDirectors, or the countries they represent. The IFC and the World Bank do not guarantee the accuracy of the data included in this pub-lication and accept no responsibility whatsoever for any consequence of their use.

Some sources cited in this paper may be informal documents that are not readily available.

The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, CorporatePlanning and Financial Policy Department, IFC, at the address shown in the copyright notice above. The IFC encourages disseminationof its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee.Permission to copy portions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910, 222 Rosewood Drive,Danvers, Massachusetts 01923, U.S.A.

Distributed by the World Bank

All IFC publications in print are shown in the World Bank's annual Index of Publications. This index contains an alphabetical list by title;indexes of subjects, authors, countries, and regions; and complete ordering information. The latest edition is available free of charge fromthe Distribution Unit, Office of the Publisher, the World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.; fromPublications, the World Bank, 66 Avenue d'Iena, 75116 Paris, France; or at the online publications site: http://wxvw.worldbank.org, andclick on "publications."

LIBRARY OF CONGRESS CATALOGING-IN-PUBLICATION DATA

Barger, Teresa.Financial institutions / Teresa C. Barger for International Finance Corporation.

p. cm. - (Lessons of experience ; no. 6)Includes bibliographical references.ISBN 0-8213-4343-21. International Finance Corporation. 2. Financial institutions-Developing countries. I. International Finance Corporation.

II. World Bank. III. Title. IV. Series: Lessons of experience ; 6.HG3881.5.156B37 1998332.1'09172'4-dc2l 98-37353

CIP

CONTENTS

.. v7..

Preface v

Foreword ix

Executive Summary 1

1 Introduction 5

2 The Financial Sector's Impact on Growth 11

3 Developing the Financial Sector 15

4 Financial Infrastructure: Banking and OtherCredit Institutions 27

5 Financial Infrastructure: Securities Marketss s ;5ib -- ~~~~~~~~~~Institutions 33

6 Access for Small Savers and Borrowers 43

7 Access to International Capital Markets 57

L- ;|| 8 Conclusion: The Future Agenda 65

Appendixes-A Sampling of Progress 69

A. Colombia 71B. India 73

-s C. Pakistan 75D. Russia 77E. West African Economic and Monetary

Union Countries 79F. Summary of IFC's Financial Sector Projects

and Lessons Learned, Fiscal Years 1971-97 81

Glossary 84

Annex:Overview of IFC's Financial SectorActivities, FY 1971-97 87

I US-I T UT I ON 5

PREFACE

44e14

For 27 years, the International Finance Corporation hasbeen working with financial institutions in the develop-ing world, either as a lender, shareholder, or adviser.From this experience one lesson has emerged above allothers: by and large, successful countries finance theirown development. Most emerging markets finance upto 90 percent of their investments locally, although forSub-Saharan Africa the figure is closer to 65 percent.

Foreign investment, of course, has an essential role to- _ |. -~ play in the development process. But it is simply

impossible for a country to climb the economic ladderwithout domestic capital accumulation based on domesticsavings mobilization. This, in turn, depends on efficientdomestic financial institutions that can manage risk andallocate capital to productive investments.

IFC works with both private and public financial insti-tutions and markets of the world's developingeconomies, helping them channel foreign and domesticcapital into their local economies with increased effi-ciency. Unique among development institutions, IFChas made building private financial intermediaries oneof its major long-term priorities, putting its own equity

_ * , - . and debt resources at risk to back up its commitment.

While experience inevitably varies from country tocountry, it is generally the ones with strong and dynamic

/ . *,.t .7*' financial sectors that have built the strongest economies.Countries without them have felt the painful conse-quences. And countries that have started with weak,state-dominated financial sectors but then committedthemselves to genuine reform have often reaped greatbenefits. Yet while several countries, notably inSoutheast Asia, have built strong economies based onexport-led strategies, "there has been no Asian miracle

I T U T I O N S v

As~~~~~ =

in finance," as one World Bank colleague has put it. dual mandate of both being profitable and making aMany governments actually used the financial sector to strong contribution to development. Investments in thedirect their economies toward certain export sectors and financial sector make up about 25 percent of IFC's totalto encourage investment financing to the near-exclusion investment in most years. Most IFC investments in theof consumer finance, including housing finance. Many financial sector have performed extremely well fromof these countries are now seeing the cracks in their commercial as well as developmental perspectives. Thesystems grow into fissures and will have to address the three main categories of investments have performedfinancial sector as seriously as they once addressed the as follows:export manufacturing sector.

* The credit lines extended to banks, leasing companies,This report sums up the lessons JFC has learned in its and other financial institutions have experienced vir-27 years of advising and investing in financial institu- tually no arrears, except in the former Yugoslaviations of all kinds in the developing world. These insti- during that country's break-up, and now in a fewtutions include everything from commercial banks and cases in Asia.investment banks to securities markets, investment * The equity investments made mostly in new, start-upfunds, leasing companies, pension managers, insurance financial institutions have had recent returns of overcompanies, housing finance institutions, and the like. 20 percent on average equity in dollar terms.Because IFC takes the long view, this report will not * Thefunds investments must be looked at in two cat-dwell on the current downturns in a great many of the egories: the por#flio funds, which invest mainly inworld's equity and capital markets. listed securities, have by and large been extremely

successful commercially, and the private equity andThe Corporation has taken on a number of high-profile venture capitalfunds, which are more difficult toassignments such as working on the first emerging mar- assess because they do not usually show positiveket portfolio investment funds and the first banking results for eight or more years. IFC's early fundsprivatization in Central and Eastern Europe. It has also showed negative returns; later funds look moreparticipated in projects that are far less known but just promising.as instructive. For example, TFC helped start the firststock exchange in Zambia, helped build a securities What can be drawn from it all? The lessons JFC hastrading infrastructure in Russia, and introduced a host learned in the financial sector may be useful to privateof countries to two key sources of finance for small and investors, to governments, and to other multilateralmedium-size enterprises-venture capital and leasing. institutions. This report outlines lessons learned first

from a general global perspective and then more specifi-All told, IFC has approved investments of US$5.3 bil- cally on a subsectoral basis.lion in more than 700 financial sector projects in morethan 90 countries around the world. At the same time, IFC's future financial sector work will incorporate thethe Corporation has successfully met its challenging lessons it has learned. In keeping with its pioneering

vi IN T ER NAT IO NA L F INA NC E CO R PO RAT IO N

role, the Corporation will continue to take risks inbuilding new financial instruments and institutionsthat the private sector alone is reluctant to incur. Theultimate goal of this work is the growth of deep, artic-ulated financial sectors, powered by private sector play-ers and regulated by well-functioning governmentinstitutions that concentrate on their unique regulatoryrole and view market development as a vital, ongoingpart of the development process.

This report was prepared by IFC's Capital MarketsDepartment. It was written by Teresa Barger and edit-ed by Rob Wright, with research support from TracyRahn and Maria Camba-Opem. Contributions oncountry examples and specific product areas came fromMark Alloway, Dan Baldini, Vipul Bhagat, HaydeeCelaya, Xinghai Fang, Jeffrey Griffin, ClaudiaMorgenstern, David Pugh, Steven Schoenfeld, andmany others, particularly in the Capital Markets func-tion. Valuable assistance in processing the manuscriptwas also provided by Evangeline Ganuelas, PatriciaMedina, Maybelle Pacis, and Julie Stack. Support wasprovided by Dileep Wagle and the Corporate PlanningDepartment. This report, like others in the Lessons ofExperience series, has drawn upon a full range of oper-ational experience with financial sector transactionsfrom across the Corporation. The report has also bene-fited from comments of staff from the World Bank.Data used in the report reflect IFC's operational posi-tion through Ju 30 1997

JJanni"kLinaekExecutive Vice PresidentInternational Finance Corporation

F I N A N C A L I N S T I T U T I O N S vii

FOREWORD

While the "Asian miracle" was, and is, quite real inmany aspects of development, recent events haveshown that it never extended to finance. The crisis of1997-98 highlights as never before the financial sec-tor's importance to development, the central topic ofthis report.

Many of the East Asian economies have excellent sav-ings mobilization and high savings rates. They also cer-tainly have made enormous strides in investing inhuman resources and in raising living standards. Yettheir success in developing robust financial sectors, abroad variety of financial products, and top-flightfinancial sector regulations clearly lagged those of otherdeveloping economies. The consequences of theseomissions are now painfully evident.

This short commentary cannot dissect all the variousfinancial sector problems of the various Asian markets.Financial historians will likely be busy with this taskfor many years to come. But the problems encountered. 4 ^ _in Korea, Thailand, Indonesia and, to a lesser extent, inthe Philippines and Malaysia are not out of keepingwith the lessons we have learned in financial sectoroperations over the years. This report does not dwellon the more obvious issues in macroeconomic manage-ment. Clearly, the pegged and unrealistic exchangerates played a key role in precipitating the downwardspiral in East Asia, and some countries were runningcurrent account deficits. So, too, did the unfortunate

_ ~ ' (but rational) decisions by local corporations to borrow_31 abroad at cheaper interest rates than were available-- locally to fund projects that often did not generate--- foreign currency and did not match the tenor of the

di borrowings.

I rF il T I O N S i

But in addition to the debacle created by poor macro- report makes quite a strong case for the positive effectseconomic choices, the recent crises have revealed some of foreign investors in domestic equity markets, and abasic flaws in the region's domestic financial sectors similar one can also be made in banking. As discussedthemselves. These include: problems arising from in the following pages, IFC generally enters into bank-directed credit and "administered" interest rates; the ing investments in newly reforming markets togetherlack of international standards in regulation, account- with foreign technical partners for one simple reason: iting, and operating policies; poor and non-transparent brings important new skills into the market. Foreignsupervision; the lack of medium- or long-term local participants also bring with them many of the vestigescurrency debt markets; and the scarcity of adequate of their home country regulation, such as internationalequity in both the financial and corporate sectors. audits, capital adequacy norms, provisioning criteria,

asset-liability mismatch limits, etc. Often these banksAs globalization proceeds and economics reaches a can contribute to the demand for better domestic regu-mature stage in which international integration is lation in the emerging market itself Increasingly, IFCinevitable, the weaknesses of the "rule-of-man" sees that international capital markets are a source ofapproach become apparent. "Rule-of-law" frameworks pressure to create high regulatory standards. In a per-must be the foundation of true market interactions, as fect world, countries with worse regulation shouldmany investors have learned the hard way. receive worse credit ratings on their international bond

issues. Here again, the export and economic growthDirected Credit and Administered Interest Rates. This history of the Asian tigers probably compensated forreport discusses the issue of directed credit largely in the shortcomings in regulation in the mind of manyrelation to "development finance institutions" (DFIs). credit analysts-or at least until recently, when theIt has been abundantly clear to policymakers in most flaws became glaringly obvious.regions for at least a decade that government is ulti-mately a poor allocator of credit. Political or social Role of Competition. Creating a vibrant financial sectorconsiderations almost invariably impinge on the lend- is aided by market contestability or, even better, actualing process when the government directs credit. The competition. Allowing international competitors toresulting portfolio losses in DFIs throughout the world play furlly in local markets (as in the case of Poland, forstand in testimony to this fact. Most governments dur- example) has been a reasonable way to increase skills,ing the late 1980s and 1990s have seen that the ulti- raise standards, and ensure equality of treatment ofmate cost to the taxpayers of poor portfolios, bad credit institutions. Welcoming players familiar with interna-habits, and sloppy management engendered by directed tional standards helps regulators adapt to internationalcredit was greater than any social benefit that would norms and gives the domestic market a head start ascome from government credit allocation. In some East the forces of globalized commerce and financial flowsAsian countries, the big and successful export push was inevitably make themselves felt. Many of the Asianto some extent driven by rewarding and punishing domestic markets have likely suffered as a result ofexporters via lower or higher interest rates given by their reluctance to allow international banks andgovernment-influenced banks. The early success of this investment banks to participate filly.kind of government intervention and the high eco-nomic growth rates probably masked many of the Poor and Non-Transparent Supervision. Clearly theunderlying problems created. Some of these countries financial sector must be regulated in any market. Thereare only now belatedly struggling to create a "credit is virtually no such thing as an entirely "free market" inculture" that has long been missing from their banking finance, especially in those segments taking consumersystems. deposits. But regulation is only as good as the enforce-

ment behind it. In IFC's experience, the East AsianLack of International Standards. Many of the Asian countries are not alone. Inadequate supervision is ancountries facing the largest problems never allowed full Achilles heel in many, many banking markets through-foreign participation in their domestic financial sectors. out the developing world. Some Asian countries, how-While this is a choice many governments make, there ever, may be poorer than average in the transparency ofappears to be a correlation between foreign entry and their regulation. Cozy relations between bank regula-the adoption of sound international operating standards. tors and banks are fairly common in some of the Asian(Poland could be cited as one successful example.) This countries, and many of them are finding this habit dif-

x I N TE RN llONA I N A A L FINANC C R PO R A I 0 N

ficult to break, despite the negative effects it has had debt-to-equity ratios. Even IFC maintained a "Koreanon their economies. exception" for its own investments. Its leasing investee

had debt-to-equity ratios up to five times the averageInadequate Local Debt Markets. Very few emerging allowed by the operating policies in its other leasingmarkets have the macroeconomic stability required to investments. This was based partly on the belief that acreate medium-term debt markets, much less long- "convoy economy" could sustain cyclical shocks in spe-term ones. They lack the benchmark government secu- cific businesses, and partly on a successful past history.rities needed to create a yield curve, and have few But as recent events show, the convoy economy model,investors willing to invest beyond a year or two due to in which group companies can steady another memberexpectations of large macroeconomic swings that may until it regains its footing, may not work when theleave them with underperforming assets. Ironically, entire economy suffers a shock. Also, excessive indebt-some Asian markets had greater potential for developing edness was tolerated by an equity market that failed tomedium-term instruments and debt securities markets exercise appropriate corporate governance pressure. Thethan elsewhere in the developing world. Some had a stock markets of Korea and Thailand had unusuallyhistory of macroeconomic stability (which turned out severe restrictions on the entry of foreign investors, andto be built on unrealistic exchange rates), governments may not have benefited from the discipline thatwith the ability to issue bonds with a range of tenors, international institutional investors can bring to a mar-institutions willing to buy debt securities, and corpora- ket. Indonesia also suffered from inadequate regulationtions with large enough borrowing programs to justify, and a history of direct government involvement in thethe initial costs of bond issues. A short-term debt secu- stock market. Now, as these countries are rebuildingrities market was already emerging in Asia before the their economies, there is an enormous need for equitycrisis, and IFC itself was involved in commercial paper in the capital of financial institutions and in the corpo-and securitization projects. With hindsight, many of rate sector. It is clearly a time to get the equity securi-the current problems could have been avoided had gov- ties markets up to speed by adopting international stan-ernments maintained realistic exchange rates that in dards of regulation, supervision, operation, and disclo-turn encouraged reasonably low interest rates and the sure.development of sound local debt markets-both bank-ing and securities markets. This would have avoided Although this report was under preparation before thethe problem of excessive indebtedness in foreign cur- Asian crisis struck, the lessons IFC has learned fromrency at imprudently short tenors. As this report says its experiences throughout the emerging markets stillquite emphatically, "Capital is made at home." ring true and may resonate even further in light of the

financial sector debacle in the Pacific.Scarcity of Equity. Korea in particular maintained anunusual economic regime based on exceedingly high

F I N A N C I A L I N S T I T Ul T I N xi

EXECUTIVE SUMMARY

"Capital is made at home," wrote the influentialColumbia University economist Ragnar Nurkse in1953. His point is still true today. Most productiveprojects and enterprises in a country are financed local-ly and generate revenues in local currency.

Domestic capital formation is the driving force behindany country's development, and effective domesticfinancial institutions are one of its most importantfacilitators. They are the key channel between savingsand investment, and their efficiency is a key determi-

nant of a country's economic growth. At the sametime, foreign investment has a critical role to play. Itspresence often brings with it foreign technical know-how, competitive pricing, higher standards of disclosureand performance-all of which can promote the effi-ciency in local markets that is so important to econom-ic growth. One must balance between too much and

too little external exposure. See the chart below for anillustration of this concept:

CAPITAL IS MADE AT HOME

Too Much Too Little

Autarky Excessive Foreign Borrowing

i ~ Results Results* Lack of competition * Higher risk* Lack of skills * Insufficient regulation/* No international standards control

I T U T I O N S

To prosper, developing economies must build strong To build financial infrastructure, many developingfinancial sectors that operate successfully in a climate economies are addressing the following areas:of rapid change. Capital markets are being deeplyaffected by three major ongoing developments: the * promoting and regulating private sector financialstate's changing role, the globalization of markets, and institutionsurbanization/industrialization. * structuring and regulating investment funds, pension

funds, insurance companies and other institutionalThe global trend of narrowing the states boundaries of investorseconomic intervention has affected the financial sector * mobilizing funds through intermediariesboth directly (free interest and exchange rates, less * developing or refining policies regarding sectoraldirected credit, privatized banks, workouts of bad port- development and the role and regulation of privatefolios) and indirectly (more private borrowers/issuers, playerslarger demand for private short- and long-term * creating or improving market systems and institutions.finance, increased volatility). Consequently, developingcountries need long-term investment in privatized and Progress must be made at both the institutional levelrestructured banks, start-ups of new private banks, (mainly setting up new intermediaries or find vehiclesmodernized equity markets, and assistance with hedg- along with private partners and lending to intermedi-ing mechanisms and derivative markets that can man- aries)-and at the regulatory level (usually through pol-age the risks of price volatility that often come with icy dialogue with government agencies or technicalfinancial sector liberalization. assistance projects on specific issues).

With today's globalization of money flows, corpora- The essential lessons learned at the institutional leveltions, financial institutions, and regulations has come can be summarized in a few points:rapid change in technologies and quick transfers ofthose technologies (both hard-e.g., computers-and 1. Management and governance matter enormously.soft-e.g., structuring of securities issues) throughout 2. Good banks need good borrowers. A sound portfolio is athe world. Needs are arising in the developing world sine qua non for financial intermediaries, and there-for over-the-counter equity markets to satisfy the fore risk assessment is one of the key skills required.financing requirements of small firms and for better 3. Thoughtful initial agreements save great pain later.regulation of new financial products. At the same time, Problems that may occur over the life of an institu-more countries that have not yet received substantial tion must be anticipated as accurately as possible.private capital flows are starting to build up the finan- Some of the issues to consider include: clarity of thecial infrastructure to begin receiving them and need role of the dominant owner; clarity of the govern-help in structuring it in ways that allow them to bene- ment role as regulator or, in some cases, as partfit from globalization. owner; the degree of eventual "indigenization"

sought and plans to bring it about; and mechanismsThe demographic changes leading to rapid urbanization for resolving disputes among owners on key issuesand the trend toward industrialization have also created such as strategic focus, investment limits, portfolioa new set of needs for private housing finance, private diversification, and arm's-length transactions.pension fund managers, private life insurance, and 4. The mobilization of local savvings must not be displaced.long-term bond markets to support privately financed When lending foreign exchange, care must be takeninfrastructure. All of these developments will add nec- to structure covenants that add value by strengthen-essary breadth and depth to developing world financial ing the intermediary. This can be done by meeting asectors. need that the local market is not filling (often pro-

viding different products like liquidity facilities orTHREE CATEGORIES OF ACTIVITY longer term loans). It is also important not to distortMany developing countries can benefit from outside localprices by lending at rates below those appropri-assistance in undertaking three major tasks: building ate for the tenor, risk, and currency The creditfinancial infrastructure, improving the ability of small should not be "directed" so tightly that it discour-savers and investors to access financial services, and ages the most productive enterprises from beingattracting international capital. finded first.

2 I N 1- r R N A-1 I 0 N A 1 F I N A N C E C O R P OR AT I O N

In providing regulatory and technical assistance, it is Timing is also key-IFC was about four or five

essential to: years too early with venture capital in Spain and

about eight years too early in Argentina. One must

1. Work with the right local counterpart. ask how many years too early many of the funds

2. Create a levelplayingfield among financial instruments. being considered for true frontier markets are, given

3. Balance incentives to private sector participants so the lack of exit mechanisms such as stock markets.

that outcomes are for the common good. Such 2. Lending to intermediariesfor onlending is most likely

actions are critical for a sustainable commercial sys- to succeed if the intermediary has a commitment to

tem. Making this thinking clear to both private building real expertise with small and medium-size

intermediaries and government officials can be a dif- enterprises (SMEs) and to term lending and has a

ficult process. ready pipeline of good borrowers. Programs are least

4. Listen to all important constituents and provide ade- successful when intermediaries are simply seeking

quate business incentives. This formula yields the general funding and intend to focus on the SME

most workable results. Regulatory regimes often fall sector only for the duration of the program.

short when the needs of the wide variety of players 3. Leasing companies can be quite successful. They

involved in the financial markets are not understood. have been threatened when the regulatory regime

For example, a securities law may look fine to a allows banks to enter the leasing business that they

lawyer, but if brokers can't make money following fund with cheap deposits (often not paying deposi-

the law, and registrars survive only on kickbacks, and tors a positive real rate of return) but does not, in

custody isn't secure, then the market system is bound turn, allow leasing companies to take deposits from

to fail. Distortions, promoted by government or the public. Countries where specialized leasing com-

agency lending, can create reckless borrowing and panies dominate usually finance more of their fixed

unsustainable commercial lending operations. assets through leasing and have more successful leas-

ing industries. This is important for small businesses

To improve accessfor small savers and borrowers tofinan- that rely more on leasing for their financing than big

cial services, it is important to strengthen local interme- companies do.

diaries, since they are closer to the ultimate borrowers

and savers and understand the risks better. Three types Attracting international capital can help close the gap

of activities are a natural choice: between local savings and investment needs. IFC

efforts in this area have concentrated on:

* providing venture capital funds that pool investors'

equity and place it under professional local manage- * policy advice and technical assistance

ment * portfolio investment funds

* lending to local banks and credit institutions for * private equity funds

onlending * corporate debt funds

* helping to establish leasing companies that create * fund management companies

their own customer base of small or medium-size * the Emerging Markets Data Base and index funds

borrowers. * underwriting and the placement of securities.

Lessons learned from participating in each of these A number of key lessons have been learned:

activities include the following:

1. Foreign investment is responsive to information. Early

1. Venture capitalfunds need a minimum critical size to efforts to promote foreign portfolio investment

be able to support well-motivated management. focused on providing information about markets,Two-tiered structures in which the management com- their regulation, and their financial returns to a wide

pany can be disciplined easily are preferable. A wary international audience. This eventually paid off in

eye cast on feasibility studies will ward off a host of the formation of the early country funds and in the

problems. Ensuring that managers have sufficient creation of the IFC Emerging Markets Indexes,

deal flow to be choosy is difficult to achieve in small which were the first to track and benchmark emerg-

countries or restricted regulatory environments. ing securities markets.

F INA NC IA L I NS T IT UT IO NS 3

2. Foreignportfolio investment usually has an importance The new emphasis, at least for IFC, in the comingfor market developmentfar beyond the actual dollars years will likely be in four main areas:invested. The presence of professional foreign insti-tutional investors usually leads to healthy changes in * Helping to create local currency vehiclesfor savings andmarket regulation, better disclosure, and more mar- investing, including debt market vehicles, localket services (such as custody, transfer agents, and mutual funds for debt and equity, and local institu-registry). tional investors such as private pension funds and

3. iVioneyflows to markets with the best regulatory envi- insurance companiesronments or to markets that are seen to have exceptional * Introducing new products and helping authorities andpri-return potential. Foreign portfolio investment has vate institutions adapt to globalization, including furthergrown fivefold in the last decade, but more than 70 work in securitization, derivatives products and regula-percent of that money still goes to only 12 mostly tion, and refinement of local securities market andmiddle-income, high-population countries, and is banking standards to meet international normsstill a relatively small portion of GDP in most. The * Meeting the needs of a growing middle class and under-challenge ahead lies in improving the domestic infra- served small business sector, including housing finance,structure and regulatory environments of other coun- commercial microfinance institutions, and consumertries so they too can attract the international capital credit informationneeded to fund productive business and to improve * Assisting in creating and deepening bond markets,their market infrastructure. including advising regulators on specific issues such

as securitization rules and bondholder claim aggrega-FUTURE DIRECTIONS tion; participating in multilateral efforts that includeThe financial sector is one of the most dynamic and the World Bank, the International Monetary Fund,innovative of all the various components of an econo- and others to encourage the issuance of term govern-my, out of necessity constantly remaking itself with ment paper to create yield curves; setting up creditnew products and techniques. In the developing world, rating agencies; investing in bond guarantee houses;basic policies and regulatory institutions also are often helping to structure local securitized and unsecuri-quickly being remade. Therefore, the rate of financial tized bond issues; and providing guarantees in localsector change can be particularly speedy. currency for local debt instruments.

4 I N I i R N A I I t) N A I RNAIINA I I N A NC1 C I R I'O R A I I oN

INTRODUCTION

I- . , |.

" ' ~~~~~~~~~~~~~~~~~To grow in the next century, developing countries WIll

need sound, well-regulated financial systems that can

operate within a challenging climate of change. The

role of the state is changing. Markets are increasingly

global. And developing nations are undergoing rapid

urbanization and industrialization.

Twenty-five years ago, developing-country economies

were largely rural and agricultural, dominated by thepublic sector, and largely cut off from international pri-

vate capital flows. Today these conditions are being

reversed, with the adoption of market-oriented reforms

leading to more than $250 billion in private capital

flows each year.

As positive as this trend is, the fact remains that these

flows are largely concentrated in only a dozen coun-tries, almost all of them middle-income. The need is

enormous to broaden the scope of these flows to more

countries, more regions within countries, and more

sectors of economic activity. This will enable more peo-

pie to experience the productivity increases, efficiency

gains, and rise in living standards that the private sec-

tor can bring to the development process.

CHANGING ROLE OF THE STATEGovernments are increasingly redirecting their focusfrom direct intervention in firms or markets to policy

and regulation (Table 1.1). This has affected the finan-

. ~~~~~~~~.. ~~~~~~cial sector both directly (free interest and exchange

rates, less directed credit, privatized banks, workouts of

had portfolios), and indirectly (more private borrowers!

issuers, larger demand for private short- and long-term

finance, increased volatility).

I T U T i0NS 5

Table 1.1 Responses to Changing Role of the State

Trend components IFC response

Governments allow bank * Set up new, private banks.privatization and private entry. * Get involved in bank privatizations-mostly as an investor, not adviser.

Liberalization leads to banking * Set up nonbanks to help create a competitive banking sector.distress as subsidies stop. * Invest in equity of restructured banks.

a Provide credit lines to help those most hurt in banking distress:small and medium-size enterprises.

Macroeconomic stability, not * Set up, modernize, or expand capacity of equity markets both fordirected credit or firm ownership, privatization and for introduction of companies to the market.is government goal. * Focus on liquidity, which research shows is a factor in growth per capita.

Free interest rates, exchange rates, * Continue to provide risk management and indexed products.and prices lead to volatility. * Provide technical assistance for futures and options markets.

* Develop intermediation of derivative products.

Table 1.2 Responses to Globalization of Markets


Growing importance of the * Help meet growing demand for private finance, especially by small firms.private real sector. * Focus on second-tier equity markets and over-the-counter exchanges, which

will become increasingly important for small and over-indebted companies.* Respond to need for equity, especially for over-indebted firms and new

companies.

Increased private capital flows. * As "market failures" decrease due to better transparency and efficiency inadvanced markets, shift focus to smaller financial institutions and to countriesand regions not targeted much by foreign investors, since this trend shouldmake it easier to attract foreign technical partners.

Increased presence of * Expand with more confidence into previously "exotic" regions as more andexperienced investors. more experienced fund managers prove willing to work in them.

Product proliferation: new products * Technical Assistance. Help governments and self-regulating organizations dealand subsectors introduced daily by with new product regulation. Involvement in futures and options is importantinternational players. for many clients.

* Investments. Give priority to innovation. Transferring knowledge of productsfrom one region to another is important.

Convergence of standards. * Anticipate and help produce a smooth transition to higher standards viatechnical assistance and investments.

* Spread knowledge of international standards for regulation, operations,prudential guidelines, new technologies, and balance sheet management.

Investors seeking global results. * Promote use of Emerging Markets Data Base as an important benchmark.

Use of global benchmarks. * Promote index funds and other index products.

6 1 N T F R N A I I O N A I F I N A N C E c O R r o R A T I O N

GLOBALIZATION OF MARKETS financed? How can sustainable housing finance systemsMoney flows, corporations, and financial institutions be developed before countries get locked into expensivenow have global reach. Along with globalization come systems (a la Japan)? How should industrial assets berapid changes in technologies and quick transfers of priced and industry growth be fiunded?those technologies throughout the world (Table 1.2).New financial services and products developed in At the same time, demographics are changing. SomeLondon can be imitated in Kuala Lumpur before being countries, notably the transition economies, are becom-reported in the international financial press. Global ing older and need quick attention to their pensioninvestors now look for U.S. Employee Retirement systems for old-age benefits (as distinct from capitalIncome Security Act (ERISA)-quality custody services market development alone). Others will continue toand Group of 30 settlement standards in the develop- have young populations and will worry about job cre-ing world. ation. In either case, developing both the banking and

securities markets should be a priority. If efficient, theyURBANIZATION, DEMOGRAPHICS, AND can contribute to the productivity needed for real wageINDUSTRIALIZATION increases and to the overall economic growth neededRapid urbanization and industrialization present a for job creation. If well developed, they can reach thevariety of challenges to developing countries, many smaller enterprises that are often the backbone ofinvolving the financial sector (Table 1.3). How can employment.burgeoning private and public infrastructure projects be

Table 1.3 Responses to Demographic Changes


Demographic changes lead to * Private housing finance is critical for efficierit provision of housing, buildingurbanization and r-ririri, point" infrastructure, accumulation of personal assets used as collateral for loans forfor cities. ,r)aI1 bu:Jre:s retirement, and education.

* Survey markets and consider nrv-.in,g in primary mortgage providers andsecondary market development.

Aging and changing - i,di .'.aqe mix * Work with World Bank and others to assist in pension reform.puts pressure on pension systems. * Invest in private pension managers and associated insurance companies.

. Apply lessons from Latin American experience.

Infrastructure needs grow; pressure * Help develop long-term bond markets for tiirig rfras[ruc[ure andto privatize and create infrastructure industrial projects.competitors grows. * Use technical assistance, securitization, credit rating, investments, early bond

or borrowing guarantees, local currency bond funds, bond insurance, anddevelopment of institutional investors.

As financing needs become more * Continue technical assistance in market development and investments incomplex, asset pricing function is brokerages and other financial intermediaries and institutions.increasingly critical. Stock markets * Focus on developing liquidity.are extremely important forasset pricing.

Middle class emergence requires * Consider erirering consumer finance, opportunistically at first.different services, provides * Increase attention to savings -ioilizat,i:ri, especially through pension, lifesavings mobilization opportunities. insurance, and local mutual funds that pool savings and become professional

investors, aiding the longer term debt and equity markets.

F I N A N C I A L I N S T I T U T I O N S 7

LESSONS LEARNED important new source of financing for smaller busi-A number of commercial and development imperatives nesses that do not have much access to bank lending.seem clear if developing countries are to build strong Since IFC's first investment in a new leasing compa-financial systems in this period of rapid change: ny, in Korea in 1978, leasing in developing countries

has grown from nothing into a $40-billion-plus1. Don'tforget thefundamentals. industry, offering capital goods financing to many

The management of risk is paramount. Risk is either small and medium-size enterprises that plays anmitigated through the balance sheet of an intermedi- important role in their local economies. Yet theary or simply priced and diversified through securities important developmental role of leasing and its com-markets. Either way, it is the keenest concern of mercial potential are still not well known.investors and bankers of all kinds. Few good finan-cial institutions have bad portfolios. As outsiders, multilateral development institutions

committed to playing a catalytic role can be in aManagement always matters. A good economy can good position to demonstrate the viability of earlyhide management weakness for a while but not for- investments in such industries to key parties. Privateeven Investment successes and failures can most investors might not otherwise be aware of the poten-often be attributed to the presence of good/poor tial rewards of entering certain markets or sectors,management in the investee. It is an imperfect and governments might not know how financialworld, and, while never intentionally investing in institutions can spur productive private investmentinstitutions with poor management, investors can and make their economies more efficient.find themselves in situations where the choice ofmanagers is limited. Sometimes the management 3. Imperfect environments need not be an obstacle to effec-group chosen turns out to be inappropriate, but tive action.changing entrenched management is always difficult. Progress can be made even in countries where the

financial sector is state run and inefficient-IndiaJoint ventures require extensive upfront negotiation, and Pakistan in the 1980s, for example; Russia in theforeign partners with long-term dedication and a sig- early 1990s; Albania and Vietnam today. Whilenificant amount of equity, and local partners willing comprehensive government banking reform in theseto add value in specific ways (such as providing local cases is always essential, the private sector can stilldistribution, local currency, and marketing savvy). take some steps toward private financial intermedia-

tion even if all the right political conditions for aGovernment involvement is key in regulatingfinancial major liberalization are not yet in place. When othermarkets, but one must always be wary of government more basic foundations of a country's financial sectorownership or funding of financial institutions. Some have not yet been established, work can begin in theof IFC's biggest problems derive from projects in small parts where private entry is allowed, such aswhich government involvement has led to less than housing finance, venture capital, and leasing.optimal use of resources. Progress there has then often helped catalyze subse-

quent broader financial sector reform that has result-Deeper, better articulated financial systems will, with ed in important benefits to the overall economy.time, serve smaller and smaller savers and borrowers. Examples here include Hungary in the mid-1980s,This dynamic often takes time but can be given a China in the late 1980s, Czechoslovakia in 1990-92,push by specific programs for smaller participants as and more recently Uganda and Tanzania.long as they do not "direct" credit too narrowly orintroduce other distortions. 4. Banking can be either the centerpiece of afinancial sec-

tors success-or the epicenter of its woes.2. Ifyou have a 'demonstration effect,"show it. Q "Mr. Sutton, why do you rob banks?"

Some pioneering investments with financial institu- A: "Because that's where the money is."tions have been quite successful, from both a devel-opment and a financial perspective. IFC investments Notorious U.S. bank robber Willie Sutton made ain leasing, for example, have earned an average 25 point still valid today. Because that's where thepercent return on equity and helped open up an money is, banks are often a magnet for both govern-

8 I N I fI NA I I O N A I [ I N A N (. I CO R 't () R A I I K) N

ment control and unscrupulous businesspeople. be adequate to allow securities markets to take root.Temptations are great for politicians to direct credit Obstacles in these environments can be reduced byto favored borrowers, even if not commercially justi- supporting regional mechanisms and by buildingfied, and to use banks to cover government deficits. interest among institutional investors who can pro-As experience in Korea, Latin America, the former vide an aggregation of capital and therefore a criticalSoviet Union, and now in several Asian nations mass for developing knowledge of markets andshows, this can have disastrous effects, particularly on absorbing transaction costs.private sector development.

For a securities market to function smoothly, aFortunately, however, when government banks are domestic institutional investor base is usually need-privatized or allowed to face competition from other ed. Yet privately or commercially managedprivate financial institutions, as in Poland, Slovenia, pension/provident finds are few or nonexistent inand Chile, commercially based discipline can be developing countries. Governments are tempted torestored. But mere involvement by the private sector control these institutions to finance the fiscal deficit,is no panacea. Many entrepreneurs and conglomer- or too many vested interests may benefit from theates are also attracted to investing in banks ("where current system to allow reform. An outsider can helpthe money is") because they want to fund them- here by demonstrating the viability of private insur-selves, their related companies, or their friends. So ance or pension fund management. Yet even withmultilateral institutions, private investors, and gov- these conditions in place, securities markets musternments have to be vigilant in dealing with banks. have credibility; they need excellent legal frameworksConccrns must be raised about individual institu- and good regulators with government support as welltions (the integrity of investment partners and oper- as a fair degree of working autonomy and a goodating controls and oversight) and at the systemic judicial/contract enforcement regime. Building theselevel (whom the government regulators allow to own conditions often takes time and political will.banks, and the need for surveillance and oversight).

These are the primary "big picture" lessons that5. Good securities markets benefit development but are not stand out. The following pages detail lessons that

a cure-all. contribute to the overall picture. Multiple tacticsRecent evidence bolsters the view that efficient, well- must be used to strengthen the basis for mobilizingregulated securities markets foster economic growth and allocating savings and investment effectively inand have effects that are felt well beyond their listed developing countries. Although not every attempt iscompanies. Yet in frontier markets such as Africa successful, this report makes clear that the venturesand Central Asia, and in small countries worldwide, that do succeed can make a profound contribution toit is still not clear that supply and demand will ever development.

F I N A N C I A II N ST I T lI I I C) N S 9

THE FINANCIALSECTOR'S IMPACTON GROWTH

f~~

9 9;

Private and public financial institutions are the keychannel between savings and investment-in the

developing world or anywhere else. Their efficiency, orinefficiency, is a critical determinant of a country's eco-nomic growth.

Efficient financial sectors do a good job of mobilizingsavings from a broad variety of sources and allocatingthem into more productive uses, thus bringing benefitsto both investor and investee and to the economy over-all. In the process of reinvesting these savings, theysuccessfully deal with one fundamental factor: risk.

The smoothest running financial sectors limit, price,pool, and trade all the related risks involved in a trans-action, and provide incentives for savers to invest byallowing them to earn rewards that are commensuratewith those risks. They are the ones best suited tofinance broad-based, healthy economic development.

A +. _ Today, there is widespread acknowledgment of the pos-... ^ itive impact a good financial sector has in any econo-

my-on enterprise productivity, accumulation of capi-tal, increased savings and investment, and economicgrowth. World Bank research shows that a 10 percentincrease in financial depth (liquid liabilities) is associat-ed with an increase in per capita GDP growth of 2.8percent, a remarkable increase.' This was not alwaysso. Twenty-five years ago, a multilateral effort to focuson financial sector development in emergingeconomies was met with skepticism from many quar-ters. But work with co-investors from the private sectorand governmental authorities wherever conditions wereconducive has successfully contributed to two essentialII goals: deepening and broadening the developingworld's financial markets.

I T U T I C N S 11

WHAT ARE DEEPENING AND BROADENING? PROMOTING LOCAL SAVINGSWhen referring to financial markets, the terms deep- "Capital is made at home." So wrote the Columbia

ening and broadening overlap somewhat. Generally University economist Ragnar Nurkse in 1953.2 By this

speaking, however, deepening refers to the increase of he meant that most productive projects and enterprises

financial assets as a percentage of GDP, and broaden- in a country are financed locally and are local-currency

ing to building an increasing number and variety of generating. Local savings are the backbone of financial

participants and instruments-for example, a larger sector development.

percentage of the population with savings, more mar-

ket intermediaries, more types of savings vehicles, or In most developing countries (outside of Sub-Saharan

more firms borrowing or raising external equity (Figure Africa), 85 percent to 90 percent of gross domestic

2.1). It is best to consider the two concepts at once. investment is funded by local savings. (In Africa one of

Taken together, the crucial process of deepening and the key development objectives must be to move the

broadening usually includes: percentage financed locally from about 65 percent to

about 85 percent.)

* expanding saver/investor participation in the formal

financial markets, such as banks, "nonbanks," and Over a long period, local investors are a more stable

stock and bond markets source of finance than outsiders, who usually have a

* increasing the number and variety of market institu- broader horizon of investment options and fewer ties

tions to the local market. In addition, local investors are, in

* widening the array of financial instruments to suit general, better informed investors. They often have a

varying risk/reward preferences greater stake in the success of the projects they finance,

* improving a market's ability to price, intermediate, since the vast majority of savers in developing countries

and settle transactions in a variety of instruments have no access to opportunities for international or

that lower transaction costs and spreads even regional diversification.

* ensuring that transactions are conducted with free

and genuine competition between efficient and To support this process of domestic capital formation,

credible institutions and players local savings must be promoted. Deposits and others

* regulating market participants on the basis of well- savings from investors, ranging from households to

designed and enforced regulations corporations to government, must be mobilized. And,

* providing a transparent market by promoting the wide finally, the resulting funds must be allocated to the

dissemination of information on the companies raising most financially and economically productive borrow-

capital, the transaction price, price benchmarks, and ers or issuers (Figure 2.2).

the financial state of market intermediaries

* conforming to international standards of settlement, Only when a local financial system achieves credibility

accounting, corporate disclosure, capital adequacy, and provides sufficiently attractive returns can savings

and other building blocks of finance. in its many forms be redeployed into financial assets.

Figure 2.1 Deepening and Broadening Local SUPPORTING LOCAL FINANCIAL MARKETSFinancial Markets Creating and supporting efficient formal financial sys-

tems should be a high priority in development. MuchDeepening: Broadenig: of the wealth of developing countries remains invested

. -$ . .. - . . - < < - ~ - - in traditional savings vehicles such as gold, land, or

More' "cash under the mattress" (Box 2.1). But formal savingsMore: Banks, insurance companies systems provide a more productive and often safer con-

Deposits Branches duit for finds than these other alternatives. The formal

Loans Savers system-when efficient, well-regulated, and competi-

Stock market trades Investors tive or at least contestable-can offer lower intermedi-

Households insured Borrowers ation costs than informal channels and can also offerPension assets Stocks listed deposit and lending services to a wide base of local

Instruments (e.g., bonds, savers and entrepreneurs. All of this is vital for devel-

unit trusts) opment (Box 2.2).

12 I N I F R N A T I O N A t F I N A N C C O 0 R P O R A T I O N

Figure 2.2 Financial Markets Mobilize and Box 2.2 IFC Financial Sector "Firsts"Allocate Savings

Financial sector development is a complex process depen-Mobilization Allocation dent in large part on government history, policy, and regu-

lation. The emergence of a vibrant private sector-ledSaver- -s - - finan7cial - - Borro.Pirri t financial system requires the participation of numerous

intermediaries issues players of varying skills with significant amounts of capital,primarily local capital. Given the limited nature of IFC's

Localsavers Stock Households charter and balance sheet-including a general require-* Households markets * Loans ment to invest alongside other private sector players and* Households via * Mortgages to absorb no more than 25 percent of any project's costs-

nutual funds, Band .the Corporation's financial contribution has been modest.pensior funds. markets Corporations Its investment of time, skill, and experience has often hadinsurance . Leans-. greater impact than its money. Very often IFC's role has

* Corporations -Credlit Leases been to discover niches where the private sector could* Government institutions quiry operate and to help local or foreign co-investors establish

new institutions in those niches, often creating new sub-Foreign savers sectors by setting up a first-of-its-kind institution, such as a* Private portfolio Government leasing, factoring, or housing finance company.

investors Bills* Multilaterals Bonds In its attempts to achieve development impact by broaden-

(e.g., IFC) ing and deepening local financial markets, IFC has had topioneer new products and markets and has consequentlybeen responsible for a number of breakthroughs, including:

Box 2.1 Getting Cash Out from Under the * In over 25 countries, IFC invested in the first leasingMattress company and/or provided advice for the establishment

of a leasing industry.Traditionally, gold, cattle, jewelry, real estate, and cash * IFC helped establish the first venture capital fund inunder the mattress are favored savings vehicles in many about 20 countries.parts of the developing world. These assets, however, * IFC's technical assistance efforts helped create or revi-rarely contribute to developing productive enterprises. talize moribund stock exchanges in over 20 countries.Attracting savings to the formal intermediation system is * IFC structured and underwrote the first successfulcritical for channeling funds to productive uses. Efficient emerging markets closed-end country fund (Korea,and effective financial intermediaries will tend to allocate 1984) and the first global emerging markets fundsavings to the more productive borrowers in a country. (1986). More recently, IFC created the first fund forThis helps raise the level of productivity and provides a Africa and one of the first emerging markets indexbasis for a rise in real incomes as well as prospects for funds (both 1993) and is in the process of structuringgood financial returns on saved money. the first global emerging markets corporate debt fund.

* IFC was the primary adviser for the first successfulbank privatization in Central and Eastern Europe,Zivnostenska Banka in the Czech Republic (1991-92).

* IFC helped set up the first joint venture commercialbank in Poland (1991), the first joint venture bank inKazakhstan (1993), and the second private joint ven-

Notes ture bank in Hungary (1987). IFC also introduced thebank 'i. inr.irig'- concept to Eastern Europe through

1 Ross Levine, 'Financial Development and Economic Growth: Viewas its work in Poland, carried out in conjunction with theandAgenda," in Journal of Economic Literature, Volume XXXV World Bank.(June 1997), pp. 688-726. * IFC's Emerging Markets Data Base was the earliest and

2 RognarNarkse, Problems of CapitalFonmation in UnderdevelopedCountries (1953; reprint, New York. Oxford University Press, 1967). single most comprehensive source of stock market

data on emerging markets for institutional investors.

F I N A N C I A L I N S T I T U T I 3 N S

- -. ~~DEVELOPING THEFINANCIAL SECTOR

j k i j ~~~~~~~~~~~~~Many emer 'ng economies benefit from advice and1 l . l ~~~~~~~~~~~~~assistance in building financial infrastructure, providing_ _ l ~~~~~~~~~~~~~~access for small savers and borrowers to financial insti-

] i ~~~~~~~~~~~~~tutions, and attracting international capital.

| b ~~~~~~~~~~BUILDING FINANCIAL INFRASTRUCTURE- . r ~~~~~~~~~~~~~~~Building financial infrastructure can involve a number

i ~~~~~~~~~~~~~~~~of activities:

. . i t

_i, \,,|,' y,/S4v, * ~~~~~promoting private sector financial institutionin !S _<5L * structuring investment funds

... t- i is i. *~~~~~~~~~~~ providing credit to intermediarics (to date, almostE - 1 | i ~~~~~~~~~~~~~~exclusively in hard currencies)

> - *~~~~~~~~~~~~ engaging local authorities in policy dialogue regarding_ t ~~~~~~~~~~~~sectoral development and the role and regulation of

^ 1 ^iM, ~~~~~~~~~~~~~~private players. _Man p roviding technical assistance and poicy advice in cre-

ating or improving market systems and institutions.

a fDevelopments in financial markets are usually led bytsound macroeconomic policy that is set in a hospitable

l B political environment. That being said, it is still possibleto make progress in the promotion of private sectorfinancial intermediation despite seemingly insurmount-able macroeconomic and politecal barriers. Privatefinancial ventures have been established in countriesundergoing major macroeconomic imbalances, oftenwith great success. Numerous examples-including* p. rvBenin, Egypt, Kazakhstan, Madagascar, Ndierian Peru,

i. sou i and Russia-suggest that progress is possible even__di-il'ia- -A- when, p litially, some people see only obstacles.

The successful "sequenctng" of financial sector develop-iment can be counterintuitive. One school of conven-

tional wisdom holds that the process of financiaal market- - ~~~~~~~~~development should proceed in an orderly fashion,

beginning with the establishment of commercial bank-

_: I t a ) s r e N x s1 5

=,,

- ei,Eyt aahtn Mdgsa,Ngra eu

ing. From there, say these analysts, move on to money Ghana, private merchant banks became powerfid com-markets, then longer term lending, then to securities petitors to government-owned commercial banks, help-market development, and finally to the establishment ing prompt the government to rethink distortionaryof institutional investors: mutual funds/unit trusts, banking policies. In others, such as India, introductioninsurance companies, pension funds, and so on. The of private venture capital, using a mutual find structure,reality, however, is far messier-and more promising. helped erode government dominance of the unit

trust/mutual fund industry, thus clearing the way forIn some markets, such as South Africa, insurance com- valuable modernization and competition in mutualpanies developed very early, far in advance of securities funds. For further discussion of the links between capi-markets. In others, such as Russia, securities markets tal markets and growth, see Box 3.1.have emerged while banking systems remained rudi-mentary or inefficient. Why? The reason is that the WHY ARE BANKS AND OTHER CREDITpolitical and economic imperative to privatize govern- INSTITUTIONS IMPORTANT?ment-owned assets was great, and market sales and Banking is the basic building block of any country'stradable privatization mutual funds were seen as the financial sector. Usually commercial banks and otherfairest way to distribute assets. deposit-taking institutions (postal savings systems, sav-

ings banks, housing banks, credit unions) are the firstIn its simplest form, financial infrastructure can be and, in some countries, only formal vehicle for mobi-broken down into two parts: banks and other credit lizing household financial savings. In many countries,institutions; and securities markets. When the private banks' dominant position in mobilizing savings alsosector enters and carves niches that were once nonexis- gives them a lead role in allocating credit. But this verytent or reserved for government alone, it can spur poli- centrality has made banks a magnet for governmentcy changes that ultimately shape sounder economic control.policy. In some countries, such as Zimbabwe and

Until about 1986, most developing-country govern-ments either dictated public ownership of the banks or

Box 3.1 New Research on Importance of imposed direct, distortionary controls over interestCapital Markets and Banking for Growth and rates, deposit rates, credit allocation, and other coreDevelopment operations. During this period, relatively few countries

allowed banks to allocate credit on a market basis, link-Recent work in 41 countries between 1976 and 1993 ing lending rates to the level of risk undertaken. As afinds that both banking and stock market development consequence, lower productivity sectors were often pro-are correlated with economic growth, capital accumula- moted over higher productivity sectors, hamperingtion, and productivity improvement. This analysis shows growth and the opportunity for real wage increases. Forthat banks and capital markets are complements, not years, banking was seen as a utility best provided bysubstitutes, and that stock market development, and government, just like roads, power, or telecommunica-especially trading liquidity, is a predictor of per capita tions. Here, just as in these "hard" infrastructure ser-growth independent of the banking market. The vices, the change of philosophy has been tremendous.research also shows that liberalization of capital flows The removal of barriers to private entry into bankingand opening to foreign investment enhance stock mar- and to the commercial functioning of financial marketsket development and iq..uri, The mechanisms behind has been close to revolutionary in many differentthese development patterns were well known to practi- regions of the world. One can argue that the effects oftioners in the emerging markets for many years, but ana- banking liberalization may eventually have even greaterlytic confirmation of the phenomenon had to await suffi- impact on developing economies than the privatizationcient experience with emerging markets. of power, water, or telecommunications because of the

reach of the banking system into so many differentSource: Ross Levine and Sara Zervos, "Stock Markets and aspects of the commercial life of a country (Figure 3.1).Banks: Revving the Engines of Growth," January 1995,and "International Capital Flow Liberalization and Stock BANKING CRISESMarket Development: A Cross-Country Event Study," The worldwide experience with government-ownedWorld Bank, December 1994. banks has proved to be, on the whole, negative. As a

16 I N T E R N A T I O N A I F I N A 'K C jr (o R P ( R A I I () N

Figure 3.1 Banking System Affects Real Box 3.2 Zivnostenska Banka, Prague: CentralSector and Eastern Europe's First Bank Privatization

Zivnostenska Banka (ZB) of Prague asked for IFC's assis-Savers _ m Banking Governrnent tance in preparing a privatization plan in early 1991. IFC

sys- m .Teleconis helped the bank's management develop the privatization

Textiles strategy and a medium-term business strategy of focus-ing on becoming a leading corporate/merchant bank. ZB

Payment fdtr~'nes and:-' management and IFC also devised the selection criteriasystem n'atural iesourc'es .Payment .'uralesource for potential foreign partners, basing them on a series ofLoans --- Manufaduring' technical qualifications and on overall suitability to sup-

Money Tourism port the merchant banking strategy. An international bid-markets Servic ding process among qualified potential partners led to

International - Letters of Sei- p es the final selection by ZB and the government of thebanks credit,trade Power Czech Republic of BHF Bank of Germany as a partner.

finance Other sectors (Since IFC had been asked to consider an equity invest-ment from the start, it was careful not to be involved invaluation and ultimately invested at the price bid bypotential foreign partners.)

The banking system can be a key ingredient in enhancing productivity if The financial and operational restructuring that IFCit understands risks and allocates and processesfiunds accordingly. helped design has already yielded results in the bank's

greatly improved profitability and in its role in Czech mer-result, the trend today is toward liberalization. This has chant banking development. Several important factorsoften been a wrenching process, especially when a new helped make the ZB privatization a success. As a traderegulatory regime unmasks the accumulated problems finance bank, ZB had few assets of over 180 days and,resulting from decades of bad loans, directed credit, therefore, portfolio evaluation was relatively uncomplicat-administered interest rates, and other distortionary ed. In part because of IFC's involvement, the Czech gov-policies. Crises also result from imprudent behavior of ernment agreed not to keep any equity in the new ZB.banks spurred by excessively expansionary monetary Existing management was good, and most managers hadpolicy combined with obsolete banking regulations. experience abroad, making the working relationship withOne school of thought believes these "banking crises" a foreign technical partner easier. Finally, ZB had an excel-constitute a stage many countries have to go through lent franchise, being the oldest bank in the country andto emerge healthier. having strong ties with the nation's exporters.

Even before the East Asian crisis of 1997-98 arose,it was estimated that one in five emerging marketsfaced a banking crisis of some kind. These crises are banking crisis can governments make reforms that areoften costly both financially and developmentally. necessary but politically unpalatable in normal times.Preliminary data, for example, show that theVenezuelan government may have paid the equivalent PRIVATIZATION AND PRIVATE ENTRYof 15 percent of GDP to bail out depositors in that IFC made very few equity investments in commercial

country's 1994-95 banking crisis. Mexico's banking cri- banks in the 1970s and 1980s because of the difficultysis that began in 1995 may ultimately cost 12 percent of or impossibility of finding private sector co-owners and

GDP, and many of its banks have not yet been recapi- the absence of market-friendly regulation. As privatetalized. Much of this upheaval is an inevitable reckon- entry into banking and privatization in the developinging with the weaknesses of old systems. Some is due to world became commonplace, IFC's role increased sub-

the implementation of new "second-best" systems, or stantially. Its most common strategy has been to investones with weak regulatory controls over bank ownership in new banks or in banks in which the Corporation's

and capital requirements. One silver lining has been stake could take the government's share below a major-identified in this cloud, however: often, only during a ity or blocking minority.

F I N A N C I A L I N S T I r U T I 0 N S 17

IFC has been involved in relatively few banking priva- issuing 10-year fixed-rate local currency bonds in thetization advisory efforts, partly because of the willing- domestic securities market. The proceeds were used toness of private advisers to do this work and partly finance Malaysia's first two independent power proj-because of the long and uncertain processes govern- ects, which added 1,212 MW of new generatingments must go through to decide whether and how to capacity to the national system. The bonds comple-privatize banks. But IFC did advise on the first suc- mented other loans YTL obtained from commercialcessful privatization of a bank in Central and Eastern banks to round out the project's debt-financing needsEurope, Zivnostenska Banka of Prague (Box 3.2), and and were purchased by Malaysia's Employees Providenthas invested in several privatizing banks. Fund, one of the developing world's largest pension

funds. While most developing-country securities mar-NONBANK FINANCIAL INSTITUTIONS kets unfortunately still lack the necessary depth toIFC also has a long history of investment in nonbank absorb such long-term local bond issues, it is throughfinancial institutions (NBFIs) such as leasing and hire- exactly this kind of transaction that they could play onepurchase companies, bill discounting and factoring of their most valuable future roles-helping countriesfirms, and brokerage houses. This resulted partly from finance their vast infrastructure needs.necessity-in many cases these were the only subsec-tors the private sector could penetrate-and partly In Kenya, the government used the local securitiesfrom a belief that specialized players could provide market in 1996 to sell off 51 percent of its stake in thesharper skills in selected areas and provide healthy national airline, Kenya Airways. After selling a 26 per-competition to the banks. One example: after the cent stake to strategic investor KLM in a previousfinancial sector was nationalized in India in 1969, transaction, the government offered most of the air-enterprising Indians found that leasing was not includ- line's remaining shares to the public by listing them oned in any regulation. Soon, private leasing and hire- the Nairobi Stock Exchange. The response was dra-purchase companies were springing up in different matic, with more than 113,000 Kenyans buying thecities, and this subsector boomed, providing one of the shares. More than 78,000 of these buyers were smallonly alternatives for businesses and households to using retail investors who put up the minimum stake ofthe state-owned banking system. about $200. In this way, the transaction raised $30 mil-

lion locally and another $14 million via a trancheWHY ARE SECURITIES MARKETS IMPORTANT? reserved for foreign investors. The airline's service stan-Considec these recent examples of the securities mar- dards and reliability have improved dramatically sincekets' role in development: privatization, which relieved the government of the

financial strain of keeping a money-losing operationIn Pakistan, Hub Power Co. was able to raise an from going bankrupt while it was also struggling toimportant $205 million component of its 1,292 MW fund an economic reform and development program.oil-fired plant's equity needs in 1995 via securitiesmarkets. Of this amount, $175 million came from In these and other cases, securities markets bring saversinternational investors via a global depository receipt and investees together in a way that complements(GDR) issue, with the remaining $30 million sourcedlocallv on the Karachi Stock Exchange. Though mod- Figure 3.2 Impact of Securities Markets onest compared with the project's $1.8 billion overallcost, these funds did seal a critical financing gap on the Dequity side of the largest private investment in Key ingreoients Securities Positive effectsPakistan's history. The HubCo project has set many tiqudry markets * GDP grwthprecedents in the privatization of the country's power * Critical size per capitasector, a process that, while controversial in some * Globally * Capitalregards, has led to efficiency gains and new generation integrated accumulationthat would not have been possible under government * Productivityownership.

In Malaysia, a subsidiary of the local conglomerateYTL Corp. raised the equivalent of $550 million by With key ingredients, securities markets have positive development.

18 I N I I R N A I I () \ A I [ I N A N C I CO R PO ()R A -T I o N

banks, further enabling the financial sector to promote investors typically invest in several enterprises so thatproductivity and growth. Securities markets provide profits from some can offset losses in others. In thiscompetition to banks and a wider array of instruments way, securities markets allow firms to raise finance forfor both savers and issuers, and they can contribute sig- riskier projects from investors who seek higher returnsnificantly to a country's overall economic growth and can manage their overall risk exposure (Figure 3.3).(Figure 3.2).

SECONDARY MARKET TRADING: ESSENTIAL TOBANKS AND SECURITIES MARKETS: TREATING MARKET FUNCTIONINGRISK DIFFERENTLY A maturity match between investors and issuers can beBanks intermediate between retail depositors and bor- achieved through a liquid secondary market. Firmsrowers. Because deposits are usually short-term in raise long-term finance through the primary capitalnature and many depositors are risk averse, banks tend markets. Many investors also make long-term invest-to make short-term loans to safe creditors. Securities ments but can turn them into short-term ones by sell-markets bring savers and investees together more ing in the secondary market. Investors can also varydirectly than do banks. Investment opportunities are their tenor preferences in secondary markets accordingdivided up into numerous small-denomination securi- to their changing financial situations.ties that can be sold off to many different types ofinvestors. This allows matches between accumulation Some evidence from the developed markets also sug-and allocation, and between risk and maturity, to be gests that more liquid and active securities marketsaddressed in a way different from banks. exert pressures on firms to increase their capital pro-

ductivity, a key component of GDP growth per capita.Securities markets make risk explicit. They price, pack- According to a 1996 McKinsey Global Institute study,age, and manage risk but do not lessen it. An investor for example, the United States, with a deep and activein securities will share in either the profits or losses of capital market, has a capital productivity about 60 per-an enterprise and will ask for a higher return to com- cent higher than that of Germany, which has relativelypensate for that risk. To protect against total loss, shallow capital markets.

Figure 3.3 Banks versus Securities Markets

Banks intermediate through their balance sheets. Securities markets price and manage risk but do not reduce it.

deposits short-term loans,a.ers Biank; Firm:

interest interest

* Absorb losses on some loans byreturning lower interest to savers

* Provide payment services

SecuritiesSa ers purchase - ~ markers Sa er;

resale r

* Price risk* Manage risk* Do not mitigate risk

F I N A N C I A L I N S T I r u T I O N S 19

INCREASING IMPORTANCE OF DEBT AND Figure 3.4 Financial System Widens ItsDERIVATIVES MARKETS CoverageDuring the debt crisis in the 1980s, attention turnedtoward developing-country equity markets. Most 2) Makes loansempirical work on the impact of securities markets on to large blue chipeconomic development is still also based on equity companiesmarket observations. Debt markets and derivatives mar- 1) Attracts savingskets, however, are increasingly demanding attentionfrom regulators, issuers, and investors.

3) AttractsThe transaction experience of financiers in the emerg- more savingsing markets reveals a significant need for local 6) Makes morecurrency-denominated medium- and long-term debt. loans, includingClearly, a credible and stable macroeconomic regime is to small firms Ithe most important contributor to the development of 4) Makes moreterm debt markets. Nevertheless, many markets find loans, including tothemselves in an odd position: they have commercially 5) Attracts middle marketattractive prospects for issuing debt to support produc- more savingstive projects even within an unstable economic envi- -evronment, but lack the infrastructure for issuing long-term local debt. In some markets such as Argentina,Brazil, and Turkey, local companies issued debt abroadbefore doing so at home. Recent studies show thatlong-term debt availability enhances corporate growth other savings rise, pressure increases within banks toand that respect for legal norms is a key factor in corpo- allocate deposits and savings to a wider base ofrate growth and contract-based financing. The relatively clients-including small firms (Figure 3.4). Increasedmore complicated issues of debt-contract structuring skills should help banks and other institutions analyzeand enforcement are expected to become increasingly and price the risks of additional types of enterprises,important. including small ones.

Derivatives markets are growing faster than regulators In many developing countries, however-indeed, incan regulate them. The fast pace of financial technolo- some "developed" markets as well-this dynamic hasgy and product transfer around the world can be seen not yet taken hold. Instead, the financial sector stillin the futures and options markets. Countries with rel- concentrates on "blue chip" borrowers. Often this is foratively less sophisticated financial markets find them- a very sound reason: a macroeconomic environment isselves facing savvy issuers advised by international so risky that the financial institution cannot afford toinvestment banks creating products that regulators take the added risk of lending to less proven, less stablethemselves do not understand well. Advisers to these companies. In addition, the inefficiencies of intermedi-countries cannot simply say, "How can this country ation may make the differential between the cost perwant to set up a derivatives market when its equity set- dollar of booking a large loan and a small loan so greattlement procedure is still a mess?" The reality is that that the higher spreads will not cover the additionalthese products are being used, and regulators have no administrative costs.choice but to become educated as quickly as possible.

Nevertheless, small companies are important contribu-MOBILIZING SMALL BORROWERS AND SAVERS tors to GDP, to employment, and often to growth. InWidening the coverage of the financial system to the industrial world, small firms of 100 or fewerinclude small borrowers and savers is a key part of the employees contribute between 43 percent (Unitedprocess of deepening and broadening. In theory, as States) and 71 percent (Italy) of employment. In devel-financial sectors develop, they attract more savings, oping countries, these ratios are often greater. In 10 low-improve their credit assessment skills, and learn to income African countries, an average of 49 percent ofprice credit risk more accurately. As bank deposits and GDP was produced by firms of 10 employees or fewer.

20 I N T E R N A I I C N A t F I N A N C E C O RP IO R A T I O N

USING INTERMEDIARIES: AN EFFICIENT WAY TO FINANCIAL SECTOR DEVELOPMENT BENEFITSREACH THE MIDDLE MARKET THE WHOLE ECONOMYThe most efficient way to channel multilateral As early as 1911, one of the first pioneers of modernresources to medium-size and small businesses is development theory, Austrian economist Josephthrough intermediaries. For this reason, it is important Schumpeter, had determined that efficient financialto support the creation of venture capital companies institutions were essential to development. His findingswith the management skills to assess and monitor remain as true today as they were then.equity investments in a variety of small, growing firms.Lending to banks for onlending to firms smaller than Stock markets, for example, have been found to play anthe banks' normal clients has been another major sup- important role in two of the key mechanisms for eco-port vehicle. In addition, the creation of leasing com- nomic growth: capital accumulation and productivity.panies can be one of the most effective means of pro- Capital accumulation takes place through the poolingviding small entrepreneurs with credit. Leasing, by of savings into corporate entities as well as from thevirtue of its asset-based credit assessment, is uniquely wealth creation possible through stock ownership. Butwell suited to firms with short or variable operating isn't it the wealthy who participate in the stock markethistories and relatively modest borrowing requirements and reap the financial rewards? In the near term, often(Figure 3.5). so, but as markets deepen, the rise of institutional

investors also gives small savers and poor households aA broad spectrum of households, not just blue chip chance to participate.companies, must participate in and benefit from thegrowth of the emerging economies. This is both for The growth of bond and stock markets can also helpeconomic reasons-formal savings are needed for make large privatization programs both politically andinvestment-and for reasons of social equity. While practically feasible. This happens in three primary ways:deposit-taking institutions, especially banks, have beenthe primary savings vehicles, the development of other * Developed markets allow fair pricing of assets to beinstitutions that can cater to varying risk and tenor sold, reducing political charges that the people's pat-preferences must be a priority. These would include rimony is going too cheaply. 2

mutual funds and unit trusts investing in equity and * Local market development allows local investors todebt securities, privately managed pension plans, and participate in equity purchases, fending off anotherinsurance companies. divisive charge-that the government is selling out

to foreigners.

Figure 3.5 Reaching Small Firms through Intermediaries

IFC Local Local institutionsVehicle used provides: m institutions p provide: m Beneficiaries

Venture capital * Equity Fund manager . Capial * Growing firmsfunds * Other investors - Deal flow * Small firms

* Management help* Governance

Lending to bnks * Hard curMrcy Local bank, * Markeling * Sma1 andarnd fiancial term loans financial : Credit assessment medium-sizeinstitutions institution * Local currency borrowers

* Working capital

Newly established * Equity funding teasing * Marketing * Small andleasing companies * Co-investors company * Credit assessment medium-size

* Hard currency * Equipment lessees, someterm loans large lessees

F I N A N C I A L I N S I I T u T I N S1

* Market deepening allows the structuring of mutual Figure 3.6 Argentina: Correlation Betweenfunds or unit trusts that can give small savers access Market Growth, Capital Repatriation, andto a share of the privatized companies. Infrastructure Privatization

Privatization allows the government to stop the fiscalbleeding that results when poorly performing state-owned companies are maintained on political rather USS billionthan commercial grounds.3 It also enables the govern-ment to redeploy its time and attention away from run- 19 Marketning enterprises and toward services such as health and capitalizationeducation (which should largely benefit the poor) and 14 Flight capitaltoward the functions only it can provide, such as jus- repatriationtice, defense, and regulation.'

ENHANCING PRIVATE INVESTMENT IN 7INFRASTRUCTURE 5 Infrastru(tureAnother important part of the privatization process 4 privatizationaided by well-functioning markets is the private provi- ° l 9sion of infrastructure services. Infrastructure projectsrequire both local equity and long-term bonds, andgetting government out of this business frees it up toattend to basic human development needs. In addition,as the private sector invests in infrastructure, it usuallyimproves services to the population and contributes tooverall economic growth. For example, the eliminationof long and pervasive power outages in the Philippines Figure 3.7. Market Allocationthrough private investment in power provision hasbenefited all of the society, including the poor. In l Low risk borrowerSouth Africa, the desperate need to extend electricity Private 1 Low risk/boroer

ity _0111- barl.- v m0 2. Medium risk/higherand water to large segments of the nonurban, poor pop- Savings interest rateulation will likely be met mostly by private suppliers.

_0111- Stock 1 Highest equity returnLatin America has also seen a correlation between rnarkeT for riskinfrastructure privatization, capital market development,and flight capital repatriation. In Argentina, capital went 4from a $7 billion outflow in 1989 and 1990 to a $14billion repatriation inflow in 1992 at the same time as Higher productivity firmsinfrastructure privatization went from zero to about $5 attract capital; lowbillion. Local market capitalization went from $4 billion productivity firms failto $19 billion in the same time period (Figure 3.6). 4CREATING OPPORTUNITIES FOR SMALL SAVERS Whole economy moreThe movement to increase the presence of private pen- productivesion fund managers in developing countries has provedsignificant in this respect. Virtually every workingChilean, for example, now participates in local capital Real wages risemarkets through his or her pension fund. Insurancecompanies can also serve this function. In addition,trusts and mutual funds can allow small savers to par-ticipate in markets and, most particularly, in the priva-tization process in many countries.

22 I N T E R N A T I O N A L F I N A N C E C O RP O R A T I O N

A BOOST FOR PRODUCTIVITY ATTRACTING INTERNATIONAL CAPITALFinancial sector development also has important effects Because of a gap between local savings and localon productivity. Both banks and capital markets per- investment needs, foreign savings have historically beenform an "investment discrimination" function and per- important for many developing economies. In additionform it better using market allocation mechanisms to sometimes providing capital where there is none,(Figure 3.7). That is, in a free environment, they usually foreign private savings often lower the cost of capitalfund the most productive investments first. In develop- for private firms and encourage their emergence anding countries, many banks have been more constrained growth.in their credit allocation function than either theircounterparts in industrial countries or the local capital FOREIGN CAPITAL CAN BRING HIGHERmarkets. During the 1970s and 1980s, in particular, STANDARDSgovernments commonly directed credit by imposing The introduction of foreign capital often has a far larg-credit allocation targets (for example, X percent of all er effect on market efficiency and growth than the dol-loans must be made to the agricultural sector, to rural lar amounts invested. Foreign financiers, particularlyborrowers, or to small businesses) or even by mandating equity investors, usually bring technical expertise andthat specific borrowers be given loans. The liberaliza- expectations of adherence to international standards oftion of the last several years has eased this distortion in information, regulation, and market systems (Box 3.3).many, but not all, developing countries. Typically, the When setting up new financial institutions, it is usefullocal stock exchanges are less hampered in their invest- to look for foreign technical partners who bring man-ment allocation function and so contribute in perhaps agement expertise as well as capital to investee firms.even greater proportion to productivity growth.

For example, when foreign fund managers begin seri-Exceptions occur in countries where information dis- ous research and investment in a country, the credibili-semination is poor and insider trading is commonplace, ty of local stock markets often grows in the eyes ofor where institutional investors such as insurance com- locals, who then invest greater sums of their ownpanies and pension funds are strong-armed into buying money in the markets. In some instances, foreigncertain shares. (The latter is rare in IFC's experience investors are the first groups actively pushing for fasteralthough minimum purchases of government bonds are settlement times, more reliable depository services, effi-common, both for reasons of investor protection and"demand support" for government paper).

Box 3.3 Zimbabwe: Catalyzing Capital FlowsThese two mechanisms-capital accumulation andproductivity enhancement-in developed financial When IFC first created the "Investable Index" of emerg-markets lead to increased growth per capita. That per ing market stocks in 1993, the Zimbabwean authoritiescapita growth is desirable is hardly worth arguing. But asked IFC why Zimbabwe was not included. In reply, IFCin an era when the "trickle down" concept is often outlined the requirements that the Zimbabwe market didtreated with cynicism, economists have highlighted the not meet. Specifi.: Mii , the country's exchange controlslinks between growth and the fight against poverty, cit- prohibited conversion of hard currency to Zimbabwe dol-ing only one instance of significant growth that was lars for stock market purchases, and foreigners were pro-not accompanied by improvement for the poor: the hibited from buying listed shares. Possibly due in part toPhilippines under Ferdinand Marcos. It is nearly the attraction of being deemed "Investable," within aimpossible to find a case where the reverse is true. few months regulatory changes were made, and the mar-What econonmies have stagnated over significant peri- ket became open to foreign investors. By June 1993,ods of time and improved the lot of the poor? Probably asset managers, analysts, and custodians from New Yorknone. As World Bank economists Klaus Deininger and and London were seen in the lobbies of the larger HarareLyn Squire have shown, empirical data indicate "eco- hotels and were interviewing companies and local bro-nomic growth benefits the poor in the large majority of kers. The market took ;ff ai-rro' immediately. Marketcases, whereas economic decline generally hurts the capitalization moved from $630 million in May 1993 topoor." $1.4 billion by year end, price/earnings ratios tripled, and

trading volume increased from $1 million per month toabout $10 million per month.

F IN AN C IA L IN ST IT UT ION S 23

Figure 3.8 Foreign Investors Often Demand cient clearing, and better enforcement of securities reg-More Services and Better Regulation ulations (Figure 3.8). This phenomenon has been

Reform observed in many markets, from Argentina and Peru toZimbabwe and Indonesia.

.4 But it is local, not foreign, investors who are the pri-mary beneficiaries of these changes. Even with the

Foreign investors demand better great boom in foreign investment in the emergingRegulations stock markets in the 1990s, roughly 90 percent of the

* Prices rise market capitalization of the emerging stock marketsLiquidity grows remains in the hands of local investors.6 Nevertheless,

the impact of the 10 percent sourced abroad is oftendisproportionately large.

Supply, liquidity, Cost ofdemand expand issuing falls A dynamic similar to that seen in Zimbabwe (Box 3.3)

occurred in Mauritius, where a reform-minded govern-More institutional ment took steps in the early 1990s to "level the playing

investors mean e equity field" between bank deposits and the capital markets. It

Insurance companies is issued allowed the formation of the London-listed Mauritius* Pension funds Fund, which was successfiilly placed with institutional

investors and closed in January 1993. Within two years,the price/earnings ratio rose from 11.6 to 18.4; the costof equity to issuers fell from 9 percent to 5 percent; thenumber of listed companies rose more than 50 percent,from 22 to 35 listings; liquidity more than doubled; and

Figure 3.9 Mauritius: Stock Market market capitalization rose 3.5 times (Figure 3.9).Development

Typically, when this sort of market momentum begins,

Reforms the new investors demand and ultimately receive a1991-92 number of benefits:

* increased disclosure and better accounting standards* more and better brokers

1993 First foreign fund U lower transaction costs% 1993-95 * faster and more reliable settlement and clearingPrice/earnings ratio rose * additional market services such as custody andfrom 1 1.6 to 18.4 transfer agents.

* U UNKNOWN IMPACT OF LARGE FOREIGN

Liquidity more than doubled; Cost of equity INFLOWSmarket capitalization rose fell from 9% to 5% The first inflows of foreign investment have a healthy3.5 times effect on market development, but the impact of large

influxes of foreign capital is not known (Box 3.4).Number of listed r Some countries such as Chile have attempted to limitcompanies rose foreign investment, while others, including Poland,from 22 to 35 have set targets for increasing it. In any case, the aggre-

gate data on foreign investment for all emerging mar-kets are probably not too useful. The large portion ofOverseas Chinese investment in China and the domi-nance of a few countries in market capitalization(Brazil, China, Korea, Malaysia and South Africa

24 IN -T R N A 1- I O N A L F I N A N C( F C RP 1O 1) R A 1- I () N

account for approximately 50 percent of all emerging Box 3.4 The Unknown Impact of Large Influxesmarkets' capitalization) make the overall estimate of of Foreign Capitalonly 10 percent foreign investment in emerging mar-kets uninformative for many specific policy decisions. Globalization is clearly a durable trend, but some observers

raise red flags about the effect of large inflows of capitalfrom foreign investors. Among the concerns raised are:

If foreign capital substitutes for local capital, it could abetcapital flight. But, in 11 ,n the counter-argument, onemust logically ask: "Why would the foreigner see morevalue in the stock than the local resident sees?" and"Aren't these investors merely trading asset/risk prefer-ences? If so, might this actually have a positive economicimpact?"

"Excess" foreign capital could lead to speculative bubblesas more foreign managers have an emerging markets man-date and must, by charter, invest in these markets. Oneresponse has to be that this may still be a remote issue forthe markets as a whole. Emerging markets represent about11 percent of total world capitalization, but only about 2percent of pension assets in industrial countries.

Notes

1 This does not refer to the necessary role ofgovernmental regulatory and supervisory oversight, but rather to government control of banking operations

as such.

2 In Chile the government began privatizing through the stock markets in the mid-1 980s. Because the stock markets were not terribly deep, they would

float a percentage of the shares at a set offerprice. Then, after several months or a year of trading, they would release another tranche of the companys

shares at the new, usually higher, market price. This would continue until all the shares were listed This allowed the government to contribute to and

take advantage ofa developing market. And it staved off criticism that assets were being sold too cheaply.

3 A recent World Bank studyfound that, on average, state-owned enterprises in Sub-Sabaran Africa had annual deficits equivalent to 3 percent of GDP

between 1978 and 1991. See Bureaucrats in Business, World Bank, 1995.

4 Guy Pfeffermann, 'Capital Markets and Poverty Alleviation, "presentation to a USAID Workshop, Annapolis, Maryland, September 13, 1995.

5 Klaus Deininger and Lyn Squire, W New Data Set Measuring Income Inequality" in The World Bank Economic Review, Vol. 10, No. 3, September

1996, pp. 565-591.

6 In 1994 and l995 about $1.7 trillion of emerging markets' stock market capitalization was held in local hands and $200 billion inforeign hands.


FINANCIALIN FRASTR-UCTURE:BANKING AND

*4~ , v n OTHER CREDITINSTITUTIONS

Although the functions of commercial and merchantbanks are well known, the distinctions between them areless clear. Development finance companies (DFCs) werelargely a construct of the international developmentcommunity, so are less familiar. It is useful to understandthe role and character of each type of institution.

Commercial banks take deposits from the general publicand extend loans (usually of short to medium tenors)primarily to corporations. Retail loans to householdsare usually permitted but are relatively rare in develop-ing countries. Commercial banks are generally thedominant form of private finance in emerging markets.

Merchant banks, in the original British sense, are largelytrade finance houses specializing in bankers' acceptances,letters of credit, and short-term corporate lending. Theyreceive funding from local corporate deposits and tradelines with foreign commercial banks. This type of mer-chant bank prevails in Africa. In other countries, mer-chant banks mobilize domestic and foreign wholesaledeposits and invest in short- and medium-term loans

ties brokerage, fund management, and underwritingi~~~~~~~k ~~~~~services akin to those of a U.S. investment bank.

Developmentfinance companies specialize in medium- andlong-term loans for industrial projects. Often partially orwholly government-owned, they frequently cannot

> . mobilize domestic term funding and therefore rely onforeign funding, largely from noncommercial sourceswith government guarantees such as multilateral devel-opment banks and bilateral agencies. Colombia offersseveral rare examples of privately owned and financedDFCs succeeding in a competitive environment.

II 1I IO0N S 27

COMMERCIAL AND MERCHANT BANKING Box 4.1 A Banking Revival in BeninIFC's lending experience with commercial and mer-chant banks has been extensive, but equity investments Credit for businesses and households in Benin came to aby IFC in such institutions have been relatively recent complete standstill in 1989. The country's three dominantand modest in both number and size. (See Chapter 5 state-owned banks plunged into insolvency after years offor more on lending.) This is due in large part to the mismanagement by a Marxist-Leninist regime, leavinghistorical pervasiveness of government control of the Benin with no functioning financial institutions. After abanking sector. Recently, liberalization and privatiza- new reformist government liberalized the sector, local pri-tion of state-owned systems, combined with the vate investors created a new institution called Bank of

increased recognition of the importance of competition Africa-Benin (BOAB) in 1989 with the equivalent of $2.2to development, have allowed IFC to play a larger role million equity. In 1992 IFC bought 5 percent of the bank'sin commercial and merchant banking. In only fiscal equity as part of a capital increase and, as an active boardyears 1996 and 1997 alone, IFC approved 20 new member, began offering it strategic advice. Today BOAB isequity investments in banking institutions. Benin's largest commercial bank, -,rn3n:ailJ strong with a

40 percent share of the country's banking assets and serv-IFC's approved investments in about 35 banking-style ing private sector borrowers with a broad array of financialinstitutions represent about $104 million in equity products that were previously unavailable in the market. Itstakes.' The typical IFC stake is between 10 percent has also worked with IFC to start the first leasing andand 15 percent. Usually IFC takes up shares in banks insurance companies in Benin.for one of the following reasons, to:

* assist in the privatization of a bank* set up new, modern banks in unbanked or under-

banked countries Box 4.2 Bolivia: From Teetering DFC to* provide private competition in an otherwise state- Dynamic Bank

dominated banking sector* help restructure or expand the activities of existing 1984 Bolivian inflation reaches 24,000 percent.

banks. 1985 New government implements a World Bank-backed stabilization and adjustment program.

IFC's experience with banking investments has been 1985 New local owners take over a troubled existingfinancially successful. Internal rates of return (IRR) IFC investee Banco Industrial S.A. (BISA), thenincluding unrealized capital gains are in the 20 percent a development finance company that sufferedto 24 percent range for investments that have been in from a high percentage of nonperformingthe portfolio for a few years. The experience to date assets.with some of the newer investments, including those in 1987 IFC extends BISA a $10 million loan facility.India and Kazakhstan, for example, has also been 1990-95 BISA becomes a full-service commercial bankexcellent. The development impact of these invest- with emphasis on small and medium-sizements has often been extremely high as well. Boxes enterprises. It reports between 10 percent and4.1, 4.2, and 4.3 present examples of evolution of pri- 20 percent ROAE in dollar terms each year.vate banks in Benin, Bolivia, and Egypt. 1990-91 IFC extends foreign currency swap lines to

BISA.LESSONS LEARNED 1992 BISA helps form BancoSol for microenterprise1. Early entry in a market has many rewards and risks. lending.

A market faces significant risks when privatizing its 1994 IFC invests $2.7 million for 9.2 percent equitybanking system or transforming its economy to allow stake in BISA plus $25 million in term loanthe entry of private banks. But returns are usually for onlending to small and medium-sizehigh, and the financial sector's contribution to devel- enterprises.opment is tremendous. Often, however, host-countryregulatory regimes change frequently at this earlystage (Box 4.4).

28 I N T t R N A T i O N A 1 i F I N A N C E C O RP o R A T I ON

Box 4.3 Egypt's Commercial International 2. Rulesforgovernment involvement must be clear.Bank: Taking a Small Equity Stake to Encourage When the government remains a shareholder, thePrivatization rules of the game must be crystal clear. Agreements

must be made to avoid government-directed lendingIn about three-quarters of IFC's banking sector invest- and noncommercial pricing of any government assetsments, a technical partner from abroad has been involved that may be part of the transfer. In one country, IFCas a shareholder and adviser to the local institution. One had to sell its investment because the governmentexception to this general rule has been Commercial used a clause in the privatization agreement to revalueInternational Bank in Egypt. In 1992, the Egyptian govern- its contributed assets to give it control of the bank.ment undertook a major banking sector reform, centered Sound agreements can minimize the chances of suchon privatization of many of the country's largest state- undesirable developments.owned banks. IFC played a key role in the privatization ofone of the banks, a former Chase Manhattan affiliate, 3. Technicalpartners must have meaningful stakes, well-CIB. IFC reviewed the bank's financial position and helped articulated management agreements, and clear gzidelinesthe company structure the terms of a public offering of regulating outside activities.CIB shares on the local stock exchange. The offering was Stakes in merchant banks are usually larger than inplaced in September 1993. IFC bought 5 percent of the commercial banks since, on average, commercialshares ($16.5 million) at market price so that it could banks are bigger institutions and have more diversehave a continuing role in strengthening the bank and in shareholdings. Even IFC's investee in Benin, with ahelping formulate future strategy as a diversified financial capitalization of less than $6.5 million, has a fewservices group that would include investment banking, hundred shareholders. In some banks, a 5 percentleasing, and insurance services. stake gives a technical partner significant sway; in

others a 20 percent to 40 percent stake is necessary.The bank has performed well and has begun to imple- In the three joint ventures with ABN-AMRO inment its diversification strategy. It sponsored and pur- Romania, Uzbekistan, and Kazakhstan, this leadingchased a 30 percent stake in a new investment bank, Dutch bank's shares have ranged from 50 percent toCommercial International Investment Company, in which 60 percent. IFC has encountered technical partners,IFC also took a 10 percent stake. In July 1996, CIB's GDR however, that seek to make profits outside the jointoffering was the first Egyptian equity issue to obtain an venture bank (for example, by billing the local clientsinternational listing in more than 45 years. At $120 mil- directly from a European head office). These "goodlion, it was also the largest international equity issue from faith" issues often must be negotiated in advance tothe Middle East at the time. prevent bleeding the new local bank of revenues.

4. Conflict can sometimes arise with a technicalpartner

Box 4.4 Adapting to an Evolving Regulatory over dffiering long-term interests regarding the creationEnvironment of an indigenous skill base.

IFC usually favors training local staff to assume bank

In one reforming country of the former Soviet Union, IFC management, but some foreign international banksworked with a large European bank to establish a prefer their own secondees to run the banks indefi-'model" bank. Within the first two years of operation, nitely. This has been a source of tension in severalthe limits on local ownership were changed, capital investments. Somc technical partners also keep therequirements were made more stringent, new licensing investee bank dependent on the home bank's tech-procedures were put in place, a new tax code was intro- nology instead of replicating and transferring sys-duced, new regulations on general reserves and provision- tems. Even in cases of close proximity (for example,ing were implemented, and new reporting requirements Hungary and Austria), this can be awkward, and infor banks were put into effect. The bank had to redevel- most cases partners and investees are separated byop its operating systems, restructure its shareholding continents or oceans.composition, and reregister for a banking license. Despiteall this, the bank has performed well (return on average 5. Joint venture banks work best when there is one domi-equity of 22 percent in its second year of operation) and nantforeign technicalpartner.has adapted to the ever-evolving environment. In several instances, IFC has invested alongside two,

F I N A N C I A L I N S T I T U T I 0 N S 29

three, or four powerful international banks. Each Box 4.5 Failure and Success in African Bankingpartner is usually expected to contribute somethingunique to the institution, but often no one takes In Ghana, IFC was an enthusiastic founding partner in a

charge, or conflicts develop among technical partners new banking institution that promised to bring much-

over operating systems or policies. Most cases resolve needed private competition to the market upon its cre-

themselves over time when one partner becomes ation in 1990. The start-up was driven by the energy of a

dominant and, in some cases, buys out the others. local entrepreneur who also took a large equity stake.

Yet, as is often the case in new ventures, the qualities6. The taikeover of international technicalpartners by other required to begin the operation were not those needed

Western banks has become a more common phenomenon. to manage it as an ongoing concern. The U.S-based

Such mergers pose the risk that the new parent bank technical partner was also too far away geographically

will not have the same level of commitment to the and had too small an equity stake (10 percent) to impose

emerging market investee that the original owner did. much discipline. But with no single investor holding more

Ideally, the initiating documents should take this into than the CEO's 30 percent, there was no one to lead the

account. decisionmaking process when problems began to arise.

Only in 1996 when the bank ran into serious difficulties,7. Agoodportfqio mast be theforemost concern of any suc- including a sharp erosion of its deposit base, did a con-

cessfui bank. sensus to replace the CEO emerge. This consensus devel-

Some IFC-affiliated banks have provided superior oped only with considerable difficulty, given the absence

service (for example, shorter loan processing times, of a true leading shareholder. Although its $8 million loan

instant access to foreign exchange) or introduced to this institution is almost fully repaid, IFC has learned an

new products (for example, "anywhere banking" in important lesson from this experience: in banking it must

India where clients can access their accounts from invest alongside institutions, not merely individuals.

any branch). But two or three bad loans can obviate

any advantages from these innovations. Strict adher- IFC is using a sounder structure in supporting the growth

cnce to portfolio diversification and loan reporting of a promising new bank in Mozambique, a country with

requirements must be maintained, This is usually no tradition of privately owned financial institutions.

necessary, if not sufficient, to build a clean portfolio. Banco lnternacional de Moc,ambique (BIM) was created in

By minimizing loan losses, a bank can build its capi- 1995 as a 50/50 joint venture of Portugal's largest privatetal base more quickly and ultimately have a more financial services group, Banco Comercial Portuguese

significant development impact. Similarly, almost (BCP), and the Government of Mozambique. This foreign

every bank could benefit from better credit analysis, technical partner has made a major commitment to its

documentation, loan structuring, security documen- new African partner, sending 1 5 professional staff sec-

tation, and general credit management. onded from Portugal. It has also installed state-of-the-art

technology to allow the first electronic fund transfers in aDEVELOPMENT FINANCE COMPANIES country where cash deposits formerly had to be flown

The promotion of local developing-country intermedi- from branch to branch. In 1996 IFC took a $5 million

aries specializing in long-term finance began in the equity position during a capital increase of BIM that

1950s, in large part with loan support from the World simultaneously reduced the governrnent shareholding to

Bank. In 1962 a specialized department to handle 25 percent. By investing alongside a major institution,

DFCs was set up in the World Bank Group and placed rather than an individual as in Ghana, IFC expects this

within IFC. The Corporation was chosen because the project to make an important contribution to financial

DFCs were supposed to be privately owned, and IFC's sector broadening and deepening, and thus development

mandate allowed it to serve the needs of private bor- overall, in one of the world's poorest countries.rowers. IFC was to invest equity in DFCs and negoti-ate loan fuinding on behalf of the World Bank, thelender of record. cent came from World Bank lending and only 3 per-

cent from IFC equity. The decision was made to return

By the end of 1968, the World Bank Group had the DFC function to the World Bank. The govern-

cumulative commitments of more than $1.7 billion to ment-guaranteed World Bank loan became the driving

27 DFCs. Of the dollars committed in 1968, 97 per- force in DFC activity within the World Bank Group.

30 I N T E RN A T I O N A L F I N A N C E C O R I' O R A T I O N

The focus on privately owned DFCs changed. The 2. Creation of institutions by governmentfiat without sup-new emphasis was on management skills regardless of porting market mechanisms is unwise.whether ownership was public or private. Many DFCs were created to replicate institutions

like IFC-that is, to be long-term project financeFrom 1983 to 1985, the World Bank lent an average of lenders and equity investors in industrial projects.$1.4 billion per year through DFCs, 80 percent majori- There were critical differences, however, betweenty government owned. In 1985 and again in 1988, the IFC itself and these "mini-IFCs." First, IFC hasWorld Bank critically assessed its DFC program, find- access to long-term finance and, with a triple-Aing that a great many of the intermediaries faced serious credit rating, can generally borrow at very favorableproblems reflected in high loan arrears and low or neg- commercial rates, whereas DFCs lack such access.ative returns on capital. Only a few institutions had Second, IFC has a skill base drawn from 174 mem-been able to "graduate" and mobilize resources without ber countries, whereas many of the DFCs were setgovernment support. up in countries with little or no banking or project

finance skills. Third, IFC has been relatively freeIFC's efforts, on the other hand, had waned since 1970. from government requests to invest in specific proj-The Corporation had created or restructured DFCs in ects. The consequences of these fundamental differ-most markets wherc private capital could bc mobilizcd ences havc often bccn severe.for such institutions. In keeping with its divestmentpolicies, IFC had sold successful DFCs when possible 3. Government ownership and/or guarantee of and controland slowly extracted itself from those with intractable over DFCfunding, in general, resulted in severe portqt-problems. By 1995, IFC had only 17 DFCs in its port- lio problems.folio. By 1997 IFC had divested seven investments in Even though most of IFC's development financeBotswana, Indonesia, Malawi, Oman, the Philippines, company investments were in majority privatelyand Sri Lanka. Only three projects failed outright or owned institutions, local government usually con-were entirely written off: in East Africa, Senegal, and trolled funding via guarantees on multilateral financewhat was then Zaire. Of the remaining DFCs, most are institution loans. This effectively empowered theunsalable but some, like the Korea Long Term Credit government to direct lending to specific borrowers orBank and the corporacionesfinancieras in Ecuador and sectors, usually for political or social, not commer-Colombia, have historically been successful. cial, reasons.

LESSONS LEARNED 4. The centralproblem of lack of access to local currency1. Lowering commercial standardsfor the sake of "develop- long-term funding persists.

ment" often helps neither development nor thefinancial Rarely has a DFC helped to encourage the creationhealth of the beneficiary institution. of longer term funding markets. One notable excep-After taking a critical look at its own approval tion is Colombia, where the very successful DFCsprocesses during the 1960s, IFC believes that it held have also helped to mobilize longer tenor funds andDFC investments to a lower profitability standard to promote the local bond market.than it used for its other investments, on the theorythat setting them up would contribute dispropor- 5. While some DFCs havefared quite well, most remaintionately to economic development. Not surprisingly, largely dependent on external and/or government-the opposite was true. On the whole, the DFC guaranteed funding.investments wasted resources and constituted a drain Many DFCs that have earned acceptable financialon the economies. They did not discriminate in favor returns still depend on foreign multilateral or bilater-of the most productive local investments, and they al finance. This is especially true in Africa. In theused taxpayer subsidies in the form of government case of Malawi, however, IFC was able to divest itsguarantees to support nonproductive projects. shareholding in a traditional DFC and take upEnterprise profitability and development are com- shares in a newly formed merchant bank establishedplementary, and deviation from this fundamental by that same DFC but run on an entirely commer-IFC philosophy helped create the DFC debacle. cial basis.

F INA NC IA L INS T J T UT IO NS 31

RISK MANAGEMENT AND CREDIT ENHANCE- credit (L/Cs) to be accepted in international markets.MENT FACILITIES Together with ABN-AMRO, IFC provided a facilityIFC's credit enhancement efforts for financial institu- with an exposure limit of $10 million in 1994 to guar-tion clients are of two types: guarantees for repayment antee up to 70 percent of the amounts on L/Cs issuedof local currency debt issues, and guarantees for foreign by a group of Russian banks. This reduced the amountexchange letters of credit issued by clients in interna- of hard currency collateral the banks needed to put uptional trade ("Trade Enhancement Facilities"). At the with correspondent banks from 100 percent to 30 per-end of fiscal 1997, a total of nine such projects had cent. The facility was designed to free up precious for-been approved for financial institution clients. In the eign exchange that the banks could use for other pro-future, credit enhancement for securitization will ductive purposes and to introduce these banks to thebecome an increasingly important area of focus. international markets. The facility has been successfully

utilized, and a similar facility was approved for banksTo address the general problem of lack of medium- or in Kazakhstan in 1995.long-term debt financing available in emerging mar-kets, guarantees can be used to encourage issuance of LESSONS LEARNEDlocal currency bonds. Since many markets find IFC 1. The miarket-sensitive nature of the risk managementguarantees expensive, this vehicle has been most suc- products also makes them sensitive to nonutilization.cessful in poorer, less stable markets where generousspreads can cover the costs of the guarantee. 2. Client training is a necessary part of the project.

A major goal of providing risk management productsIn 1981, IFC offered a guarantee for a peso bond is to familiarize financial institutions with risk man-issued in Colombia by Corporaci6n Financiera agement tools so they can better manage risks in theColombiana. After the lead manager's withdrawal due future.to low expected fee income, the issue was canceled.Between 1984 and 1995, seven more local currency 3. Bond issue guarantees have to be priced to make themdebt guarantees were approved. Of these, two were attractive to issuers.canceled. A 1988 facility-a guarantee for a 15-year Such guarantees can help develop corporate debtbond for a development finance company in Trinidad security markets, but they must first be commerciallyand Tobago-was successful. And three approved in acceptable.1995 were also used. These were in Cote d'Ivoire andBangladesh (all to raise funding for leasing or hire pur- 4. Introduction of new products is always difficult.chase). The seventh guarantee was for a leasing company Some patience and willingness to refine and scruti-in Senegal, but it is still too early to know the results. nize the structure and pricing of the products are

usually required.Banks in newly emerging market economies usuallylack the necessary credit standing for their letters of

NotesI An approved investment is one approved by IFCs Board of Directors. A committed investment is one that has been approved b the Board signed by

the cosponsors, and, usually,funded by IFC. Commitment usually lags behind approval by afew weeks or monthsb

32 I N T E R N A T I 0 N A lI I N A N C I C OR P O R A T I O N

FINANCIALINFRASTRUCTURE:SECURITIES MARKETSINSTITUTIONS

Promoting securities markets has been one of IFC's

best-known contributions to developing-country finan-

cial sector infrastructure. Over the last 27 years IFC

has built up extensive experience in this field. It has

accepted about 400 assignments to provide policy

advice and technical assistance, usually at the specific

request of local authorities. IFC has also invested in

more than 40 securities-market related institutions and

helped to structure specific financial transactions to

further develop local equity and debt markets. (Many

of these transactions are discussed in Chapter 6.)

PROMOTING LOCAL SECURITIES MARKETSSome projects have been based on multiyear relation-

ships with local stock exchange establishment commit-

tees or ministries. These include, for example: work

with Korean authorities from 1971 until the issuance

of the ground-breaking Korea Fund in 1984; and work

in Chile from 1980 to 1986 in which a joint IFC/local

team wrote the Securities Law and Companies Law

and six years later rewrote both laws to reflect market

experience (Box 5.1).

In other regions, IFC's work has been similarly com-

prehensive and intensive. For example, in less than one

year IFC helped the Zambian authorities comply with

World Bank covenants mandating the quick creation

of a stock exchange. The Corporation did this by

working with a local team to develop draft legislation

and regulations. It also aided in the establishment of a

_ _ r _ _ _ Securities Commission organization with staffing,

work plans, operating systems, and hardware and the

creation of a Stock Exchange with management,

staffing, and systems. Finally, it assisted in the creation

of a clearing, settlement, and depository system.

-I i I N S 33

Some policy and technical assignments are responses to volumes have seen an unprecedented increase. Nowvery specific issues (for example, improving the settle- there are 9 emerging markets with derivativesment and clearing process in Mauritius), and some are exchanges and 10 others under development. This isreactive, such as helping the Indian authorities respond largely attributable to the increased need for risk man-to a financial sector and securities market crisis in 1993. agement stemming from the volatility in exchange

rates, interest rates, and commodities prices and fromWhen IFC began its financial sector efforts in 1971, the increased liberalization of previously planned32 developing countries had securities markets, some economies.more than 100 years old, but only a few worked. Sixhad some sort of securities legislation but only two, LESSONS LEARNEDArgentina and the Philippines, had fledgling securities 1. Choose the right local counterpart.commissions.' Bv 1997, of the 45 stock markets cov- A stock exchange establishment committee made upered by IFC's Emerging Markets Data Base, virtually of credible local players from the public and privateall had securities legislation, securities commissions, sectors often works well when new markets are beingand at least minimal trading. established. This sort of committee works best when

the government representative has energy, commit-Not every country needs a stock market and, in many ment, and authority and can anticipate concretecases, regional integration (currency transferability and rewards for his or her work. In one country the lackregulatory conditions permitting) is preferable. Manycountries do not have the minimum physical, regulato-ry, or financial infrastructure or the critical mass of pri- Box 5.2 Working with Small Marketsvate issuers and investors to make an organized marketuseful. Nevertheless, IFC has worked in some small Ghana and Malawi are examples of IFC work in develop-economies to help create appropriatcly sized markets ing equity markets in small economies. IFC, along with(Box 5.2). other advisers, worked over a three-year period

(1990-92) with Ghanaian officials to set up the frame-Since the late 1980s, the number of futures and work for securities markets and create a stock exchange.options exchanges in emerging markets and the trading While the exchange is modest, with under 20 companies

listed, it proved to be a useful vehicle for broadeningequity ownership when Ashanti Goldfields, Ghana's

Box 5.1 A Sampling of Stock Exchange largest company, was locally listed, raising market capital-Creations and Revivals Assisted by IFC and ization from $118 million in 1993 to $1.6 billion in 1995.Local Authorities Although this figure "double counts" Ashanti, since it is

also listed in London, New York, Sydney, and Harare, 23Korea 1971-84 percent of Ashanti's listed shares are locally owned byJordan 1978, 1982, 1994 government or private investors. Local -r.dirg volumes inMauritius 1979 Ashanti are small, however.Chile 1980-86Cyprus 1984 Malawi, though a small economy, has several well-runHungary 1986-90 companies. Using its experience in participating in theKenya 1987-95 framework for Botswana's one-broker securities market,Ghana 1990-92 IFC helped Malawi set up a similar system in 1995 andIndia 1992 took a modest equity stake to help with the financing ofRomania 1992 the brokerage. Because the largest corporate group in theZambia 1993-94 country is still not privatized, listings are very limited,Vietnam 1993-96 although several are in the pipeline. If privatization doesWest Africa proceed, the market mechanism will be in place to broad-

(UEMOA) 1993-96 en participation in the privatized companies. Meanwhile,Malawi 1995 the brokerage has been able to make a market in govern-

ment bills, thus contributing to that important market's'West African Economic and Monetary Union. liquidity.

34 I N T F R N A T I O N A L F I N A N C C c o R I'O R A T I ( N

of credibility of the government appointee has had cally rational) suspicion of the "casino-like" qualityfar-reaching consequences for the credibility of the of securities markets. Many governments feel theymarket that was established and the willingness of need to exercise greater control to protect investorsprivate financial institutions to participate. In anoth- and do not believe an independent commissioner case, advice and assistance could not proceed until would exert such control. In some cases, securitiesa chairman of a securities commission was appointed commissions can be hampered by the disproportion-because of the strong belief that efforts would not be ate power of market players compared with the com-fruitful in this formerly communist country unless a mission. Often the local stock market itself will havepowerful counterpart were in place. This delayed better information than the commission, and it willefforts for two years, the time it took the govern- not be fully shared. Politically, brokers can be morement to build its own commitment and generate the powerful than the regulators, making broker inspec-political capital needed to set up a stock market. For tions a dubious undertaking.market reform projects, having counterparts in boththe appropriate ministry (usually the Ministry of In most of the advanced emerging markets today, theFinance) and in the private sector (the Stock problems are more often in the enforcement of regu-Exchange, brokers' association, and so on) is useful. lations than in the regulations themselves. This

should be an area of primary focus in future market2. Develop a levelplayingfield amongfinancial instru- development from the regulatory point of view.

ments as soon as possible.Many countries favor bank deposits over corporate 4. When reforming securities markets, keep in mind inter-securities by not taxing interest income and impos- relationships among the various parts of thefinancialing taxes on dividends. Further, the banking system sector, the needs of the real sector, and the needforoften receives cheap refinancing and government achieving social goals, including the distribution ofdeposit insurance, either implicit or explicit. wealth.Frequently, securities are also subject to capital gains Securities markets do not exist in a steady-state vac-taxes and transfer taxes or stamp duties. Pakistan, for uum. They can affect, and be affected by, amongexample, reccntly abolishcd capital gains taxcs on othcr things, thc banking systcm (paymcnt systems,listed securities as part of its liberalization efforts. for example), the pension system (a major source ofMauritius began a small stock market boom when it market demand), and the mortgage market (forremoved the interest rate floor on bank deposits and potential supply of securities). The particular needscreated equal fiscal treatment for deposit and securi- of the real sector will also shape a market. One mar-ties income. One caveat on human behavior: experi- ket may need long-term debt for infrastructureence shows that creditors get bailed out more often finance; another may be concerned with exportthan equity holders. No country seems to have lev- finance instruments. Another goal, particularly rele-eled the playing field in this respect. vant in the privatization context, can be wealth dis-

tribution-whether it is Chile's "capitalismo popular"3. Reform securities and corporate laws and try to get an or Margaret Thatcher's shareholder democracy. (See

independent securities commissioner. Box 5.3 for an example from Zimbabwe.)The first step in creating or reviving a stockexchange is often reforming the regulatory frame- 5. Balancing minority investorprotection with incentivesforwork. The specifics of regulatory reform are so mul- corporations to list on the local exchange can be I- , -.titudinous they cannot be covered in this mono- In Argentina in the 1980s, for example, the lawgraph. But even with the proper laws and regulations allowed any investor to force the liquidation of a list-in place, people are key to enforcement. ed company at book value. Since most companies

were trading below book value in the late 19 80s, theGetting a credible and, ideally, independent securi- listing incentive was strongly negative. Minority pro-ties commissioner who has the willingness and tection on the basis of equal access to accurate infor-authority to inspect brokerages, prosecute insider mation is, of course, a key part of a credible market.trading, and fine companies that publish misleadinginformation is important, but is often resisted. Inpart, this is due to a deep-rooted (and often histori-

F I N A N C I A L I N S T I 1- U T I O N S 35

Box 5.3 Zimbabwe: Opening Up to Households Box 5.4 Zambia: Building a Stock Exchangefrom Scratch

In April 1993, Zimbabwe changed its securities and for-eign investment regime, leading to a flood of foreign Zambia's return to a free market economy in 1992 stimu-portfolio and local investment between June and lated new interest in privatization. The government want-December of that year. Beginning in 1993, a small fund ed to ensure public participation in any widespread assetmanager began to set up a series of unregulated unit sale and agreed with the World Bank that public listingtrusts. Though small, they provided an impetus for the would help to spread the ownership base and that publiclydevelopment of a proper unit trust framework. The listed mutual funds could bring share ownership to smallerauthorities worked with IFC between 1994 and 1995 to savers. Thus, in the beginning of 1993, the World Bankdevelop unit trust regulation. Now the unit trust law has listed the creation of a stock exchange by December 1993been drafted and is being debated in parliament. With as a condition of its Private Sector Development Loan.the institution of this vehicle, household participation isexpected to rise, and the government can use this vehicle An IFC team visited Zambia's one-man securities marketto make privatization more politically palatable. Through development "team" in March 1993, finding him in needpooled vehicles, small household investors can participate of much assistance. All the stops would have to be pulledin the sale of government assets. This will avoid the to meet the December deadline for a functioning small-charge, commonly found elsewhere, that the government scale exchange. By April a group of IFC consultantsmay sell the country's "crown jewels" to big corporations, (,mlOu:Iding a project manager, securities lawyer, stockforeigners, or political friends. exchange organization expert, trading specialist, and

back-office/clearing specialist) were at work with a smallZambian team. Both sides worked together to produce a

6. It is important to improve auditing standards and blueprint for the Zambia securities market by June 1993.remove auditing as a barrier to listing.

Auditing standards have posed problems in many The relevant securities laws were drafted, reviewed, andcountries. In setting up new markets, issuers' reluc- put into legislation by December 1993. The Stocktance to provide detailed, audited financial accounts Exchange Council, its CEO, and its systems were identi-has been a key point of contention. fied and in place by January 1994. Training programs for

brokers and market staff were set up. The SecuritiesIn far too many countries, auditing standards remain Commission was set up in outline: job descriptions, officeinadequate. In some countries, the law allows audi- space, and computer systems were secured. The remain-tors, even those working for "Big Six" firms, to sign ing task of appointing a Securities Commissioner provedaudit statements as individuals. This provides effec- to be a thorny issue and was critical for winning the trusttive protection against lawsuit since the individual of potential brokers and issuers. In fact, no Securitiesauditor is unlikely to have significant seizable assets. Commissioner was appointed for about a year and a half.While such laws may have made sense before theubiquity of international accounting firms, they The exchange's main constraint has been a lack of securi-should be changed in any country with a securities ties. A slow privatization process meant that the marketmarket. In most markets, problems arise because of did not gain more than the four initially listed companiesthe coziness between corporations and individual for two years. But in January 1996, Zambia Consolidatedauditors. The authorities and shareholders must be Copper Mines listed its minority shares on the Lusakawilling to challenge these relationships. Stock Exchange. Because the company generates 43 per-

cent of the country's GDP, this was a significant step for-7. Localplayers and trade groups are often the most power- ward for the local capital market.ful voices in regulatory and institutional reform.Although governments are ultimately responsible for This "hurry up and wait" process has been experienced inshaping the regulatory and, to some extent, the insti- many countries where privatization has run into unantici-tutional framework for securities markets, the impe- pated glitches. Romania and Malawi are also marketstus for change in governmental policy increasingly where IFC worked to set up securities trading mecha-comes from such local groups as bankers' associa- nisms that now sit all but idle, awaiting progress in thetions, securities dealers' groups, accountancy trade sale of state assets.

36 I N T E R N A T I O N A L I I N A N C E C'O R I' O R A T I O N

associations, issuing corporations, and the like. Box 5.5 Impetus for Futures and OptionsAlthough foreign advisers can have a significant role Exchanges Variesin dialogue with governments, engaging the localpri-vate sector in conversation on market development In emerging markets, futures and options exchanges haveissues is important in helping to shape effective and sprouted up for a variety of reasons. Usually, however, theenforceable policy. Long-run commercial self-interest exchanges fit into one of three categories. They:of market players can coincide with the larger socialinterest. But often commercial interests present a * fill a vacuum left by the collapse of government distri-mixture of desirable and undesirable policy pressures. bution systems (Russia, Hungary)An outsider in many cases can play the role of honest . fulfill the traditional roles of risk transfer, price discovery,broker to bridge the gap between local business inter- and transaction integrity (China, Indonesia, and Malaysia)ests and societal or market goals. . manage volatility risk (Brazil).

8. Sometimes work that seems "too early" can end up

being useful

Local policy constraints can delay implementation foryears. Early dialogue, however, is still useful. IFC's undertook eight projects in this area. For example, inwork on the Zambian (Box 5.4) and Romanian stock 1993 and 1994, IFC worked with Thailand's Securitiesmarkets may turn out to be such cases. Similarly, and Exchange Commission to define parameters, mar-repeat assignments that reiterate earlier recommenda- ket structure, and a regulatory framework for a poten-tions can result in significant change and develop- tial futures and options market. Similar work was donement impact. In India, Kenya, and Pakistan, for in Hungary, and some preliminary assignments wereexample, recommendations were followed years after undertaken in China and India.they were originally made.

Derivatives markets are different from cash debt andFUTURES AND OPTIONS equity markets in their regulatory, trading, payment,Derivatives markets can and do play a vital role in pro- and settlement systems. Great care should be taken tomoting market efficiency through better price discovery, balance the need for distinct systems, given the limitedrisk transferal, and transaction integrity. Futures and availability of technical skills in many emerging mar-options markets may be equally appropriate-and kets. Often this will also mean treading carefully onsometimes more appropriate-in less-developed "turf" issues among existing market participants andemerging markets than in "advanced" emerging mar- systems. Priority should be given to ensuring the mostkets (Box 5.5). For example, the futures markets of efficient (and potentially liquid) market, even if thisHungary and Russia are in many ways more important does involve opening up competition between, forto the local economy than those in the Philippines and example, banks and securities firms.Korea. The third largest futures market in the world,after the two Chicago exchanges, is in Brazil. Futures, INVESTMENTS IN SECURITIES MARKETSoptions, and derivatives markets can help establish In addition to providing advice and assistance onbenchmarks and price transparency for nascent debt developing stock markets, regulatory agencies and poli-and currency markets as seen in the examples of cy, and back-office functions (clearing, settlement, andThailand's over-the-counter currency forwards and depository systems), IFC has invested in market com-Russia's MICEX currency exchange. panies and institutions working directly in the securities

markets. The numbers of these investments are not asInnovations in new instruments in developed markets great as the investments in credit and banking institu-cannot be isolated from emerging markets. In fact, the tions for a number of reasons:growth of derivatives markets in the industrial worldhas spurred derivatives market development in many * Often brokerages already existed (even in low-activityemerging markets. This means that local authorities markets) or quickly sprang up in markets with newmust consider the regulatory and market structure exchanges.issues involved, whether they believe their markets to * Many intermediaries require low capital and do notbe "ready" or not. Just between 1993 and 1995 IFC need IFC's equity capital.


* In many countries, institutional investors (insurance 1. The markets are often not ready.

companies, unit trusts or mutual funds, pension sys- Often, new intermediaries end up being primarily

tems) are still government controlled. government bond or bill dealers because the corpo-

* Many market institutions are not commercial and rate market that had been anticipated failed to mate-

therefore are not suitable for an IFC investment (for rialize. Part of this is an occupational hazard for

example, cooperatively owned depositories or IFC-to fulfill its development mandate, it will often

exchanges). move faster than the markets themselves. In Uruguay

IFC helped set up a capital markets institution in

IFC's investments in securities markets institutions are 1981. When capital markets there failed to develop as

diverse: investment banks, brokerages, pension fund foreseen, this institution moved into conventional

management companies, insurance companies, infra- short- and medium-term lending. With macroeco-

structure services (including credit rating), and market nomic deterioration, the lending portfolio experi-

utilities (including share registry, depository and stock enced problems. The company then turned success-

exchanges) (Box 5.6). fully to trade finance and is now branching out into a

variety of banking businesses. The ability to adapt to

LESSONS LEARNED changing environments and recreate product lines

and the skills needed for them is key to survival.

SECURITIES INTERMEDIARIESThe major problem in establishing new securities 2. Education ofregeulators and investors is crucial and

intermediation and underwriting firms is getting the should be included in the cost of investment.

institutions to pursue the securities business aggressive- In allowing the introduction of new products, regula-

ly. Reticence exists for a variety of reasons: tors must understand the product and the risks

involved. Reform is usually an iterative process: a

Box 5.6 Russia: Shareholder Protection and product is launched by a private firm, regulators assessForeign Private Investment it and refine regulations, then new products conform-

ing to new guidelines are launched. In addition, some

Shareholder protection has been a major investment regulations prohibit institutional investors fromimpediment in Russia. Under Russian law, the country's investing in any product that is not on a list of14,000 privatized companies are not required to issue accepted products. Regulators have to be informedshare certificates. The sole document establishing share enough to continue to add to the list of acceptedownership is a company's share register. Many of Russia's products. When working with PT Citimas on receiv-largest companies control their own registers, leading to ables securitization (Box 5.7), IFC helped put togeth-a conflict of interest and, in some cases, fraud. While sev- er a seminar on securitization for Indonesian regula-eral independent registrars have been established, they tors, and it has since begun providing training pro-are unequipped to service a national or international grams on regulating securities markets in Vietnam.shareholder base, and the quality of their services is Likewise, investors need to be educated. In the case ofweak. The resulting uncertainty regarding share owner- new corporate debt products, for instance, many insti-

ship haslimited the equity market's liquidity, tutional investors, potential buyers, are accustomed toinvesting only in government bonds and need to be

The Russian government requested that IFC take the lead educated in the corporate product.

role in establishing an internationally recognized, indepen- 3. Specializedpersonnel are needed.

dent share registry company. Within six months, in April 3. c ontes are needed.

1995, IFC established the National Registry Company In many countries with new or newly revivified mar-(NRC), the first joint venture share registry company in kets, the only financial professionals are bankers, but

Russia. IFC designed the structure and management the banking mentality is often wrong for the securi-

arrangements for the project and recruited Bank of New ties business. Even when ample opportunities areYork, one of the leading transfer agents worldwide, as available, the management of some firms continuestechnical partner for the venture. NRC provides share reg- to pursue banking-type business because it is famil-istration and transfer services that meet international iar, lower risk, and provides steady revenue, instead

quality standards. of going after securities market business.

38 1 N T F R N A I I 0 N A L F I N A N C [ CO R I'O R A T I C) N

Box 5.7 P.T. Citimas: Setting Up a Specialized Box 5.8 Chile: Why an Investment Bank FailedSecuritization Institution

After a slow start, one IFC investee became a respectable

To help develop local bond markets and mobilize local presence in the local capital markets and one of Chile'ssavings as corporate funding sources, IFC was a founding largest stockbrokers. Competitive pressures forced theshareholder in Indonesia's PT. Citimas Capital, eslat,i,-ried company to concentrate in a single line of business:in 1994. Thc. was Asia's first ;pe* ialheEd financial institu- repurchase (repo) operations in which it funded holdingstion dedicated to offering securitization services and cred- of long-term bonds with short-term deposit instruments.it enhancement. Together with Citimas, IFC :arilciPiitCd A ;Pharp up nq.. rq in interest rates and an illiquid portfolioin the structuring of Indonesia's first asset-backed security caused the company to fail. It turned out that the com-in which credit card receivables were :e,:'ririt1ed. The pany's accountant had been booking phantom repo

.u l three-year. fixed income, rupiah-denominated transactions without underlying securities. Managementsecurity was placed mostly with local investors. had misrepresented its noncompliance with risk asset and

other operational guidelines and with the strict internaland external reporting requirements that were in place.Audit reports failed to uncover this.

4. Lack of specialization can deter skill development. Now emerging markets can make quantum leaps inIn countries where all financial institutions have a efficiency and transparency by taking full advantageuniversal banking charter, many securities intermedi- of new technology.ary firms opt for safer banking business. In one suchmarket in Central Europe, the investee was well 2. Solving back-office problems involvesfar more thanpositioned to be a dominant merchant bank but lost technology.leadership in the securities market area to foreign- Markets as diverse as India, Venezuela, and Jamaicalocal joint ventures that stuck purely to securities have found themselves unable to cope with suddenbrokerage and underwriting. While still profitable, increases in trading volume because of manual sys-firms such as these are less profitable for investors tems at the exchanges. This problem was compound-than their pure securities market competitors. ed by requirements for physical delivery of shares.

Having to educate market regulators and players5. Noncompliance andfraud can beset this business. complicates and protracts efforts to develop this area.

Like any other financial business, investment banks In some countries vested interests favor the statuscan be subject to fraud. IFC's one outright commer- quo even though most market participants agree oncial failure in establishing financial institutions was the need for faster and more cfficient tradc settle-an investment bank in Chile (Box 5.8). IFC and ment and registry. Different political climates con-other minority investors who monitor investments sider these interests more or less important.from a seat on the Board of Directors are often pow-erless to prevent misrepresentation. As in all invest- 3. New ways can befound to break down traditional bar-ments, the key is to hire management of the highest riers among participants.caliber and integrity. In Venezuela a legal requirement that only brokers

own a stock exchange prevented corporate issuersTRADING INFRASTRUCTURE and registrars from working effectively with the1. Technology opens up new possibilities. exchange to deal with a large volume spike in 1990.

The failure of market infrastructure has worked to Some of the issuers and banks invited IFC to jointhe detriment of many emerging markets. Outdated them in creating two linked institutions: an electron-trading rules and inadequate clearing, settlement, ic stock exchange with broker membership and adepository, and share registration procedures have service company with a diverse shareholder base thathampered the liquidity and attractiveness of many owns, operates, and maintains the new exchange'smarkets, even successful ones. The availability of trading, settlement, and clearing system. The newinexpensive electronic networks has begun to make system has opened access to new participants-radical changes in the way securities markets operate. including brokers outside Caracas-and tailored

F I N A N C I AL I N S T I T U T I O N 5 39

trading procedures for specific products, such as one- This would help to maximize the impact on localtime auctions for new issues, continuous trading for capital market development.liquid shares, and periodic sessions for less liquidshares. 4. Trade-offs between choice and churn must be addressed.

The freedom of choice for participants to move fromPENSION FUND MANAGEMENT COMPANIES one private manager to another is an important ele-In IFC's investments in private pension fund managers ment in ensuring competition and quality of service.both in Peru and in Argentina, significant early cost However, it also results in significant spending byoverruns resulted in follow-on investments within the fund managers on sales and marketing just to retainfirst year. Considering that these were new companies or replace clients. These costs are, of course, passedin a completely new business, accurate financial projec- on to the customers in higher management fees.tions were (not surprisingly) difficult to produce. New systems should consider possible measures toHowever, the heavy start-up costs, mostly marketing limit unproductive and excessive switching providedrelated, could have been reduced had the government they do not materially affect the participants' free-strengthened its public support and promotion of the dom of choice.new private system during the start-up phase.

5. Consider allowing more than onefundper manager.Some of the other lessons arising from IFC's experi- The systems in Chile, Peru, and Argentina provideence in Peru and Argentina are: for only one fund per manager. All funds tend to

have a similar investment profile because the poten-1. Significant supervision and monitoring are required in tial costs to the managers of underperforming the

thefirstfeew years. average outweigh the possible benefits of beating thePension management firms cannot be considered average. As a result, all participants, whether just'hands-off" investments by any of the investors. A joining the work force or close to retirement-havecommitted technical partner such as a Chilean pen- their savings in the same pool of funds. The current-sion fund manager can add a lot of value, especially in ly proposed system for Mexico requires managers tothe early stages when the learning curve is steepest. A have at least two funds, one of which must be in rel-strong local sponsor and good management are also atively risk-free investments. This refinement couldessential. be worth considering in future private pension sys-

tems provided that the likely amount of funds to be2. Strong and continued government commitment is crucial managed is sufficiently large to warrant the multi-

to success of the system. fund approach.This includes careful design of the new system, draft-ing of the law (establishing, among other things, the INSURANCE COMPANIEScommercial and legal framework in which the new 1. Life insurance companies must be careful; although theyprivate fund managers will operate) and supervising have very long-term liabilities, they often have dfficultythe system through an appropriately staffed superin- finding enough of the viable long-term domestic invest-tendency. "Transparency" is also important-meaning ment opportunities needed to back them.conducting public debate throughout the process. For Successful insurance companies in developing coun-example, Argentina achieved strong support from tries can control and manage this asset-liability mis-trade unions by making them part of the pension match. This can be done through various means,reform decisionmaking process. such as by offering policyholders a variable rate of

return based on a locally accepted benchmark. A life3. The introduction ofprivatepensionfunds is often accom- insurer must also have strong actuarial control of

panied by excess demandfor suitable financial instruments. both its liabilities and its investable funds in order toAs a result of the local market's inability to satisfy avoid potential deficiencies in its life fund-especial-demand, a large proportion of the accumulating ly if local interest rates change substantially.funds is at least initially invested in governmentbonds and bank deposits. When considering a new 2. Liberalization in the insurance industry often proceedsprivate pension system, one should ideally try to more slowly than expected.encourage the supply side of the capital markets. In Sri Lanka IFC has been waiting for several years

40 I N T E t, N A I t C N A L F I N A N C ( C O R I'C) I' A T I o N

for the government, in consultation with the World cut the distribution expenses themselves. The lifeBank, to level the playing field for insurance. In the insurance industry has yet to break the traditionalmeantime its investee company, Union Assurance, is agency system of high initial commissions becausebarred from competing for insurance busincss with attempts in this area have affccted persistency ratios.state-owned enterprises, and government-owned Several companies are trying out nonagency distri-insurance companies are able to undercut it on price. bution methods, but business volumes generally haveNevertheless, Union Assurance has been profitable been somewhat disappointing.and has contributed to financial sector developmentby bringing new products and services into the mar- 4. Returns on investment are higher in the early years inketplace as well as introducing competition, which property and casualty than in life insurers, which oftenhas brought down the overall cost of premiums. eat into capitalfor theirfirst seven to eightyears hefore

reaching the point where renewal business exceeds new3. Controlling costs of distributing insurance products is sales and profitability emerges.

essential. An investee in Indonesia, a joint venture withOne of the biggest problems in the worldwide insur- Manulife Financial of Canada, has become highlyance business is the high and increasing distribution profitable because of its sound product base andcost of all forms of insurance products. One excep- strong marketing skills. The country's first foreigntion is an investee in Uganda, Jubilee Insurance joint venture in the life insurance industry set aCompany Uganda Ltd. It has done an impressive job precedent that has led to 15 other joint ventures ofof keeping its expense ratio down, partly by ceding a this kind. But it took eight years before P.T. Asuransilarge part of its business as reinsurance, thus giving it Jiwa Dharmala Manulife's net worth exceeded initialsignificant commission income to offset commission capitalization. Like other successful life insuranceexpense. However, this gain comes at the cost of companies, it had to be adequately capitalized tolower net retained income within Uganda. But the endure the difficult early period.company still has not developed innovative ways to

Notes1 David Gil, Two Decades of Change in Emerging Markets, "in Keith Park andAntoine van Agtmael, The Worlds Emerging Stock Markets

(Chicago: Probus Pubaishing Co., 1993).

F I N A N C I A L I N S T I T u T I O N S 41

ACCESS FOR SMALLSAVERS ANDBORROWEM

i}.4.,,iv y;vt., | W }~~~~4

It is not only blue chip businesses in developing coun-

tries that need increased access to the formal financialsector. Households and small and medium-size enter-prises need it as well, and governments and develop-ment agencies have found many ways to help bringthem into the financial system. IFC has focused on

three principal methods: creating specialized institu-tions that serve the needs of small participants; settingup equity investment funds; and providing credit foronlending to small private companies.

-'I' jL. The emphasis has been on working through privatevehicles rather than primarily through government pol-icy. Too often, distributive policies have ended up dis-torting market incentives. These include the many"directed credit" programs in which financial institu-tions were required or encouraged to lend to under-privileged sectors to the ruin of their own balancesheets and, ultimately, the government's budget.

The major vehicles currently used are listed in Table6.1. Some focus on the allocation of savings to smalland medium-size enterprises, that is, giving loans and

,, , t .investing debt or equity. Some are targeted to mobiliz-ing household savings. Some vehicles both mobilizesavings from small depositors and invest those savingsin small enterprises. Savings are allocated to SMEs viaintermediary lending programs, venture capital, leasing,and other products.

INTERMEDIARY LENDING PROGRAMSIn dollar volume, more IFC money has reached SMEsthrough onlending by local financial intermediariesthan any other route. More than $1.5 billion has beenonlent through programs wherein local banks, mer-chant banks, leasing companies, and the like onlend

II_ I T I O N 43

Table 6.1. IFC Vehicles Used for SMEs Box 6.1 How Intermediary Programs AreLocal Local Structured

Vehicle n, ,l,.:..3 allocation

Intermediary lending * IFC has structured SME financing programs through localVenture capital a intermediaries in three ways:

Leasing U

Factoring 0 Credit lines, IFC lends foreign currency directly to financialHousing finance * institutions that onlend the borrowed funds to companiesMicrofinance * below a given asset size or needing loans below a givenLocal unit trusts/mutual funds * * maximum. The average loan size onlent to SMEs underMobilization of household savings * credit lines is less than $1 million. Loans to financial inter-Insurance companies (Chapter 5) * * mediaries range in size from $2 zi-,ii to $60 million,Pension funds (Chapter 5) 0 0 with an average size of $13 million. Tenors range from 3

to 10 years. The financial institution then adds an addi-tional spread on loans to the sub-borrowers. IFC requiresthat the rates charged to sub-borrowers be in line with

funds they borrow under the condition that these funds local market rates. The intermediaries assume the foreignbe spread among a variety of borrowers of a specified exchange risk and pass it on to sub-borrowers.maximum size. This program has succeeded in reach-ing many medium-size businesses, but not in reaching Agency credit lines (ACLs). A local financial institutionmany truly small businesses. About 800 businesses in acts as an agent for IFC by identifying, appraising, and50 countries have been supported through the interme- documenting a credit to an SME that IFC then fundsdiary lending program. directly in foreign currency. The agent is usually paid an

agency fee, often under 1 percent. As protection againstVIRTUALLY NO ARREARS adverse selection, the agent is required either to matchFinancially, credit lines have been very efficient (Box the IFC loan with its own local currency loan or to guar-6.1). Except in the former Yugoslavia and now in a few antee half of IFC's exposure.cases in Asia, IFC has experienced virtually no arrearsin 26 years of onlending programs. More than 100 Multicountry loan facilities (MLFs). International banksinstitutions have received loans. About 80 percent of already active in developing countries act as agents tothese have been dedicated to onlending to SMEs. direct IFC funds to their clients. The banks receive a fee,

and IFC books the asset.These intermediary programs are intended:

* to provide finance to local medium-size (and, wherepossible, small) companies ary of lending to small, less well-known firms. Third,

* to introduce local financial institutions to a new, IFC chooses only sound and well-managed institutionsnon-blue chip market so they can gain experience in to work with; very few of these have extensive SMEcredit analysis of smaller firms client bases, and only a few in any country are willing

* to develop skills in analysis of long-term credits. to try this market.

NOT ALL DEVELOPMENT OBJECTIVES In many instances, these programs have introducedCONSISTENTLY MET financial institutions to a new class of small customersThe first of the three objectives has been achieved, but that continued to be a focal point for the institution.the other two have not been consistently met because But in about a third of the cases, IFC estimates thatof constraints on IFC's instruments and its commercial the financial institutions did not continue significantmandate. The first constraint is the fact that IFC is relationships with the SME customers. This was partlyoffering hard currency. The universe of small compa- due to the risks involved in lending to SMEs, risks thatnies earning foreign exchange with which to service a the financial institutions simply judged untenable.foreign exchange obligation is, in most countries, limit- Partly it was due to the fact that the institutions dided. The second basic issue is the risk to the intermedi- not truly develop different skills while onlending the

44 I N T r R N A -I I C N A L I I N A N C U C ) R [' C R A 1 I ) N

IFC facilities. This is even more true in the case of Box 6.2 A Catalytic Role in Lebanon: Nineterm-lending skills. In one country in Africa, the only Syndicated Credit Linessignificant arrears experienced by a group of localfinancial institutions that normally concentrated in Lebanon's financial sector survived the long and devastat-short-term finance were long-term project finance ing civil war largely intact. Good banking laws and rigor-loans funded through IFC credit lines. ous prudential requirements imposed by the central bank

helped maintain banking system stability, but the banksIn three early programs in the 1970s (Kenya, the were pushed into shorter tenors by the uncertainties ofPhilippines, and Thailand), IFC invested resources in war and restricted their activities largely to short-termdeveloping the long-term lending and SME analysis trade finance.skills of the intermediary institutions. In these cases,one or more outside professionals were recruited for Private enterprises, however, were looking for longerperiods of one or two years to work in the local institu- term resources to modernize and expand their opera-tions and train their staff. Unfortunately, these pro- tions. In May 1993 IFC's Board approved $45 million ingrams proved unreplicable. Grant funding to pay for syndicated (cerlit lIre; to five private Lebanese banks forthe experts was not available, and finding experts to onlending to private SMEs. The success of the facilitieshire was difficult. Similar programs were attempted in led to a second $45 million syndicated credit line pro-the 1980s and 19 90s but again ran into problems. In gram for four more banks in 1994. In 1996 IFC arrangedone Central European country, the expert and the its largest syndication to date for Lebanon-$70 millionfunding were in place but the government did not was raised from European institutions for six Lebaneseallow IFC to make the loan. In other instances, funding commercial banks, which are onlending the funds to helpwas available but personnel were not, so the financial local families buy or expand private homes.institutions proceeded without outside advice.

These loans helped private banks play a role in economicNonetheless, credit lines have been the most successful reconstruction by providing longer term credit. They alsointermediary lending program, developmentally speak- attracted the first postwar syndicated funds to the coun-ing. The example of Lebanon is given in Box 6.2. try-eight international banks joined the B-loan program,

IFC's name for loans made under an IFC credit agreementFAILURES IN TWO LOAN PRODUCTS but funded by private banks participating in a syndica-In general, the agency credit lines (ACLs) and multi- tion. This was a milestone in strengthening the interna-country loan facilities (MLFs) have been failures. A tional recognition and perceived creditworthiness of theproduct is judged a failure if it cannot disburse the Lebanese financial sector. About 90 percent of the creditamount committed or if it runs financial losses. The lines have been committed, and more than 90 SMEs haveACLs and MLFs are in the former category- IFC been funded in a wide variety of industries.incurred no significant financial losses but was disap-pointed by slow disbursements. Only $13 million outof $150 million committed to six MLFs was disbursed.

agencies. But the local offices of the internationalACLs were conceived as an innovative way to solve the banks found the programs too complex and insuffi-"spread on spread" problem of credit lines. IFC charges ciently rewarding to implement. In general, productsa spread over its cost of funds to the intermediary, are more successful if IFC has its own direct relation-which adds an additional spread when onlending to ship with borrowing clients and if the products are nolocal enterprises. But the product turned out to be too more complex than strictly necessary.complex for many agents and did not build in enoughincentives for agents to find projects with smaller com- EXCEPTIONS TO GENERAL FAILUREpanies that needed foreign exchange. There have been some exceptions, however, to the dis-

mal record of these products. Learning from past expe-In the case of MLFs, IFC and the headquarters staff of rience, IFC has structured with Bank of Nova Scotia athe international banks that would be "retailing" IFC $50 million MLF targeted at the Caribbean islands,funds believed the concept to be innovative and sound. and in Argentina two agents used the ACL productIn fact, the idea was copied by other development well (Box 6.3).

F I N A N C I A L I N S T I T U T I N S5

Box 6.3 Agency Credit Line Successes in Table 6.2 Early Entrants into Venture Capital:Argentina IFC-Cosponsored Funds

Between 1986 and 1990, five agency lines totaling $48 IFC was the first or one of the first to introduce the ven-million were set up with two Argentine banks, Banco ture capital concept in a number of countries:Roberts and Banco General de 'IegOr; acting asagents. A total of about $40 million was disbursed to 58 Date Country Project name

projects. Approximately 60 percent of all the SME bor-rowers were export oriented. Of the 58 projects, 13 198 Spain siNpaexperienced some debt-servicing problems. 1980 Brazil (ra nyar

1982 Kenya IPS (Kenya)

Unlike many ACLs elsewhere, these worked for the fol- 1983 Korea KDIClowing reasons: 1983 Malaysia Malaysia Ventures

1983 Asia Regional SEAVIC

* They were committed during a time of slow economic 1984 Argentina SADICARgrowth and hyperinflation, when only the largest com- 1987 China JF China

. ' . . . ~~~~1987 Cote d'lvoire IPS (Cote d'lvoire)panies could access funding of any significant tenor.* The small size of each program, about $10 million, was 9 Inter-Risco

1989 Hungary First Hungar Fundmanageable for the agent. 1989 Madgar FirO* The agents were excellent and committed (despite a 1989 Madagascar FIARO

1989 Philippines H&Q Filipple Venturesmodest agency fee of 0.83 percent of the outstanding 199 indi TD ilp-VEVAUeIFC loan), and they were willing to seek out smallerclients and to help them service their obligations to IFC 1990 Thailand SEAVI Thailandwhen they were experiencing financial difficulties. 1990 Indonesia SEAVI Indonesia

1991 Zimbabwe VC of Zimbabwe* The banks dedicated small groups of staff to the proj- 1992 Z.mEuroe Ve Pf Europeects and used IFC's own frameworks for choosing, 1993 Russia Amvinton Russiaanalyzing, and monitoring projects. Investmn Fun

Investment Fund

Despite the success of those ACLs, later projects under- 1993 Ukraine Ukraine VC Fundtaken for SME financing in Argentina-including with 1994 Bulgaria Balkan Fund

1994 Mauritius Mauritius VC Fundthese two banks-were structured as credit lines to avoidthe heavy administrative burden of the ACL approach. 1995 Slovenia Slovenia Development

Capital Fund1995 Southern Africa Zambezi Fund1996 South Africa South African Capital

Growth Fund1997 Pacific Islands Kula Fund

VENTURE CAPITAL sion. Chief among these are know-how from findDespite rapid development, many stock markets in managers and cross-fertilization of experience fromdeveloping countries remain illiquid, with few buyers other growing firms in similar sectors or with similarand sellers and weak supporting infrastructure. Stock business problems. Table 6.2 lists the countries andmarket equity financing is limited mainly to larger regions where IFC was the first, or one of the first, tocompanies with a history of audited accounts. introduce the venture capital concept.

For any new or growing enterprise, however, risk capi- POOR RETURNS ON EARLY EFFORTStal is the most basic financing. Most risk capital comes The financial returns on IFC's early venture capitalfrom the traditional sources-entrepreneurs' savings, investments have been poor. Nevertheless, IFC hasfamily, and friends. But access to third-party risk capi- continue to pursue investments in venture capital. Intal through venture capital funds can bring a number the 12 years prior to 1990, IFC approved $35 millionof important benefits beyond more funding for expan- in 21 venture capital investments; in the following

46 I N T E R N A T I C N A L F I N A N C F C C R 1i' C R A T I .N

5 years, $272 million in 45 funds was approved. IFC China. In some countries, the macroeconomic situationhas now approved investment commitments in more limited mainstream project finance opportunities, butthan 90 different funds, six of which have received some contribution to kick-starting the economies couldmultiple investments. be made through venture capital.

To date, only four funds have completed their invest- Another reason to continue is the fact that preliminaryment cycles, and their returns arc in the single digits. assessments of unrealized gains in venture capital fundsHowever, as the majority of funds begin to reach mid- show signs of financial improvement. Some funds havelife, indicative returns are starting to reach internation- listed their investees on stock exchanges, and others areally competitive rates. Since most returns are realized issuing second tranches of investment capital in theon or near liquidation, the full performance cannot be funds. The private co-investors in IFC's funds seemassessed until the fund is wrapped up. Figure 6.1 shows bullish. In IFC's 70 new funds approvcd in the last fivehow a venture capital fund typically has negative cash years, $4.4 billion was co-invested by private investors,flow in the early years as management fees and failed six times the amount committed by IFC.investments eat into capital; cash flows then shouldturn positive as the fund sells profitable investments. LESSONS LEARNED

1. Market assessment requires skepticism.Despite commercial difficulties, perseverance is impor- Demand for venture capital is almost always overes-tant because venture capital funds remain one of the timated. Surveys of entrepreneurs are unreliable:best vehicles for providing risk capital to small, grow- when asked, most small-business people say theying firms. By mid-1997, 39 of the venture capital funds welcome new sources of risk capital, but they rarelycosponsored by IFC had financed 680 companies with understand that venture capital is expensive money.an average investment of $700,000 per company, for a Venture capital investors demand returns commen-typical stake of 5 percent to 20 percent. Four funds in surate with risks and attach conditions to theirSub-Saharan Africa had invested an average of investment-for instance, fund managers may$100,000 per company in 81 firms. replace firm managers or veto expansion plans.

Government-supported equity programs do notIn recent years, the needs of the transition economies often carry these disciplinary costs and are, therefore,have been particularly pressing. Over half of IFC's ven- "priced" below market rates. Also, investors are oftenture capital fund approvals since 1990 have been in overoptimistic about the emergence of exit mecha-these countries, with several funds each in Russia and nisms over the life of the fund. Since establishing

Figure 6.1. Venture Capital Funds: Positive Returns Take Time

Highest returns come frominitial public offerings, butseveral years' track recordis needed first.

0 0

Manager's fees eat sFailures usually showinto capital from -~ up earlier thaninception. successes.

Time


stock exchanges and developing their liquidity gen- 5. Assemble a like-minded investor group.erally take many years, it is not safe to bet on the When all fund shareholders have a common objec-course of their future development. Funds often use tive, usually long-term capital gains, a host of prob-put options wherein the entrepreneur agrees to buy lems can be avoided. Having local banks or otherthe fund's shares at a future date. These contracts, operating companies as shareholders can be prob-while useful in theory, often cannot be enforced or lematic if their owners insist on focusing on annualare of no practical value if the entrepreneur does not cash flow and dividend returns. Experience withhave sufficient funds. governmental shareholders has not been positive-

governments often want to achieve social goals2. Afund must attain critical mass, and there is a through the venture capital vehicle, which is inap-

"minlmax"fund size. propriate when the fund is commercial and wants toSome of IFC's early funds were too small to support provide other commercial investors with a successfulthe costs of high-quality management. Returns on model. Patient money is a rare find outside institu-investment, in fact, correlate highly with fund size.' tional investors with long-term portfolios, multilater-Nonetheless, investors do not want funds that are al development banks, and governments.too large for the marketplace because of the oppor-tunity costs of uninvested moneys and the fact that 6. Structurefunds carefully in advance.fees are often based on committed capital size. One It is important to use a "two-tiered" structure whereanswer to the dilemma has been to take a regional fund and fund manager are each separately incorpo-approach, for example in Southeast Asia, Central rated or established. Fund investors should be ableEurope, and southern Africa. easily to fire the manager for nonperformance and to

control the strategy of the fund. If the manager is3. Experience counts in management teams. also the CEO of the fund, things can get messy, and

Despite the paramount importance of experience, information flow to the shareholders can be con-IFC has often had to settle for inexperienced man- stricted. A one-tier option sometimes meets a num-agers. In some pioneering markets, no local profes- ber of other requirements and can be used, but safe-sionals have had equity investing experience, and no guards should be built in to mimic the fund-fundforeign venture management firms have been inter- manager relationship of two-tiered funds.ested. In these cases, IFC hoped that good structur-ing and governance would help achieve good perfor- 7. Address governance issues early and maintain vigilantmance results. But in the optimal situation, managers governance throughout the I~fe of thefund.have operating experience, strength in negotiating Once a fund is set up, giving additional powers towith clients and investors, flexibility to change the Board or Investment Committee is difficult.strategies as markets change, ability to get any job Hiring fully trusted fund managers is the bestdone even in the face of regulatory and macroeco- promise of good performance, but this is not alwaysnomic obstacles, and unquestionable integrity. possible. The fund's Board must be given sufficientAnother ingredient of good management is competi- powers to monitor and control the fund manager.tive, results-based compensation. Scrimping on com- This is especially true in emerging markets, whichpensation to individual managers can hurt share- are subject to wide swings of economic policy andholders' returns. business cycles. For example, in one East European

fund, the manager was not providing investees with4. Recruit suitableforeign technicalpartners when necessary. technical support as stipulated in the investment

In new venture capital markets, it is often best to memorandum. The IFC Board nominee was able tohave an experienced international venture capital advise the fund's shareholders and managementmanagement firn manage the fund together with company how to reorganize to bring in competentlocal staff members who bring specific knowledge of support.the local market. The foreign technical partnershould have a meaningful stake in the fund or fund 8. Try to anticipate problems associated withfollow-on funds.management company; anything below 15 percent Often the feasibility study for a new managementhas proven almost useless. A compensation package company assumes that the managers will manage abased on realized returns to shareholders is kley. second or third fund a few years after the first fund

48 I N TIF 1, \ A I I () N A I II N A N iF I )R I' 0 f, A I I () N

is operational. The issues of compensation, manage- Figure 6.2 Leasing in Emerging Markets byment attention, and portfolio selection can become Volume and Market Share of Private Financingcomplex, especially when, as is usually the case, theinvestors in the subsequent funds are different from 80 - 16%those in the initial fund. Initial investors must haveenough power to veto arrangements made with other 70 - 14%investors that work to their detriment. For example, ifbetter compensated by the second fund, the manager 60 - 12%

will tend to concentrate energies there, or if given abigger stake of projects in the second fund, the indi- 50 - 10%vidual manager will channel investments to that funndand leave the worse investments to the first fund. 40 - 8%

LEASING AND OTHER PRODUCTS 30 - 6%Leasing is a more than $350 billion industry worldwide,financing about an eighth of the world's private invest- 20 - 4%

ment and growing fast in the emerging markets. Between1988 and 1995, new leases written in developing coun- 10 - 2%tries increased from $15 billion to $56 billion (Figure6.2). Five of the 20 largest leasing markets worldwide 0 0%were in the middle- and low-income countries. The per- 1988 1989 1990 1991 1992 1993 1994 1995centage of private investment financed by leasing in theemerging markets more than doubled, from just 4 per- Volume $ billioncent in 1988 to an average of 14 percent today. + Market Share %

SUITED TO SMESADVICE AND MODEST INVESTMENTS HELPFor financing smaller businesses, establishing and sup- C E THE INDUSTRY

porting leasing companies has been highly successftil.Leasing is well suited to small business finance for the IFC has undertaken more than 60 technical assistancefollowing reasons: projects to advise governments on how to regulate and

promote leasing. Between fiscal 1977 and fiscal 1997,

* The leased equipment usually generates enough cash 1FC's Board approved $774 million in 151 transactionswith 80 leasing companies in 44 countries. IFC invest-

to pay for the lease. Leasing therefore puts less e qiyi oto hs OFne,wt mlemphasis on historical operating success and balancesheet strength than bank financing does. average investment size of about $500,000. Over 75

* Leases can be obtained more quickly and simply percent of IFC's lease financing was approved between1992 and 1997, in large part because of its suitability

than other sources of finance, because outside secu- g~trity does not need to be arranged. to transition and low-income economies, which have

* The specialized focus of many leasing companies been a particular focus in the 1990s. Boxes 6.4 and 6.5

has allowed them to excel at the speed and ease of describe IFC experiences in Korea and Vietnam.

processing.

* Although the spreads are generally higher on leases PROVIDING EX eLe RETURnsthan on bank loans, the overall cost to the borrower In m stconis where IFC ha te it hascan be the same or lower after the costs of assigning helped establish the first or one of the first leasing

collterl, dcumntaton,andslowr pocesingfor companies. The "demonstration effect" of the projectsbollankral, borroingtartinc , and slower processingfor as early entrants has been especially important. And

bak orown ae ncudd because of its efficiency and usefulness, leasing in* Leasing contracts can be structured to meet the cash aust efficiency and use rale lesing in

flow needs of the lessee. Payments can be stepped almost every country has had admirable results. Returnup or down to match variations in the cash flow or on average equity (ROAB) for investee leasing compa-seasonallty of the business. Payments can be in nies has been an excellent 27 percent in dollar terms.2

advance, arrears, or at varying intervals. The 28 leasing companies in which IFC has an equity

F I N A N C I A L I N S' II - LI T I 0 N S 49

Box 6.4 Korea: How Leasing Aids Box 6.5 Vietnam: Complementarity ofDevelopment Advisory and Investment Work

In 1973 IFC provided the Korean government with tech- The creation of Vietnam's first leasing company illustratesnical advice on a Leasing Industry Promotion Law. New the complementarity of advisory and investment work.leasing regulations were issued in 1977. Shortly there- IFC began by undertaking a leasing feasibility study withafter, IFC invested in Korea's first leasing company. IFC consultancy fees paid by the European Union. After sub-supported the early growth of the company with a $15 mitting a draft regulatory framework to the governmentmillion credit line, of which two-thirds was syndicated to in November 1992, IFC spent the next two years explain-commercial banks that would not have taken the risk of ing leasing and its advantages to relevant governmentallending to a new Korean company without IFC's umbrel- parties, ir,, the State Bank of Vietnam. In 1995 IFCla. The leasing company, Korean Development Leasing and its cosponsors of the country's proposed first leasingCorp., provides more than 4,000 leases to Korean com- company organized a study tour to Korea.panies. Its large client base includes many small andmedium-size enterprises. Not until October 1995 was the prime ministerial decree

on leasing issued, and not until February 1996 was theToday, Korea has the sixth largest leasing industry in the State Bank's implementing circular released. A fewworld. Other countries have borrowed ideas and lan- months later, IFC invested $750,000 for a 1 5 percentguage from the Korean regulations, and Korean leasing equity stake in Vietnam International Leasing Company,companies have invested and acted as technical partners the country's first leasing institution and IFC's first invest-in early leasing companies in countries such as ment in the Vietnamese financial sector, which continuesBangladesh and Vietnam. to be dominated by state-owned banks. VILC's local

sponsor is the Industrial and Commercial Bank ofThis case embodies a number of IFC development Vietnam, the largest industrial financing institution in theapproaches. Policy advice work helped promote a new, country. The technical partner and largest equity holder isspecialized subsector. The investment itself began the Korea Industrial Leasing Corporation, one of Korea's topindustry and mobilized new foreign investors through a leasing companies. Nippon Credit Bank of Japan andsyndicated loan. As the company and the local leasing Banque Fran~aise du Commerce Extbrieur of France alsoindustry grew, leasing became a useful vehicle for fund- hold equity. The new institution, which opened for busi-ing smaller Korean enterprises. The Korean leasing com- ness in February 1997, is expected to contribute topanies themselves have pushed cross-border investing-in broadening and deepening the Vietnamese financial sec-this case from one emerging market to another. tor, assisting the small and medium-size enterprises that

are the backbone of Vietnam's emerging private sectorand the main engine for its economy's future growth.

stake write more than 15,000 new leases per year, specify the maximum percentage of the portfolioworth a total of more than $3 billion. Because the defi- (often 25 percent) that a single industry or group ofnition of small and medium-size businesses changes companies may hold. The violation of this rule isfrom market to market, there are no accurate figures on often a source of trouble. As in any risk business,the numbers of leases extended to small firms. One portfolio monitoring is more cost effective thanestimate is that between 50 percent and 70 percent of working one's way out of defaults. One strength ofnew leases given by IFC investees are written for leasing companies is their low provisioning rate-SMEs. The average lease size varies tremendously, 1.25 percent of lease receivables over the last fourfrom $13,000 for a Slovenian lessor to a high of years among IFC's investees on average.$650,000 for a Korean investee, but half the Koreanleases were fairly small at less than $200,000. 2. Management is critical.

Management should insist on high standards of cashLESSONS LEARNED flow-based credit analysis and client supervision,1. Carefulportfolio management and divers fication pay off. excellent follow-up, and good equipment insurance

The operating policy of investee companies should and documentation procedures. Teaming up with a

50 I N T F R N A T I O N A L F I N A N C F C O R PO R A T I ( N

foreign technical partner to provide skills unavailable Box 6.6 Some Special Pitfalls of Leasinglocally in some markets is appropriate. The technicalpartner should have a significant equity stake, When trying to recover collateral, leasing companies havebetween 20 percent and 40 percent, to ensure active an advantage over bank lenders-they own the leasedparticipation. Technical partners often second the asset. Physical repossession can still prove difficult. Infirst manager or two, but it is best to recruit partners Czechoslovakia in the early 1990s, for example, no assetwho are dedicated to training local staff to take over could be repossessed if it were fixed to the floor or con-management positions so as to make the company stituted part of a larger process (for example, a dietruly local and ensure that the skills can be increas- machine that was part of a metal finishing process). Iningly found in the local market. China many aspects of legal enforcement are determined

at the provincial, not national, level, and some leasing3. Realistic strategy must be planned early. companies have given up trying to lease outside their

Most leasing clients demand local currency leases, and home province due to difficulties in obtaining court per-finding local currency term funding is usually the sin- mission to repossess in other provinces. In Malawi an IFCgle biggest obstacle to growth. Since this is a scarce investee has experienced difficulties with trucks. Whilecommodity in most emerging markets, leasing compa- transshipment is a major local business, the mobility ofnies have to think this problem through from the start. trucks poses an obvious hazard to repossession. InOften institutional investors such as insurance compa- Tanzania mortgage rights are actually easier to enforcenies and pension funds are brought into the share- than ownership rights, impairing one of the great advan-holding and asked for a commitment to lend term tages found frequently elsewhere.funds to the new company. Most bond markets are notwell developed, but leasing companies often are the No matter how strong their potential market, leasingpioneers in building the local private bond markets. In companies are like any other: they need strong manage-Brazil, for example, 60 percent of the bond market ment and can fail if not properly structured. A leasingissues were from leasing companies in 1994-95. company in Ghana was started in 1991 with an inordi-

nately high 75 percent of its equity held by international4. Currency convertibility is of enormous value. development institutions, including IFC. Although the

Most leased equipment is imported and must be pur- local economy was strong during the early 1 990s, thechased with hard currency, but equipment users usu- company ran into serious difficulties five years later andally want to make lease payments in local currency. had neither a strong local shareholder nor a foreign tech-Without a conversion mechanism, leasing companies nical partner that could provide leadership. The invest-often must restrict their clients to exporters who are ment has not produced significant returns for IFC fromable to service foreign currency-denominated leases. either a development or financial perspective.

5. An appropriate regulatoryframework and repossessionrights should be in place. 6. Sector spreads for high-risk clients must be competitive.Leasing companies need a regulatory, legal, and fiscal Experience shows a worldwide convergence ofenvironment that at least provides equal treatment spreads around the 6 percent to 9 percent range. Incompared with other sources of capital investment one African country, an investee found half its busi-financing (Boxes 6.6 and 6.7). Clear, simple, and ness wiped out overnight when a usury law waseffective legal procedures to reclaim assets are impor- instituted. Rates were capped without regard to termtant. Any tariff reductions or investment tax credits - in fact, ceilings were pegged to move with thegiven to direct importers or users of equipment discount rate, a very short tenor rate. With a strokeshould be given to the leasing company, which is the of the pen, this eliminated the only source of financ-owner of record. Many leasing companies have to ing for small businesses.struggle to make this concept clear to local authori-ties but cannot compete with bank financing without 7. Stand-alone leasing companies compete more vigorouslyit. Many countries give favorable tax treatment to than leasing operations that are part of otherfinancialleasing in order to promote investment. By and large, institutions.this seems to have had minimal distortionary effects. Countries where stand-alone leasing companies do

F INA NC IA L INS T IT UT IO NS 51

Box 6.7 Tax Incentives for Leasing FACTORINGCompanies sometimes sell their receivables to raise

Tax incentives reflect governmental recognition that eco- cash. This process, factoring, is useful for small compa-nomic benefits are associated with leasing because it nies without adequate working capital or enough vol-expands productivity by giving new and small firms access ume to justify their own receivables management func-to investment financing and encourages the use of pro- tion. It is also used by large companies with largeductive equipment. In many countries, lessees can offset amounts of receivables and a wide variety of vendors.their full lease payments (which include principal and In addition to buying receivables, a factor may provideinterest components) against income before tax, but they clients with general cash management services for acan offset only the interest portion of a bank loan against fee. Factoring is often an important credit tool forincome. Leasing companies may also pass on tax benefits SMEs that do not have large assets or collateral butassociated with their depreciation to lessees via reduced have expanding sales. It is a flexible form of financingfinancing costs. and provides services that banks do not, such as receiv-

ables management, credit insurance, and collection ser-The existence of a leasing industry may allow a mismatch vices. Factoring helps fill gaps in existing financial sys-in tax positions to be productively arbitraged, such that tems, promotes diversification of industries, andcapital investment is more likely to be undertaken by a improves capital efficiency. It is a surprisingly largecompany that expects the highest marginal return on its global business.investment, even if it does not itself have a favorable taxposition. Governments recognize that overall volume and The factoring industry grew nearly 50 percent in theefficiency of capital investment can be higher when tax first half of the 1990s, going from $233 billion in 1990positions can be "swapped" and thus design tax regimes to $340 billion in 1995. This makes it only slightlyto encourage this. smaller than the global leasing industry. While interna-

tional (cross-border) factoring accounts for only 7 per-cent of worldwide volume, it is growing somewhat

most of the leasing usually have higher penetration faster than domestic factoring. Emerging marketsrates (leasing as a percentage of investment financ- account for about 11 percent of all factoring, abouting) than do countries where banks or universal $38 billion in 1995.financial institutions provide leasing as a service.This is due to the greater development of skills and RESULTS MIXEDmarket focus. In some markets, however, companies Though large, factoring is still considered a niche busi-can be at a disadvantage vis-a-vis banks that have ness. IFC has pursued it where a critical mass of busi-access to low-cost deposit funding, especially if nesses had factorable receivables and where IFC couldbanks start to compete before specialized leasing interest an international factoring company in becom-achieves a market penetration of about 5 percent to ing a technical partner. IFC has invested $3.1 million10 percent. Leasing companies can provide one of in seven factoring companies, with another $1.6 mil-the few sources of competition to banks, a benefit to lion pending in two factoring companies. Almost allsectoral development that is vitiated when banks these moneys have been invested since 1992. On aver-control the leasing companies. age, IFC has taken a 20 percent funding equity stake

in these firms. IFC has sold two investments, making a8. Leasing companies are less subject to fraud than are other small capital gain on an Ecuadorian company (dimin-

financial institutions. ished because of the effect of devaluation) and achiev-Relatively few problems with "creative bookkeeping" ing an internal rate of return of more than 31 percentoccur in leasing since such a high proportion of assets on a Czech operation.(often 60 percent to 80 percent) are in leases backedby documented and insured equipment. Some excep- Considering the newness of IFC's investment portfoliotions have been found in less liberal regions, where in factoring, the success of the investments is difficultunstable macroeconomic environments encourage to judge. The portfolio has been affected by currency"overinvoicing" to facilitate capital flight or where per- devaluations and country-specific problems in Turkeysonal gain from granting leases to bad creditors has and Mexico. Lately, the return on average equity of thesometimes prevailed over corporate considerations. six remaining investees has averaged only 3 percent.

52 I N T E R N A I I O N A L F I N A N ( F C O R I'P R A T I o N

The type of feasibility study needed for factoring is of the firm (vhich was subsequently restructured byunique. Information about market competition is often shareholders). In another company, 70 percent of thecompletely wrong because much receivable finance is turnover came from one client when IFC sold out itsunrecorded. The mix of domestic and cross-border fac- position. While this cannot be avoided in the verytoring demand is difficult to assess. Cross-border fac- beginning of a company's life, diversification oftoring is lower risk but often in low demand. The lack clients should be a major objective from the start.of entry barriers can lead to incompetent competition.This is dangerous for the industry because some firms 6. Stick by the companies that comply with sound operatingcan underprice for a long time before they fail, in the principles.

meantime leading other firms into failure trying to IFC has faced two cases where major financial ormeet the same unrealistic pricing terms. market problems threatened the life of the company.

In one case, IFC did not participate in recapitaliza-LESSONS LEARNED tion because the company did not have a clear andThe possibility for fraud is perhaps greater in factoring viablc strategy for the future and did not expressthan in any other area of the financial sector. IFC willingness to adhere to basic policies on fundinglearned this lesson at the price of substantial losses on a mismatches. In the other case, IFC continued toleasing investee that was engaged in factoring fraud. support the company because it continued to adhere

to operational policies to the best of its ability. Its1. High volumes of receivables are needed. portfolio was beset with arrears after a major eco-

Invest only where a large volume of clients can be nomic crisis, but its lending margins, administrativeanticipated. expenses, commission and fee income, and client dis-

tribution were in line with the original business plan.2. The technicalpartner is indispensablefor international

(cross-border)factoring. 7. Information systems andfraud checks must be excellent.The worldwide factoring business is concentrated ina few networks of factors because of the economies 8. An outsider playing the role of neutral broker can beof scale in information. Teaming up with one of especially valuable in a volatile industry.these networks is the only way to enter the interna- IFC has helped introduce the concept to localtional business. Given the specificity of the systems cosponsors who would otherwise not have beenskills required, even purely domestic factors will ben- interested in entering. As companies weather macro-efit from the guidance of a technical partner. As in economic storms, some shareholders drop out, andall such cases, the technical partner's commitment, companies need an outside institution with the willskill, and follow-through are crucial. and ability to bring in new local or foreign share-

holders, or both.3. Invest in a thoroughfeasibility study, using savvy local

experts as much as possible. 9. Governments must be encouraged to consider requiringminimum capital andprudentialguidelines as aform of

4. Set out operational strategy and internal control mecha- entry barrier.nisms clearlyfrom the start. The lack of discipline in some markets has led to theRemain flexible on strategy as the macroeconomic destruction of the industry and the withdrawal of aenvironment changes-but remain firm on control working capital finance source for many small firms.mechanisms. In one case, other factors were arbitrag-ing between foreign and local interest rates; they bor- HOUSING FINANCErowed cheaply abroad and lent in local currency. This Housing finance will be one of the most importantforced an investee into higher risk market segments as segments of the financial sector in emerging markets init tried to stick to a matched finding policy. Most of coming years. Allowing households to invest in theirthe local firms were devastated when devaluations homes aids capital accumulation and gives ordinary cit-made it impossible for them to repay foreign debts. izens assets against which to borrow for critical items

such as starting new businesses, educating their chil-5. Stick to limits on concentration of business. dren, or providing old age security.

In one company, one loss wiped out the entire equity

F INA NC IA L INS T IT UT IO NS 53

Although housing finance is expected to receive Trinidad and Tobago. IFC helped set up the first sec-increased attention from all players in development, ondarv mortgage market institution. In 1983 theIFC has not made many investments in this area. This Corporation invested in the Home Mortgage Bank,is due partly to the mixed success of the few invest- which in 1996 became the technical partner for thements it has madc and partly to the complex policy East Caribbean Home Mortgage Bank.issues surrounding government incentives for bothbuilding housing stock and financing mortgages. In LESSONS LEARNEDaddition, foreign currency loans are rarely appropriate With the usual caveats about extrapolating from ain countries with no swap markets. small base of data, some lessons must be considered

when contemplating activity in the area of housingCOMMERCIAL RECORD MIXED AT BEST finance:IFC has made 10 equity investments in housingfinance institutions, in addition to several credit lines 1. Overall system design andpolicyframework are critical.to housing finance institutions. Of these equity invest- The government's role should be clear. If publicments, 3 can be called successful, 2 have persevered incentives are provided within the framework of awith marginal profitability, and 3 have failed or nearly private housing finance system, they should be care-failed as housing institutions although they have con- fully delineated. In general, the principle of subsidiz-tinued to operate, sometimes as straight commercial ing the homeowner and not the house or the financebanks. Despite the mixed record, IFC now has a bur- is less distortive because it allows housing andgeoning pipeline of new housing finance projects tai- finance prices to follow the market.lored to liberalize macroenvironments and focused, tosome extent, on secondary market development. 2. Strong government supportfor the institution without

strong government control is idealThe successful companies have been in Colombia, In Colombia, for example, the interaction betweenIndia, and Trinidad and Tobago. policymakers and private finance providers has

worked well. The government tried to pave the wayColombia. In 1973 IFC was a founding shareholder in for securitization through regulatory change. It thenDavivienda, a pioneering housing finance institution. prompted private firms to get the help they neededIn the 1970s the Corporation contributed policy advice to issue the first mortgage-backed securities.on the regulation of the savings and housing corpora-tions. Colombia today has one of the most vibrant 3. The major problem of access to term funding must behousing finance systems in the developing world, with addressed early.more than two decades of experience with a private Access to term funding has been the main obstaclesector-driven system. IFC helped Davivienda complete to creating private housing finance industries in mostColombia's first mortgage securitization transaction emerging markets. Consumers usually expect mort-(January 1995). This was an important milestone for gages of 8 to 15 years, and some of the better func-asset securitization in Colombia, and four more trans- tioning developing-country markets see average loanactions were completed during 1995. terms of about 7 years (due to prepayments or sale of

the home). Yet few markets have this sort of termIndia. IFC took a founding stake in Housing money available because of inflation, policy uncer-Development Finance Corporation (HDFC) in 1978. tainty, lack of yield curve benchmarks, and generalThis was the first major financial institution in India macroeconomic instability. IFC has experimentedthat was permitted to be majority private-owned since with ways to alleviate this problem-for example, bynationalization. The company targeted the urban mid- providing guarantees on later tenors, providing liq-dle class and maintained a very low (below 1 percent) uidity facilities to mortgagors, guaranteeing localarrearage rate. Today it has more than $2 billion in bond issues, and working with governments to guar-assets, and its success has spawned about 20 other pri- antee later tenors of mortgages. This work will likelyvate mortgage finance companies. continue in tandem with other work on bond market

development.

54 1 N T E R N A T I O N A I F I N A N C E C O R P O R A T I O N

4. Demonstrating success by targeting lower risk, middle-class Internacional, S.A. (Profund) and Kenya Rural

markets may be more important than workingfor even Enterprise Program (K-Rep). Others followed in fiscal

distribution offinance to all income levels right away. 1997 in Bosnia and Herzegovina and the WVest Bank

Given the judicial problems in many markets and and Gaza.

the impossibility of repossession or other legalrecourse, minimizing credit problems by choosing IFC's experience in microfinance is still too new to

responsible borrowers is the most efficient way to provide any valuable lessons. In the fiture, the

run a commercially viable institution and to give the Corporation hopes to provide various financing instru-

concept appeal to other investors. For example, if the ments for microfinance intermediaries such as credit

HDFC in India had not been successful, it would lines, guarantee products, loan option facilities, syndi-

not have given rise to some 20 competitors or even cated flow through guarantee programs, securitization

to the rural finance institution to which it later pro- of microloan portfolios, as well as equity and quasi-

vided assistance. equity investment instruments.

MICROFINANCE LOCAL UNIT TRUSTS AND MUTUAL FUNDSAlthough conditions inevitably vary from country to Because local mutual fund vehicles for mobilizing and

country, microenterprises are often defined as businesses investing savings in local equity and debt markets do

with fewer than 10 employees and assets of less than not require hard currency funding, foreign investors

$10,000. Microenterprises are engaged in activities have done relatively little in this area. But developmen-

ranging from street vending, food preparation, weav- tally, the creation of funds for mobilizing and allocat-

ing, and ceramics, to cabinet making, metalworking, ing household savings is of primary importance. Most

bicycle repair, and the like. The economic rationale for emerging markets are in great need of additional insti-

supporting these enterprises is compelling: they often tutional investors and vehicles for enhancing middle-

make up 50 percent or more of the labor force in class participation in the financial system.

developing countries and can provide a sustainable

route out of poverty by generating increased employ- IFC has helped to get several local open-end finds3

ment and income. They also can broaden capital mar- started and has provided policy advice to a number of

kets by instilling a culture of savings and investment governments on structuring laws that promote and

for the vast majority of the poor in developing coun- properly regulate domestic funds.

tries who traditionally rely on friends, relatives, and

informal money lenders for initial capital. From a developmental and political point of view, these

funds are excellent vehicles for giving middle-class

To begin operations, microenterprises need small households access to capital markets. In some countries,

amounts of short-term working capital, sometimes the entry of foreign funds has been the catalyst for the

backed by unconventional but safe and liquid collateral rise of local mutual finds, in some cases because local

and savings services. Mindful of the significant devel- legislation was not in place or was not suited to a mod-

opment impact of microenterprises and the over- ern capital market. In India local open-end unit trusts

whelming demand for their services, IFC has begun to did exist but could be run only by government entities.

seek out finance programs and institutions with strong According to many observers, the presence of foreign

potential for financial sustainability and commercial investors and skilled asset managers helped along the

viability as well as broad outreach capabilities. Because process of opening up to private funds.

it is mandated to invest only in commercially sustain-

able businesses, IFC has had to search for projects Mass privatization programs have also led governments

which will attract other private investors. Experience to consider creating privatization mutual funds to allow

has shown that early grant funding does not necessarily citizens to benefit from the sale of state-owned assets.

compromise the principles of commercial sustainability Czechoslovakia, in 1992, was the first to put such a

provided that it is (a) timebound, available for, say, three program into effect. Russia, Romania, and Poland fol-

years, and (b) linked to the achievement of specific lowed, with varying degrees of success in meeting their

objectives such as growth of funding base, and size and stated goals. This mechanism is being discussed or for-

quality of loan portfolio. IFC's first investments in mulated by the Kyrgyz Republic, Zambia, Zimbabwe,

microenterprise finance came in fiscal 1996: Profund Tanzania, and Peru (Box 6.8). Work in Zambia,

F I N A N C I A L I N S T I 1- U I I O N S 55

Zimbabwe, and Tanzania has been aimed at creating Box 6.8 Peru: Enhancing Small Investorenvironments in which privatization mutual funds Participationcould operate successfully.

IFC has embarked on a policy advisory effort to encour-Now an increasing number of international asset manage small savers to invest in the Peruvian capital markets.agers are interested in setting up local operations. In The project will help support and refine the financial sec-these cases, an outsider like IFC can contribute its tor infrastructure needed to successfully accommodatecountry knowledge and act as an honest broker in the estimated 400,000 small savers expected to partic-bringing together experienced international money ipate in the Programa de Participacibn Ciudadana. Thismanagers and local institutions that can provide local program will allow households to invest in recently priva-market expertise and distribution capacity. tized Peruvian companies through participation in mutual

funds. The ultimate objective is the creation of a vibrantLESSONS LEARNED mutual fund industry in the country that will accommo-1. A consistent legalframework is needed. date wide citizen participation in the securities markets.

Some countries attempt to reinvent fund legislationand sometimes simultaneously draw from the legaltraditions of the United States, United Kingdom, orFrance, ending up with unsatisfactory laws andinconsistent principles of regulation.

2. Distribution is often more expensive and more difficultthan expected.

3. Being a market pioneer has its costs.The systems requirements are high, and skilled man-agement must be given incentives. A significantnumber of investors, therefore, is needed to makethe operation cost-effective. Many markets are alsoconstrained by the supply of securities. A new mutualfund industry may be in the middle of a vicious supplyand demand circle-there are not enough issuersbecause there are not enough investors.

Notes1 In a sample ofl5funds, 7 'with capitalizations under $10 million had internal rates of return of-i percent, and 8 with capitalizations over $10 mil-

lion had IRRs of 3.9 percent.2 The 27 percent ROAE average is based on the average ROAEsfor eachf irm in IFCsporqfoliofor the lastfour annual rportingperiods.

3 Open-endfunds constitute most of thefunds in developed markets. In an open-endfund, an investor can cash out the investment at almost any time at

net asset value. The corpus offunds under management, therefore,flzctuates as investors come in and go out of thefund A closed-endfund has a definedcorpus. and investors exit only by selling their shares to other 'willing buyers at the prevailing market price.

56 1 N T r R N A Ir o N A L. F I N A N C C - ORP 1' 0 R A T I O N

ACCESS TOINTERNATIONALCAPITAL MARKETS

e ~~~~~~~~~~~~~~.,

The global debt crisis precipitated by Mexico's 1982loan default presented the world with a fundamentallynew challenge: how to sustain and increase foreigncapital inflows to developing countries. These inflowshad peaked at about $134 million in 1981, only todecline to $96 billion in 1982 and to $61 billion in1984. For IFC, the particular challenge was to sustainforeign private sector capital inflows to private sector

entities in developing countries, for these private netflows dropped even more sharply than general flows,from $95 billion in 1981 to $22 billion in 1984.

Part of the needed response was to develop theinternational capital markets as an alternative source offulnds for private sector firms from developing countries.Equity investors, who had virtualy no experience indeveloping countries, had to be persuaded that investingin equity securities of private emerging markets firmswas an attractive and appropriate investment opportu-nity. (In view of the debt crisis, the traditional debtinvestors were unlikely to supply additional debt funds.)

To make the case that emerging markets investingEiz'; s;e eYmade sense, impartial data had to be collected (Box

7.1). So IFC further developed the Emerging MarketsData Base it had set up in 1981. The data collectedshowed that many markets provided superior retumsand, further, had low to negative correlation with

-. .~ developed-country equity markets. Therefore, theycould be good portfolio diversification tools.

Next, practical ways for investors to enter the emergingmarkets had to be provided. The first vehicle IFC usedwas an adaptation of the closed-end fund. Company bycompany, IFC also began helping private developing-country firms access international markets by structuring,underwriting, and placing their securities issues abroad.

I T U T I 0 N S 57

Box 7.1 Creating the Debate Box 7.2 Meeting Concerns about ForeignInvestment

Between 1978 and 1985, IFC began collecting data onthe emerging stock markets and gave dozens of presen- Traditionally, developing-country governments have hadtations in various global forums. These presentations put two concerns about foreign investment in local shares,forward data on size, depth, liquidity, float, and the regu- These concerns have centered on a sense that foreignlatory environment in developing-country stock markets. investment entailed the sale of "national patrimony" toThey also helped launch a worldwide debate on the foreigners and a fear that volatility of foreign flows mightadvantages of local stock markets and the issues involved create a roller-coaster effect in their markets.in allowing foreign investment.

IFC's resurrection of a little-used instrument, the closed-Debates were raised on competition for capital in small end country fund, helped address these concerns.economies; the pros and cons of foreign investment in Closed-end funds invest only in minority shares in listedsecurities; the importance of local capital markets to companies and do not seek control. Many of the earlyenterprise creation; the question of supply (issuer)-driven funds also had a minimum life, which gave comfort toor demand (investor)-driven barriers to development; the the host country that they would not exit the marketimportance of sound regulations and strict enforcement; quickly. Being closed-end, these funds are capitalizedand the question of whether audit requirements would with a fixed sum and grow or shrink only with the under-discourage listing. lying value of the shares (plus or minus a premium or dis-

count depending on foreign perceptions). They do notredeem shares at the investors' request as open-endmutual funds do, and therefore do not fluctuate greatly.

Among the vehicles useful in promoting access to instrumental in structuring the first emerging marketsinternational capital have been: fund in this country, in 1981 but, due to misgivings

over management arrangements, did not, in the end,* policy advice and technical assistance underwrite it.* portfolio investment funds* private equity funds In the meantime, IFC's financial market specialists had* fund management companies been working with the Republic of Korea since 1971* Emerging Markets Data Base and index funds and had, with the Korean authorities, forged a vision of* securities underwriting and placement (for financial opening up that market to foreign investment in a

institutions and industrial companies). politically acceptable way. The authorities determinedthat they could welcome foreign investment in the

PORTFOLIO FUNDS form of a closed-end fund that would not seek majori-Often the first international access for emerging mar- ty stakes and would not be subject to fluctuations ofkets is the entry of portfolio funds in which foreign principal. The first step, taken in the late 1970s, was toinvestors creatc pools of funds for investment in minor- crcate a regulatory infrastructure suitable for interna-ity stakes, primarily of listed companies. (Box 7.2 tional investors. IFC and the Korean authoritiesexplains why closed-end portfolio funds were an accept- worked together for many years developing regulationsable first vehicle for foreign entry.) For investors, the and institutions to enforce securities market regula-closed-end model provided a means to have exposure to tions. IFC structured the ground-breaking Korea Funda diversified portfolio of stocks. It also offered dedicated in 1984 and sought co-lead underwriters to help listportfolio management, brokerage, and custody services the fund on the New York Stock Exchange. This firstnot previously available. $60 million listed fund was the grandfather of what

was to become a $100 billion industry.About half of all foreign investment in developing-country stock markets is in the form of portfolio funds. Subsequent IFC efforts to structure, underwrite, place,The first market in which IFC tried to use the closed- and (in the case of private placements) invest in fundsend fund structure was Mexico. The Corporation was provided an early example of success. After the Korea

58 1 N T E R N A T I 0 N A [ I I N A N C E ( O RP I' O R A T I O) N

Table 7.1 Opening Markets to Foreign Portfolio Investors: Some Examples

CapitalizationYear of IFC (US$ millions)approval Country Fund Initial Oct. 1996

1984 Korea Korea Fund 60 6441986 Global Emerging Markets Growth Fund 50 8,5101986 Thailand Thai Fund 30 2821987 Malaysia Malaysia Fund Inc. 84 2061987 Brazil Equity Fund of Brazil 87 891989 Latin America New World Investment Fund 62 n/a1989 )Illl:'Pirle; Manila Fund Inc. 50 1021989 Turkey Turkish Investment Fund Inc. 24 351990 Chile Five Arrows Chile Fund 75 3241990 Portugal Portuguese Investment Fund 30 n/a1992 Mauritius Mauritius Fund 17 251993 Africa Africa Emerging Markets Fund 30 791994 Middle East Emerging Mid-East Fund 40 40

nla - not available

Fund experience, IFC structured 19 more portfolio on the Korea Fund, for example, was 27 percentinvestment funds between 1986 and 1990. These were between 1984 and 1995.all the first of their kind for their respective markets.IFC's average underwriting commitment or cash Foreign portfolio investment funds have been impor-investment amounted to a mere $12 million per fund. tant for the considerable capital flows they represent-After 1990 the private international investment banks but their impact on market development may be evenand asset managers began to understand that this was more important. Even with the great boom in foreignsound business. As the private market began to struc- investment in emerging market stock markets, it is stillture country funds, IFC stepped away from this busi- the local investors that control roughly 90 percent ofness. However, the Corporation did continue to pio- the market capitalization. Foreign investors help spurneer new markets that were unfamiliar to international improvements in the functioning of local stock mar-investors. In addition to its 1993 cosponsorship of the kets, and these changes build local investors' confi-first Africa Fund, in 1994 it cosponsored the first such dence in their own market. Recent research corrobo-fund for the Middle East. (Table 7.1 presents a partial rates the fact that foreign investment leads to higherlist of funds that opened up markets.) liquidity and that higher liquidity is correlated with

growth for the economy as a whole.2

By the end of 1991, nearly 300 funds managed $20 bil-lion of emerging markets equities. By 1994 nearly Foreign portfolio funds introduce professional asset1,000 funds were running more than $100 billion in managers to new markets.' In turn, these managersemerging markets investments. IFC has cosponsored demand better levels of service: transfer agents, cus-36 portfolio funds with an original capitalization of tody, accounting and disclosure, and enforcement of$2 billion. These funds, virtually all early entrants, are securities regulations. It is common to see new indus-now worth about $11 billion, or about 11 percent of tries spring up almost overnight. The thriving corpo-the total market. rate equity research business in Zimbabwe, for exam-

ple, was virtually nonexistent in 1992. ERISA-qualifiedThe returns on the portfolio funds in which IFC custodians are now found in most African countriesinvested have been excellent, averaging over 24 percent with a stock market. Foreign investors tend to requireannually.' The returns to investors on funds IFC has greater company-level disclosure and, in some cases,underwritten have been comparable. The annual return are the first investors to demand that companies pay

F I N A N C I A L I N S T I T tJ T I O N S 59

attention to the rights of minority shareholders. Figure IFC has helped establish 15 such funds, 11 since 1994.7.1 illustrates the dynamic of foreign portfolio funds Most of the funds are large (Table 7.2). In addition,pushing market development. most are in the larger GDP regions and tend to con-

centrate on infrastructure. ByJune 1997, the 16 privatePRIVATE EQUITY FUNDS equity funds then in IFC's portfolio had an averagePrivate equity funds are invested primarily in growing, investment size of $18 million.unlisted companies. They differ from venture capitalfunds in the size and stage of investment. Private equi- Because of the brevity of IFC experience in the area,

ty funds tend to target larger, more developed projects. no definitive conclusions can be drawn yet about the

The market for private equity funds developed in financial success of its private equity funds. In the early

response to several factors: privatization, increased pri- period, the investors are generally concerned with the

vate provision and financing of infrastructure, and rate of investment, that is, how fast the fund manager

improvements in stock market size and liquidity that can disburse moneys to worthy commercial projects.

have allowed private equitv investors to anticipate sell-

ing stakes through initial public offerings. LESSONS LEARNED1. For portfolio equity funds, continued government priva-

tization and reforms, combined with macroeconomic sta-

bility, are important to deliver a pipeline ofpotential

investments.Figure 7.1 Portfolio Funds Encourage market inesmet.Figurepth 7.1 Portfolio FundsEncouragemarketThis is more pertinent for country-specific fundsDepth than for sectoral funds. Funds in Argentina, Brazil,

Reform and Morocco invested at a steady rate; those in Peruand Egypt invested more slowly, due in part to

delays in privatizations and government reforms.Foreign investors

demand beTner• Regulation 2. For pri'vate equity funds, the market i's rapidly becoming* Servltices more competitive.

*_ * Prices up When IFC started its push in private equity funds in* Liquidity up 1993, many of the targeted projects had few alterna-

_M,re tive funding sources. That has changed in the major

institutional More supply, Cost of markets. Sponsors of good projects, particularlyinvestors liquidity, issuing infrastructure projects, have many financing options,

demand down including international debt and equity offerings,____ private bank finance, national export-import bank

programs, and development agency funding. Some_ More equity lenders demand equity participation as part of theissued

Table 7.2 Examples of IFC-Sponsored Private Equity Funds

Initial capital Board IFC share Regional!(U S.$ million) approval Fund name (percent) sectoral focus

500 Mar 1994 Asia Infrastructure Fund 10 Asia/infrastructure

500 Apr 1994 Global Power Investments 10 Global/power500 Jan 1994 GP Capital Partners Brazil 15 Brazil/all300 Dec 1996 Mexico Partners Trust 5 Mexico150 Jun 1995 Latin American Enterprise Fund 13 Latin America/all100 Jun 1993 Scudder Latin American Trust for Power 25 Global/ power68 Dec 1994 Argentina Investment Capital Fund 20 Argentina/all

60 I N T E R \N A T I O N A L F I N A N C E C O R PO R A T I O N

price of supplying long-term debt, thus narrowing $200 million was passively managed. That rose to moreopportunities for private equity funds. than $11 billion in 1997. About 75 percent of this is

run against the IFC indexes. Index products are likely,3. Forfund managers, good management can overcome a to continue to grow, as are index-linked products,

host ofproblems. including debt market indexes. The indexes may even-Experienced managers adapt to changing circum- tually form the base of exchange-listed futures andstances. The management of one fund, the Central options products for emerging markets.European Tetecoms Fund, shifted priorities awayfrom local telephone concessions in Hungary after EMDB now covers 45 markets (up from 27 markets indiscovering that the concession winners demanded 1996) and more than 2,200 stocks. EMDB currentlyvery high premiums from outside equity investors. calculates 228 indexes on a daily basis and hundredsInstead, the fund turned its focus to other types of more on a monthly basis. These include Global,companies in Poland and Hungary. Projects increas- Investable, and Frontier Indexes.4

ingly demand that investors bring expertise as well asmoney. The Asia Infrastructure Fund, for example, is LESSONS LEARNEDmanaged by technical experts from the targeted infra- 1. Impartiality and credibility are key.

structure sectors. As the product of a multilateral organization,EMDB has no ties to investment banks, brokers, or

THE EMERGING MARKETS DATA BASE AND fund managers and is unlikely to have conflicts ofINDEX FUNDS interest in choosing companies for inclusion in itsThe Emerging Markets Data Base (EMDB), estab- indexes. As part of IFC and the World Bank Group,lished in 1981 with data collected back to 1975, was EMDB has been able to maintain its reputation forthe earliest and single most comprehensive source of in-depth country economic and market knowledge.stock market data on emerging markets. The synergies with IFC's work in securities market

development can be helpful both to developing-In late 1985, in response to interest from institutional country clients and international investors.investors, IFC upgraded the data it was providing. Theindexes were changed from equal weighting to market 2. The more comprehensive an index can be, the better.capitalization weighting, reporting lags were shortened, The EMDB is the most comprehensive of the datathe number of markets covered rose from 10 to 17, base services. This is largely due to IFC's develop-with 380 stocks reported. In 1987 the product became ment mandate-IFC will track markets even beforecommercial and included the IFC indexes, which sufficient commercial interest makes the serviceproved particularly popular with money managers. By commercially viable. IFC covers the largest number1991 EMDB collected detailed data on 850 stocks in of markets and has the longest history and timethe 20 emerging markets included in the indexes, and series of data of any emerging markets data service.it collected information on another two dozen markets.

In 1993 EMDB introduced the IFC Investable (IFCI) Box 7.3 Explosive Growth of Index Fundsindexes. Designed to reflect the realities faced byinternational investors, these indexes take account of IlFC helped launch the State Street/lFC Global Emergingownership restrictions imposed on foreign investors, Markets Index Fund in 1993, capitalized at less thanlimited market liquidity for shares, and currency-con- $50 milIl,r. Two and a half years later, despite difficult mar-vertibility regulations. The JFCI indexes have trans- ket conditions, the fund's capitalization topped $1 billion.formed the EMDB product from an information tool ut:euer;iy, IFC hepled structure the NatWest/lFC Latininto an investment tool. The EMDB indexes are now a American Index Fund with an initial size of $60 million.benchmark for measuring the performance of emerging Some niche products are also being structured using themarket portfolios and the basis for running passively indexes. For example, in 1996, Bankers Trust Internationalmanaged, or Index, funds. Limited issued "Index Return Certificates" traded on

German exchanges for European retail investors. The cer-Recent years have seen an explosion in emerging mar- tificates are based on the IFC indexes for Poland,kets index-based investments (Box 7.3). In 1993, Hungary, and the Czech Republic.

F I N A N C I A L I N S -T I T U T I o N S 61

3. Many markets will change their regulations so they can lead manager, IFC had to work with its partners tobe included in prestigious i'ndexes. overcome investors' concerns about domestic politicalMany countries see inclusion in the IFC indexes as a instability in Colombia. This, the first internationalsign of their market acceptance and sophistication. equity offering by a private Colombian company, pavedIn some countries, the "carrot" of becoming listed in the way for other such offerings. Similarly, in 1996the Investable Index has been a more powerful tool IFC led the effort to do the first GDR for a Moroccanfor policy change than any "stick" of loan condition- company, Banque Morocaine du Commerce Exterieur.alities or expert advisory panels. This stems in large Despite great initial difficulty in finding anotherpart from the fact that over $10 billion of actual investment bank willing to share the underwriting risk,investment tracks emerging markets indexes. the final issue was oversubscribed.

SECURITIES STRUCTURING, UNDERWRITING, International commercial paper (CP) represents an

AND PLACEMENT alternative and often cheaper short-term funding

IFC's experience in underwriting and placing country source for IFC's financial sector clients. IFC completedfunds has been put to use in arranging for access to three transactions providing contingency loan facilitiesinternational markets for issuers using other vehicles as to backstop commercial paper issuance, all in Turkey. Awell. IFC always takes a joint-lead position, working cumulative total of over $100 million in commercial

with international investment banks in this field. Its paper was raised under these arrangements.

mandate in securities placement is to bridge a gap inservices available by linking developing-country com- Early in the emerging markets' development, IFC

panies and international capital markets. The nature of encountered great difficulties in convincing otherthis gap changes from time to time and case to case. investment banks to co-underwrite issues that it had

Very often, IFC is working in "frontier" countries, sourced and often structured. By the 1990s that had

countries that international investors are not yet famil- changed.

iar with, or with new products that have been unavail-

able before in a specific market. Both investors and In this new environment, IFC is mindful of certain

issuers look to IFC from time to time to provide com- approaches it must consider in its own work:

fort because of its past experience and its reputation for

good project analysis.

IFC has been involved as joint-lead manager in the Box 7.4 BLADEX: Raising Internationalunderwriting, distribution, and/or private placement of Funding amid a Debt Crisis59 securities issues involving an aggregate amount of

$4.5 billion. Of these issues, 11 have been for the sup- The Latin American debt crisis began in 1982. By 1985

port of financial institutions. This support has taken virtually no new foreign bank loans were being extended

two forms: underwriting debt instruments, convert- in the region. But as one of the few sources of trade

ibles, and equities; and arranging for issuance of com- finance, BLADEX found demand for its loans increasing.

mercial paper. After nearly a year's work and difficulty finding coman-

agers, IFC successfully launched a $50 million floating

The first underwriting for a financial institution client rate note (FRN) issue for BLADEX in 1985. This was the

was for the Latin American trade finance institution, first new debt financing for a Latin American corporation

BLADEX (Box 7.4). This and subsequent transactions since the 1982 crisis.

demonstrate how IFC can help clients when little

financing is available. In 1986 IFC underwrote a second FRN with attached war-

rants that could be used to purchase preferred shares.

Two floating rate note issues were underwritten for This was the first issue with quasi-equity features in the

two Turkish institutions (1989 and 1992), one in com- postcrisis market. The next year, another FRN was issued,

mercial banking and the other in trade finance. Both this aimed at Japanese investors. IFC did not underwrite

issues opened up new funding sources for the institu- this issue but, since this investor class was new to Latin

tions. A GDR issue was done for Corporaci6n America, IFC subscribed to 20 percent of the issue to pro-

Financiera del Valle in Colombia in 1993. As a joint- vide necessary comfort to the Japanese investors.

62 I N T f R N A T I C N A I r I N A N(- C- O R I'O R A T I O N

1. IFC must choose its underwriting andplacement assign- understanding of the details of their operations willments with care. help sell an issue or because they want a developmen-IFC is mandated to collaborate, not compete, with tally oriented commercial party involved when theyprivate sector providers of finance. Some recent do not feel they have the experience to negotiateinternational securities placement efforts, for exam- terms with purely profit-maximizing underwriters.ple, have been targeted at second-tier companies thatare too small to warrant the attention of the interna- 4. Sometimes IfC has a role in domestic underwriting ortional investment banks or to the opening of new deal structuring.countries to the international capital markets (for IFC has advised clients on securitization of receiv-example, Morocco and Tunisia in the mid-1990s). ables in Sri Lanka, Indonesia, and Colombia, for

example.2. Investment banks sometimes ask IFC toparticipate if

they find they cannot sell an issue. 5. IFC stresses its role as a "value-added" partner knownThis was the case with a recent "frontier" market for innovation, additionality, and risk-taking ability.fund, for example. Some investors take comfort that Many of its recent attempts at marketing funds andan agency like IFC has invested its own money in a other securities issues are in the "where angels fear tocompany when privately placing the remainder of tread" category. IFC will usually be involvcd in issuesthe securities. that open up a country or type of vehicle to interna-

tional investment for the first time.3. On other occasions, certain issuers spec ically request IFC.

This is usually either because they have had a longproject finance relationship and believe that IFC's

Notes1 The funds in which IFC took positions are only a minority of the IFC-structured portfolio funds since most were underwritten by IFC, and no residual

shares devolved to IFCs portfolio.

2 Ross Levine and Sara Zervos, 'Stock Markets and Banks: Revving the Engines of Growth, "January 1995, and "International Capital FlowLiberalization and Stock Market Development:A Cross-Country Event Study, " World Bank, December 1994.

.3 IFC has used existing asset managersfor many of itsfunds. but where none wao available, IFC set zip new fund management compainies- In total, IFC

has cosponsored 35 fund managers (excluding 2 pension fund managers), of which about a dozen manage portfolio funds and the remainder venture

capital or private equityfunds.

4 The Global Indexes include indexes for all countries followed, regardless ~f they are open to foreign investment. The Investable Indexes include only

countries and stocks that can be invested in by outsiders. The Frontier Indexes cover relatively smaller, less liquid emerging stock markets.

F I N A N C I A L I N S I I T I T I O N S 63

- 7 .4 ^ CONCLUSION:1 : S w THE FUTURE AGENDA

'I<'

9.,~~~~~~~~~~~~~~~~~~~~~~~~~~~

Experience has shown time and again that the efficien-cy of the local financial sector is of vast importance to acountry's domestic capital formation-or the lack of it.Indeed, it is a more basic building block of the entiredevelopment process than is often acknowledged. Asound financial sector is needed to allow the success ofother more visible aspects of development such as thegrowth of industry and manufacturing, privatization,and the strengthening of entrepreneurship and smallbusiness, all of which are critical to job creation, toincome generation, and thus ultimately to povertyaleviation.

IFC has been actively engaged in supporting "home-made capital" since 1971. It has pursued a broad rangeof advisory and investment work, giving it a transac-tional experience base in financial institutions inemerging markets that is probably unmatched world-wide. Although the Corporation's individual financialsector investments have typically been small, they haveprobably yielded more "bang for the buck" in develop-ment impact than have its investments in most othersectors.

Initially, this work centered on basic banking, launch-ing equity markets and nonbank financial institutions,developing the right tools to finance small and medium-size enterprises; and mobilizing foreign portfolioinvestment. But the financial sector is one of the most

. s dynamic and innovative parts of an economy, constant-ly remaking itself out of necessity and offering newproducts and techniques. In the developing world,where basic policies and regulatory institutions areoften being remade, the rate of financial sector changecan be particularly rapid. IFC's service provision inthis area thus must also change to continue to meetclients' needs.

I T U T1 I 0 N S 65

In the future, both "new" and "traditional" products will C Introducing new products and helping authorities andbe necessary, depending on a country's individual needs private institutions adapt to globalization - includingand the state of the financial sectors in which they further work in securitization, derivatives productsfunction. Markets that need special attention are: and regulation, risk management products, new

intermediaries, and refinement of local securities* Relatively developed markets that are experiencing set- market and banking standards to meet international

backs. Examples include Mexico in 1995, or norms. This work often needs to be done in con-Indonesia, Malaysia, the Philippines, Korea, and junction with other agencies assisting authoritiesThailand today. In situations such as these, IFC is with systemic reforms.often a "foul weather" investor, remaining in marketsafter other foreign commercial investors flee. m Meeting the needs of a growing middle class and under-

served small business sector-through housing finance,* Relatively developed markets where some key components commercial microfinance institutions, and consumer

of thefinancial sector still do not function. Examples credit information.include Argentina, which in 1996 was still lacking aleasing industry; the many countries without enough * Assisting in creating and deepening local bondprivate institutional investors or housing finance; or markets-by advising regulators on specific issuesthe underserved geographic or demographic regions such as securitization rules, bondholder claim aggre-within large middle-income countries such as, say, gation, and the like; working with the World Bank,Brazil, Turkey, and South Africa. the International Monetary Fund, and other multi-

laterals to encourage the issuance of term govern-* Transition economies. Examples include Russia, ment paper to create yield curves; setting up credit

Lithuania, and Vietnam. rating agencies; investing in bond guarantee houses;helping to structure local securitized and unsecuri-

* Frontier markets. Examples include Uzbekistan, tized bond issues and amending regulations to makeTanzania, and Uganda. this possible; or providing guarantees in local cur-

rency for local debt instruments.Table 8.1 shows the kinds of "products" IFC will likelyoffer and some examples of where they might be applied. In keeping with its pioneering role, IFC will take risks

in building new financial instruments and institutions,The new emphasis in coming years will likely be in risks that the private sector alone is reluctant to incur.four main areas: The ultimate goal of this work is the development of

deep, articulated financial sectors powered by private* Helping create local currency vehicles for savings and players and regulated by well-functioning government

investing -including debt market vehicles, local institutions that concentrate on their unique regulatingmutual funds for debt and equity, and local institu- role and view market development as an ongoingtional investors such as private pension funds and process.insurance companies.

66 I N T E R N A I I (I) N A [ E I N \ N L F CO R I' () R A I i O N

Table 8.1 "New" and "Traditional" Products of IFC

Developed, with Some subsec-tors Transition FrontierMarket type setbacks undeveloped economies economies

Bank re .rr,: ,-: , r1 .r i U

B,ond mnarke'-r de.edcprrierit * * U

Cr.,-rjii in& 3rid r.m:It,e * * * U

Derivative markets and products * o

Equity market building * *Housing finance *Local mutualfu uh. * *.iiccrr r,,t:r- U- U

I: I en ,;t tc.rt'1:r ci ,ri vestor; * U

New banks, leasing, insurance companies * * o

Private pension funds * *Securitization *


A53 % APPENDIXES

A. Colombia 71

B. India 73

C. Pakistan 75

D. Russia 77

E. West African Economic and MonetaryUnion Countries 79

Wsb .-, _] ; =&sF. Summary of IFC's Financial Sector Projects

and Lessons Learned, Fiscal Years 1971-97 81

I ITUT INS 69

Appendix A

COLOMBIA

Colombia provides a good example of the ways financial In the 1970s, IFC began working with Colombian sav-sector liberalization can spur economic growth, improve ings and housing corporations. At the end of thethe allocation of resources, and stimulate development of decade, IFC also played a role in developing of theimportant new financial institutions. The government's Colombian leasing industry, which has become impor-broad-based sectoral reforms have given Colombian tant in financing the country's SMEs.companies and households better access to domesticcapital markets, more competition between financial In the 1980s, policy changes influenced Colombia'sinstitutions, and a greater number of investment instru- evolving financial sector. The government drafted a taxments available to meet their financing needs. reform bill in 1986. It then proposed capital market

regulations that ultimately helped set the stage in theIFC's investments in Colombia, going back 35 years, 1990s for sweeping deregulation of the financial sector,have helped build new industries and develop more which increased competition by significantly liberaliz-sophisticated local financial companies. Over this peri- ing the operations of the different classes of intermedi-od, IFC has worked in many areas of the Colombian ary institutions. The government also launched a newfinancial system, sometimes successfully and other private pension fund system whose assets have sincetimes not. Because Colombia has presented an evolving grown to approximately $1.6 billion. More recently,set of political, economic, and financial challenges, pro- Colombian companies have begun to issue equity over-moting development of its financial sector has required seas. IFC assisted in placing the first internationala varying set of responses over time. equity issue by a Colombian company and provided

financing to SMEs through credit lines of about $200In the 1960s, IFC worked with the World Bank to million.help Colombia implement regulatory changes thatenabled privately owned DFCs to operate profitably. Colombia still lacks sufficient technical and managerialAfter making several equity investments in them in the skills to develop the range of products needed for its1960s, IFC scaled back its efforts to build these insti- growing investor population. Banks dominate thetutions in the 1970s, when Colombia had established financial sector, and the volume of stock market activi-one of the world's few successful DFC sectors. This ty is still low compared with other emerging markets.success is attributable to aggressive decisionmaking by Its capital markets do not yet allow SMEs to raisemanagement to diversify into promising new areas like term-financing at reasonable costs or enough long-investment banking. These institutions are now a major term local currency debt to finance infrastructuresource of long-term capital for Colombia's industrial needs. Progress has been made, but organizations suchsector, particularly for SMEs, and are innovative play- as IFC can have a constructive role to play asers in the capital markets. Colombia's capital markets continue to develop.

71

LESSONS LEARNEDIFC's experience in Colombia suggests the followinglessons.

1. Good relations between the private sector and thegovernment are a must in financial sector liberaliza-tion and development, as is developing an overallstrategy for the sector based on identifying gaps andneeds. A "deal to deal" mentality must be avoided.

2. It was extremely important for IFC to get involvedearly in the financial sector liberalization processalongside the World Bank, especially during the reg-ulatory reform phase.

3. It is crucial for IFC to support clients and countriesthrough both good and bad times.

4. Several factors came together in this case that madesuccess possible: a far-sighted government; low infla-tion; the right mix of public and private institutionsand incentives; and the role of the public sector instimulating but not dominating DFCs, the mortgagemarket, and term-debt market.

72

Appendix B

INDIA

When IFC began working in the Indian financial sec- times higher than that of the Bombay (now Mumbai)tor in 1978, state-owned enterprises were dominant. market, which introduced electronic technology inPrivate institutions were either discouraged from oper- response to the competition. This competition has ledating or severely hampered by government regulations to increased liquidity and efficiency nationwide in anin all the major areas of finance except stockbroking equity market that foreign portfolio investors had oftenand merchant banking. Market discipline, competition, viewed critically. Back-office procedures, including set-and the resulting efficiency gains they would bring into tlement, remain slow and cumbersome, however, andthe sector were sorely needed. do discourage some investors.

To help spark much-needed change, IFC worked on Since the liberalization, Indian firms have also becomestudies with the World Bank and made selected invest- regular issuers on the GDR and Eurobond markets,ments designed to build new institutions. Over time an more country finds have been created, and a local cur-important new nonbank financial institution (NBFI) rency debt market has developed and been opened tosector, including new housing finance, leasing, and foreign institutional investors. The increased businessventure capital institutions, came into being, although volume is giving rise to a new nationwide network ofthe overall financial system remained under tight state sophisticated corporate brokerages, helping Indian firmscontrol. raise financing on both domestic and international

markets. In 1995 the government also began movingFurther momentum came in 1991, when the govern- toward creating India's first depository, which has great-ment began a dramatic liberalization program. After ly improved the outmoded share trading system.more than 20 years of protection, the state-ownedbanks dominating the sector were reformed and India already had a tradition of high domestic savingsopened up to partial private ownership and competi- so, when liberalization added breadth and depth to thetion from new private banks. financial sector, it provided benefits and increased effi-

ciency for companies of every size as well as for house-Liberalization prompted greatly increased activity in holds. There is still an important role for additionalthe domestic securities market. Though one of the old- competition in most financial subsectors, however,est in the developing world, it was considered by 1991 because the state continues to be the dominant player.to be lagging behind others in emerging Asia. In 1992 IFC and other investors can make a continuing contri-a highly publicized scandal occurred in the pre-emi- bution by helping introduce new, more sophisticatednent Bombay Stock Exchange. Two years later the products and higher international operating standards.government introduced competition by creating a newNational Stock Exchange (NSE) that offered superior IFC had completed some 55 investments in 39 finan-technology for electronic trading and computer links to cial institutions in India through June 30, 1997.brokers in 40 cities around the country. Today the During the same period, its equity investments totaledNSE's average daily trading volume is almost three $74.7 million, and loans reached $225.6 million.' IFC's

73

strategy in India has had three principal goals: to pro-

mote private financial institutions; to help improve the

environment for private financial institutions by

encouraging positive regulatory reform and by building

market infrastructure; and to use imaginative financing

vehicles to support private companies.

LESSONS LEARNEDIFC's experience in India suggests the following

lessons:

1. Once freed from state control, a private financial sec-

tor can quickly emerge, offering new instruments,

pools of funds, and other innovations in the market-

place. It can thus become an efficient channel in

mobilizing savings and redirecting them into pro-

ductive investment.

2. In countries with over-regulated economies such as

India, private entrepreneurs can sometimes start new

private finance companies in unregulated subsectors

such as leasing. Once the industry starts, good regu-

lation can be put in place.

3. Technological obstacles to financial sector develop-

ment are awesome. A company that can overcome

them, as did the nationwide brokerage JSB, can

ignite positive change in the entire sector.

NotesI In addition, approved lFC syndicated loans totaled $78 million. Apart from investments, IFC completed 14 technical assistance projects in the finan-

cial sector. Additional IFC activities include joint lead managing three Global Depositary Receipt issues by private lndian companies and organizing

two regional equity funds covering India.

74

Appendix C

PAKI STAN

Pakistan's nationalization of the financial sector in the small to meet the exchange's listing requirementsearly 1970s made any private investment in the sector meanwhile benefit from the growth of national leasingimpossible. Throughout the 1980s, government domi- and, to some extent, venture capital industries.nation of much of the sector continued to discourageprivate participation. In 1989 and 1990, however, the In this setting, IFC has followed a three-pronged strat-government implemented several market-based egy aimed at providing technical assistance to the gov-reforms as part of a World Bank Financial Sector ernment on a wide range of financial issues; establish-Adjustment Loan. These moves greatly improved allo- ing financial institutions that have often been "firsts" incation of credit and other resources, supported capital the marketplace; and delivering and mobilizingmarket development, and helped ensure a stable flow resources for the burgeoning private sector, particularlyof long-term foreign exchange resources to private SMEs.industry. Although state-owned banks still dominatethe banking sector, Pakistan's financial sector has It is hoped that these efforts will be especially useful indeveloped considerably since 1990, gaining efficiencies two areas important for the maturation of securitiesthat have helped renew GDP growth, reduce inflation, markets anywhere: a modern central depository to facil-and achieve initial successes in privatization. itate trading volume increases through improved clear-

ance and settlement procedures, and an independentUnder the financial sector liberalization program, new rating agency to spur the growth of local debt issues.privately owned local banks have emerged to competewith state-owned banks, and favorable market condi- LESSONS LEARNEDtions have developed, attracting the entry of several From its experience in Pakistan, JFC has learned theforeign financial institutions. These reforms have following lessons:breathed new life into the once-dormant KarachiStock Exchange, whose market capitalization more 1. Even in times of strong government control of athan tripled between 1990 and 1996 to about $10.6 financial sector, leasing is an excellent way for thebillion despite considerable volatility. Its number of private sector to gain a foothold and help create alisted companies rose from 487 to 782 in that time, climate for eventual reform.with monthly trading volume climbing from $231 mil- 2. Commitment to reform of securities markets regula-lion to $6.1 billion. Many new local brokerages, mutual tion and infrastructure can lead to abundant flows offund companies, and investment banks have been new portfolio investment, which stimulate the cli-founded, and regulatory bodies and securities trading mate for more positive change in the entire sector.infrastructure have been strengthened. Initial Pakistani 3. In the process of strengthening securities markets, itGDRs have been placed in international markets, is important to build a climate for new investment incountry funds established, and a domestic corporate not only equities but also debt instruments such asdebt market is fast developing with the potential to corporate bonds and commercial paper.play an important role in financing both local firmsand private infrastructure projects. Companies too

75

Appendix D

RUSSIA

With no tradition of issuers, investors, or intermedi- and volumes for the 24 most commonly traded equi-aries, transition economies are essentially starting from ties, and spreads are narrowing. IFC's Emergingscratch in building modern financial institutions. A Markets Data Base began tracking RTS daily perfor-lack of any history of sound legal and regulatory mance in October 1996, listing its market capitaliza-framework compounds their challenges. Russia stands tion at about $135 billion.out as a special case among these economies for manyreasons-especially because its mass privatization pro- In this environment of profound change, IFC had togram needs rapid development of domestic capital design a capital market development strategy flexiblemarkets. enough to meet constantly shifting market conditions

in Russia. Work began in 1992 with heavy emphasis onIFC's work in Russia has had to be tailored to the technical assistance. This was an urgent matter, becausecountry's unique circumstances, such as those presented the mass privatization program put enormous pressureby its vast voucher privatization program. Designed on the country's nascent capital markets. Since then,with the objective of creating a privatization process IFC has also given priority to the support of key mar-that would enjoy wide political support and participa- ket institutions that will serve as models for developingtion, privatization vouchers were distributed to all important industry segments. This institution-buildingRussians in October 1992 and used to acquire shares in work complements much of the technical assistancelarge and medium-size enterprises via auctions. The effort, as does other IFC work in Russia involvingvoucher program, which ended in June 1994, was a key mobilization of foreign portfolio investment and assis-part of a privatization in Russia that has created some tance to the banking sector.15,000 publicly held enterprises with about 40 millionshareholders. LESSONS LEARNED

From its experience in Russia, IFC has learned the fol-The underdeveloped state of capital market structures lowing lessons:and regulations, however, often leaves these new share-holders unable to protect their ownership rights, to 1. IFC must always be grounded in the needs of theenforce basic corporate governance, or to realize value market. This is especially true in country environ-for their shares. Privatized enterprises also have great ments that are as fast-moving as Russia's.difficulty raising capital, and foreign investment is 2. Under these conditions, IFC must be able to workdeterred. Despite these weaknesses, the first signs of a on several fronts simultaneously and offer a packagemodern capital market in Russia are beginning to of products and services that can be constantly tai-emerge. A fully computerized Russian Trading System lored to meet a country's changing needs.(RTS) has about 75 listings, including all Russian blue 3. Whether in investments or advisory services, IFCchips. Its daily trading volume has reached $85 million, must work with partners. By acting as an honest bro-comprising up to 60 percent of all equity trading ker, IFC helps other parties collaborate.nationwide. Market makers quote firm bid/offer prices 4. In technical assistance activities, it is always the

77

client that implements reform. The role of the advis-er is not to tell the client what to do, but to help itdetermine what it wants to do and how to do it. Bytaking this partnership approach with the RussianFederal Commission for the Securities Market, IFCdeveloped a model for ongoing, active engagementin securities regulation.

78

Appendix E

WEST AFRICAN ECONOMIC AND MONETARYUNION COUNTRIES

Benin, Burkina Faso, Cbte d'lvoire, Mali, Niger, Senegal, UEMOA governments have worked with the Worldand Togo comprise the West African Economic and Bank and the International Monetary Fund to strengthenMonetary Union (Union economique et monetaire ouest the operating environment for their financial institutions.Africaine, UEMOA). These seven countries have a com- IFC tried to move quickly to help this process. Sincebined population of about 51.5 million and share a com- 1965, it has approved 22 financial sector investments inmon central bank, the Dakar-based Banque Centrale des the region, including projects involving leasing, commer-Etats de l'Afrique de l'Ouest (BCEAO). cial banking, life and general insurance, an equity find,

fund management, and development of a regional stockIn addition to the countries in the current UEMOA, exchange.Guinea-Bissau joined the Monetary Union (UMOA) onMay 2, 1997. It relinquished its former currency and Although it is still too early to evaluate these efforts, IFCreplaced it with the CFA franc (franc de la Communaut6 has been careful to tailor its UEMOA work to local con-Financiere Africaine). The Guinean Central Bank has ditions. It has acted proactively to start new financialbecome a national agency of the BCEAO. Guinea-Bissau institutions when necessary and to support them withhas about three years to comply fully with the various investments-even if the appropriate levels of investmentfacets of the regional integration efforts to become part are quite small. In total, IFC has completed 17 projectsnot just of the Monetary Union but also of the Economic with 12 companies in four UEMOA countries (Benin,Union (UEMOA). Burkina Faso, Cote d'Ivoire, and Senegal). IFC financial

sector equity investment in UEMOA has reached $13.8The pivotal event in the recent economic history of these million, plus loans totaling $7.5 million. IFC has alsocountries was the January 1994 devaluation of the com- approved $15.3 million in local currency guarantees tomon regional currency, the CFA franc, which is pegged to companies in the UEMOA region.and exchanges freely into French francs. This first fluctua-tion in the currency's value since 1948 was difficult to LESSONS LEARNEDabsorb initially but has since proved highly beneficial for IFC's experience in the UEMOA countries suggests thethe UEMOA economies overall. Collective GDP growth following lessons:rose to 2.6 percent in 1994 and 5.6 percent in 1995 afteraveraging 0.3 percent between 1990 and 1993. The newly 1. It is difficult to do anything in financial sector develop-devalued currency raised the competitiveness of exports, ment if the macroeconomic framework is not right, aswhich increased in value by 4.4 percent in 1994 and 13.8 was the case in the UEMOA countries before thepercent in 1995. The largest and most developed economy January 1994 CFA devaluation.in the region, Cote d'Ivoire, ended a seven-year recession 2. It is possible to act as a catalyst for positive change inin 1994 and achieved 6.5 percent growth in 1995 and 6.8 Africa, even if it takes a while. Since the devaluation,percent in 1996. Each of the other six UEMOA countries the UEMOA financial sector has made considerablealso reported rapid growth rates. progress.

79

3. In building a financial sector in Africa or anywhereelse, it is generally wise to start with the basics: com-mercial banks, insurance companies, and so on.There are many exceptions to this rule, but it is easi-er to establish other institutions such as stockexchanges and investment banks after basic deposit-taking infrastructure is in place.

4. The small size of most countries in Africa favors useof a regional approach to financial sector institution-building whenever feasible. This was especially truein the UEMOA countries, where a common curren-cy and central bank provided a natural base forregional linkages.

80

Appendix F: SUMMARY OF IFC's FINANCIAL SECTOR PROJECTS AND LESSONS LEARNED, FISCAL YEARS 1971-97Does it Does it Importance of Importance of

Good for mobilize local allocate local investors/ foreign partners/ Typical IFCSegment development? savings? savings well? managers investors role Lessons learned

Banking (Commercial Essential for payment Yes Yes, more High Varies Start up * Technical partners must have large stake, commitment, clear role,& Merchant) Equity systems, savings efficient in new banks, preferably be only oneOnly mobilization, working liberal systems give loans and * Portfolio performance must be highest priority

capital and (generally) equity, * Privatization difficult, time and labor intensivetrade finance participate in * Private entry good alternative but not necessarily have large-scale Impact

expansions * Beware unsavory investors or group lending interestsand * When government remains shareholder, be very clear about rights andrestructuring investment terms

Development Finance Not if unprofitable Usually not Usually badly Medium High, usually In 1960s and * Do not lower commercial standards for perceived "developmental" benefitsCompanies and unsustainable if government depend on 70s: equity * Emphasize mechanisms for local funding

interference multilateral investor, lender * Disallow government interferencedevelopmentbanks for funds

Stock Markets Liquid markets Yes Yes High Foreign investors Advisory, rarely * Level the regulatory playing field between banking and securitiescorrelated with growth can catalyze investor * Set up independent commission if possibleper capita, productivity reforms * Streamline corporate lawand capital accumulation * Balance minority protcction/listing incentives

* Emphasize enforcement* Improve auditing standards and practices

* Take a hard look at timing and "sequencing": sometimes "too early" isdisastrous; sometimes it's helpful

Derivatives Markets Beneficial for better Yes Yes High Often important Advisory, some * Emerging markets cannot be isolated from the global trendsprice discovery, risk for product Investing in * Regulator and investor education is keytransferral and introduction related * Need for separate systems can strain local skill basetransaction Integrity institutions

Investment Banking, Intermediation leads Yes, helps Research and High Depends Investor * Markets often not yet readyBrokerages to efficiencies and information * Regulators and investors need to be educated on new products - included in

innovations and makes key to efficient cost of the investmentmarkets available to allocation * Recruit non-bankerswider public * Specialized system develops skills better than universal financial service regimes

* Beware noncompliance and fraud

Appendix F (continued)Does it Does it Importance of Importance of

Good for mobilize local allocate local investors/ foreign partners/ Typical IFCSegment development? savings? savings well? managers investors role Lessons learned

Pension Fund Capital aggregat on Yes Provides one of High Depends Investor, * Investment In governance Is largeManagement key for lorig-term few sources of adv sor * Corititued government corrimitment is keyCompanies fundirig, market long-term capital; * Supply of investable Instruments iS main constrant

development and should be well * Understand rchoice/churn" trade-offretrement planning ailocated if * Consider allowinq more than one fond per manager (to allow for

competitive/ differing r sk preferences)commercial

Insurance Companies As above Yes As above High Depends, often Investor * Need long-term instruments in marketneeds foreign * Liberalization often slower than expectedtechnical * Cost control is key (esp, distribution costs)partners * Eliminate preferences for state-owned insurance compames

Other Securities Information providers Yes Can be helpful High Depends investor, advisor * Use newest, cheapest technologiesMarket Players, important; exchanges, in the process * Focus on back-office skills as well as systemsNiches registrars, depositories

all critical

Credit and Agency Mostly targeted at rea No Mixed Local intermediary Not unless lines Lender * Intermediary must have desire and skills to enter middle marketLines for Onlending sector development is key are syndicated * Pipeline of projects should be in place before loan is signedto SMEs * Economy must be able to sustain expert-oriented SMEs

NI * IFC should have direct relationship with borrowing entity(Agency lines usually fail)

* Program should be kept simple

Venture Capital Yes, provides equity Sometimes Mixed success Local managers High Structure, * Market surveys are unreliable; apply skepticismfor expanding firms important mobilize funds, * Fund size large enough to support excellent management team

invest, govern * Need excellent, appropriately compensated individual managers withinstitutional back-up

* Shareholders must share common objective-financial return* Structuring is key; should allow termination of manager, address a host

of governance issues, and address conflicts with future funds

Leasing Yes; especially useful Sometimes Yes High Often high Structure, * Portfolio management and diversification keyfor new and small Invest * Lack of access to local currency term funding or currency conversionfirms without access is biggest obstacleto traditional bank * Legal rights of ownership and tax treatment at least comparablefinancing to banking should be in place

* Spreads should not be capped* Standalone leasing companies develop deeper skills and provide more

depth to the finanrcial sector than bank subsidiaries

Does it Does it Importance of Importance ofGood for mobilize local allocate local investors/ foreign partners/ Typical IFC

Segment development? savings? savings well? managers investors role Lessons learned

Factoring Yes; increases efficiency No Yes Moderate High; for Investor * Market surveys often highly inaccurate

of local and foreign export factoring, * Fraud is rampant

trade and allows an ties with * High volumes needed

alternative financing international * Technical partner with int'l network indispensable for export factoring

source for smaller factors are critical * Strategy should be flexible; control mechanisms should not be

companies * Stick to business diversification targets

* More entry barriers and regulatory standards needed

Housing Yes Yes Yes High Low Equity investor, * Government and private rules clearly delineated, e.g., subsidize

Finance lender homeowners, not the house or the mortgage

* Government support without control is ideal

- Lack of access to long-term local funds and lack of bond market is

problematic

* Beginning with the middle class may have best long-term

development results

Microfinance Yes, but may not have Somewhat If done well High Low Equity - Too early to tell

large impact on the GDP investor,

lender

Local mutual Yes; important as Yes Yes High Depends Advisory, * Existing legal frameworks very often are not adequate

funds institutional investors investor * Distribution is more difficult and expensive than planned

and to allow small * High cost base requires large enough investor base and high availability

savers access to capital of securities. Being a pioneer is difficult

markets instruments

GLOSSARY

ADRs (American depositary receipts): Shares of a foreign corporation that are listed in the United States as wellas on their own country's stock exchange.

Agency credit line: A device IFC uses to finance small and medium-size enterprises (SMEs) that are too small forit to reach directly. A local financial institution acts as an agent for IFC by identifying, appraising, and document-ing a credit to an SME, which is then directly funded by IFC in foreign currency.

Apex fund: An investment fund through which other funds are channeled.

Asset securitization: The packaging of assets (often credit card receivables, mortgages, or leases) which are on thebalance sheet of a company or financial institution for sale to investors as tradeable securities.

Backstop facilities: An arrangement through which a financial institution agrees to provide financial support ifanother instrument can no longer be used or, in some cases, when a short-term financing is not rolled over.

Broadening: Building an increasing number and variety of participants and instruments active in a country's finan-cial sector.

Call option: A contract that allows the seller of a certain number of securities to buy them back at an agreed priceby a certain date; frequently used as a tool to manage risk.

Central depository: A central repository where securities certificates are held and exchanged when ownershipchanges occur.

CFA francs (francs de la Communaute Financiere Africaine): the regional currency of the seven West AfricanEconomic and Monetary Union (UEMOA) countries (C6te d'lvoire, Senegal, Togo, Mali, Burkina Faso, Benin,and Niger) and Guinea-Bissau. They are fully convertible into French francs under a monetary agreement withFrance. The parity remained unchanged from 1948 to January 1994, when the CFA franc was devalued by 50 per-cent, falling from CFAF50 = FFrl to CFAF FFrlO0 = 1. Monetary policy is governed by one supranational centralbank based in Senegal. Another central bank in Cameroon oversees monetary policy for the six members of theCentral African Economic and Monetary Union (Cameroon, the Central African Republic, Chad, the Congo,Equatorial Guinea, and Gabon), all of which also use CFA francs.

Clearance and settlement: Completion of a trade through delivery of securities certificates to the buyer and pay-ment to the seller.

Closed-end funds: An investment fund in which a finite number of shares are owned and new ones are not issued.

Commercial bank: A financial institution whose core business is collecting deposits and making loans first to cor-porations and, secondarily, to consumers.

84 I N T E R N A T I O N A L F I N A N C E C O R I' O R A T I O N

Commercial paper: Unsecured short-term obligations issued by banks and corporations in public debt markets.They can be rated or unrated, and typically have maturities of less than three months.

Convertible bonds: Bonds that may be converted into a set number of shares of the issuer's stock, usually atprestated prices and times, at the bondholder's option.

Corporate brokerage: A brokerage with a corporate (as opposed to partnership) structure, allowing it to have limit-ed liability.

Custody: The holding of securities in safekeeping on behalf of a client.

Deepening: The process of increasing financial assets as a share of a country's gross domestic product (GDP).

DFCs (development finance companies): Institutions that specialize in medium- and long-term loans for industrialprojects and often are partially or wholly government owned. Also called DFIs (development finance institutions).

Discount houses: Financial institutions that make markets in debt, usually in government notes and bonds.

Factoring: The discounting of trade receivables. It allows sellers to receive payment for goods immediately fromthe factoring company, which then presents the receivable documents to the buyer for payment within 60, 90, or180 days, or whatever was the agreed time period.

Financial intermediation: The process of collecting savings and allocating them to borrowers.

FRNs (floating rate notes): medium-term debt instruments paying interest on a floating basis, adjusted accordingto a formula agreed at time of issue.

GDRs (global depositary receipts): Shares of a foreign corporation that are publicly traded in London,Luxembourg or another international stock exchange as well as that of their host country.

Global custody: Multicurrency safekeeping, settlement, and reporting services that a major financial institutionprovides to a client.

Hire purchase: A credit arrangement allowing assets to be leased for a specified period. Usually ownership is grad-ually transferred to the user, who gets outright ownership of the asset at the end of the lease period.

Housing finance companies: Financial institutions providing home mortgages.

Initial public offering (IPO): The first offering to the general public of a company's common stock.

Internal rate of return: The true annual rate of earnings on an investment. The cash invested, the value of cashreturns, and the application of compound interest factors are taken into account.

Investment bank: A financial institution whose core business generally involves issuing, underwriting, placing, andtrading securities.

Leasing company: A financial institution that finances equipment and other productive assets over a specified (usu-ally medium-term) period. It has full right of repossession, because ownership remains with the leasing company.

Liquidity: Characteristic of securities that can be bought or sold in large volumes without directly affecting their price.

Market capitalization: The value of all the traded and outstanding common shares of a corporation, or of all thecorporations listed on a given stock exchange.

Market maker: A dealer who simultaneously maintains bid and offer prices for an issue of securities.

Merchant bank: See "Investment bank." (In some countries, notably in Africa, "merchant banks" specialize not inthe securities business but in trade finance and other short-term instruments such as bankers' acceptances or lettersof credit.)

F I N A N C I A LI N S T I T U T I O N S 85

Modarabas: Islamic closed-end funds in Pakistan that cannot borrow on an interest basis; leasing is their primarybusiness.

Mutual fund: A fund that raises money from individuals and institutions and invests it on their behalf, offeringthem the advantages of professional management and diversification.

Nonbank financial institutions (NBFIs): Leasing companies, investment banks, insurance companies, pensionsfunds, development finance companies, housing finance companies, etc. They are usually differentiated from banksin that they do not take deposits from the public.

Open-end fund: An investment fund in which new shares can frequently be issued and in which existing sharescan be redeemed on demand.

Over-the-Counter (OTC) Exchange: A stock market owned and organized by its member brokerages in whichsecurities trading is conducted through a telephone and computer network connecting dealers in stocks and bonds,rather than on the floor of an exchange.

Provisioning: The setting aside of a financial institution's resources to cover potential losses from bad loans.

Put option: A contract that allows the buyer of a certain number of securities to sell them at an agreed price by acertain date; frequently used as a tool to manage risk.

Rating agency: Private corporations that evaluate debt securities' investment and credit risk. Examples includeStandard & Poor's, Moody's Investors Service, Duff and Phelps and Fitch in New York, International Bank CreditAnalysis (IBCA) in London, and the Japan Credit Rating Agency in Tokyo.

Return on average equity (ROAE): Net income divided by the average equity in a company during a given year.

Rights issue: An issue of new shares by a publicly traded company that are offered first to its existing shareholders.

Seed capital: Initial amount of equity a business needs to begin operations.

Share registry: A listing of companies' shareholders, reflecting ownership changes as they occur. The registry can bekept centrally for all public companies, or it can be kept individually by each company.

Stamp duties: Taxes levied on securities documents; they are relevant when they add to the cost of transferringshares from a seller to a buyer.

Subordinated debt: Debt that is repayable only after other debts with a higher ranking have been repaid; it is gen-erally listed in a firm's capital structure between equity and senior debt.

Term lending: Lending for a tenor of more than about three years, thus including both "medium-term' and "long-term" lending.

Unit trusts: See "Mutual finds."

Universal banks: Financial institutions that combine commercial banking and investment banking functions underone roof

Venture capital: A pool of equity financing for unlisted companies with high growth potential. The risks forinvestors and the returns can both be high; often accompanied by management support to the investee companies.

86 I N 1- t R N A T I O N A I F I N A N & L C R PI () R A 1I I

Annex: Overview of IFC's Financial Sector Activities Board Approvals FY71-FY97Swaps, Under-

Quasi- guarantee Syndi- writing andFinancial Fiscal Net Loan Equity equity facilities cations placement

Institution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US$m) (US$m) (US$m) (US$m)

Commercial bank Africa Cote d'lvoire Bank of Africa - Banking & other Credit and agency lines 1996 3.15 - 0.14 0.11 2.90Cote d'lvoire credit institutions for on-lending to SME's

Commercial bank Africa Cote d'voire Banque Atlantique Access for smaller Credit and agency lines 1994 527 5.27 - - -

Cote d'lvoire I savers & borrowers for on-lending to SME's

Commercial bank Africa Mauritania Banque Mauritanienne Access for smaller Credit and agency lines 1997 14.00 14.00 -

pour le Commerce savers & borrowers for on-lending to SME'sInternational/BMCI

Commercial bank Africa Mauritania Generale du Banque Access for smaller Credit and agency lines 1996 4.18 4.00 0 18du Mauritania savers & borrowers for on-lending to SME's

Commercial bank Africa Mauritius Mauritius Commercial Access for smaller Credit and agency lines 1992 10.00 10.00 -

Bank ACL savers & borrowers for on-lending to SME's

Commercial bank Africa Mozambique Banco Internacional de Access for smaller Credit and agency lines 1996 15.00 10.00 5.00

Mozambique, SARL savers & borrowers for on-lending to SME's

Commercial bank Africa Tanzania EurAfrican Bank I Access for smaller Credit and agency lines 1994 5.77 5.00 0.77savers & borrowers for on-lending to SME's

osCommercial bank Africa Tanzania EurAfrican Bank I Access for smaller Credit and agency lines 1996 - - - - - 5.00

savers & borrowers for on-lending to SME's

Commercial bank Africa Zambia Finance Bank of Access for smaller Credit and agency lines 1997 5.00 5.00Zambia Ltd/FBZ savers & borrowers for on-lending to SME's

Commercial bank Asia Indonesia PT Bank NISP - Access for smaller Credit and agency lines 1997 5.00 5.00A Loan Increase savers & borrowers for on-lending to SME's

Commercial bank Asia Indonesia PT Bank NISP - Dual Access for smaller Credit and agency lines 1997 5.00 5.00 - -

Borrower Facility savers & borrowers for on-lending to SME's

Commercial bank Asia Philippines Far East Bank & Access for smaller Credit and agency lines 1997 25.00 25 OC - - - 50.00Trust Company savers & borrowers for on-lending to SME's

Commercial bank Asia Thailand Finance One USCP Access for smaller Credit and agency lines 1995 30.00 30.00 - - - 150.00savers & borrowers for on-lending to SMEs

Commercial bank CAMENA Kazakhstan ABN-AMRO Bank Access for smaller Credit and agency lines 1995 7.50 7.50 - - - 10.00Ltd/AABK 11 CL (TEF) savers & borrowers for on-lending to SME's

Commercial bank CAMENA Kazakhstan Kazkommertsbank Access for smaller Credit and agency lines 1997 10 00 10.00 - - - 20.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Kyrgyz Republic Demirbank Krygyzstan Access for smaller Credit and agency lines 1996 2.30 2.00 0.30 - - 2.00International Bank I savers & borrowers for on-lending to SME's

Annex (continued)Swaps, Under-


Institution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (USSm) (US$m) (US$m) (US$m)

Commercial bank CAMENA Lebanon Bank of Beirut and The Access for smaller Credit and agency lines 1993 6 00 6.00 - - - 3.00Arab Countries, SAL I savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Bank of Beirut and The Access for smailer Credit and agency lines 1996 700 500 200 500Arab Countries, SAL II savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Bank of Beirut Lebanon Access for smaller Credit and agency lines 1997 12 50 12 50 - 750Credit Line IV savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon BanqueAudi, SAL II Access for smalier Credit and agency lines 1996 12 00 10 00 - 2.00 10.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque Aud,, SAL I Access for smaller Credit and agency lines 1993 6.00 6 00 - - - 3.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque Beyrouth Access for smaller Credit and agency lines 1997 10 00 10.00 - - 750Lebanon Credit Line IV savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque du Liban et Access for smaller Credit and agency lines 1993 6.00 6 00 - 300d'Outre Mer savers & borrowers tor on-lending to SME's

Commercial bank CAMENA Lebanon Banque Libanaise pour Access for smaller Credit and agency lines 1994 6 00 6.00 - - 3 00le Commerce savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque Libano- Access for smaller Credit and agency lines 1994 6 00 600 - - 6.00OD Francaise I SAL savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque Libano- Access for smaller Credit and agency lines 1996 12 00 1000 - 2 00 1000Francaise II SAL savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Banque Saradar Access for smaller Credit and agency lines 1997 10 00 1000 - - 750Lebanon Credit Line IV savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Byblos Bank, SAL I Access for smaller Credit and agency hines 1993 6.00 6 00 - - - 3.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Byblos Bank, SAL II Access for smaller Credit and agency lines 1996 12.00 10.00 - - 2 00 1000savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Fransabank, SAI Access for smaller Credit and agency lines 1993 6 00 6.00 - - - 3.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Fransabank, SA Il Access for smaller Credit and agency lines 1994 6.00 6 00 - - 600savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Fransabank, SA Ill Access for smaller Credit and agency lines 1996 9 50 7.50 - - 2.00 7.50savers & borrowers for on-lending to SME's

Commercial bank CAMENA Lebanon Societe Generale Access for smaller Credit and agency lines 1994 6.00 6 00 - - - 6.00Libano-Europeene savers & borrowers for on-lending to SME'sde Banque SAL I

Swaps, Under-Quasi- guarantee Syndi- writing and

Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US$m) (US$m) (US$m) (US$m)

Commercial bank CAMENA Lebanon Societe Generale Access for smaller Credit and agency lines 1996 9.50 7 50 - - 2.00 7.50Libano-Europeene savers & borrowers for on-lending to SME'sde Banque SAL II

Commercial bank CAMENA Lebanon Transorient Bank SAL Access for smaller Credit and agency lines 1997 12.50 12.50 - - - 7.50Lebanon Credit Line IV savers & borrowers for on-lending to SME's

Commercial bank CAMENA Morocco Banque Commercial Access for smaller Credit and agency lines 1992 12.00 12.00 - - - 21 00du Maroc savers & borrowers for on-lending to SME's

Commercial bank CAMENA Morocco Banque Marocaine du Access for smaller Credit and agency lines 1992 12.00 12 00 - 21.00Commercial Exterieur/ savers & borrowers for on-lending to SME'sBMCE I

Commercial bank CAMENA Morocco Credit du Maroc, S A. Access for smaller Credit and agency lines 1992 8.00 8 00 - - - 14.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Morocco Wafabank, SA Access for smaller Credit and agency lines 1992 8 00 8.00 - 14.00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Pakistan Askari Commercial Access for smaller Credit and agency lines 1997 17 00 17.00 - --

Bank -Credit Line savers & borrowers for on-lending to SME's

0 Commercial bank CAMENA Pakistan Bank of Khyber Access for smaller Credit and agency lines 1995 10.00 10 00savers & borrowers for on-lending to SME's

Commercial bank CAMENA Pakistan Faysal Commercial Access for smaller Credit and agency lines 1997 17 00 17.00 -

Bank Ltd - Credit Line savers & borrowers for on-lending to SME's

Commercial bank CAMENA Pakistan Muslim Commercial Access for smaller Credit and agency lines 1993 15.00 15.00 - - 10.00Bank savers & borrowers for on-lending to SME's

Commercial bank CAMENA Pakistan Prime Commercial Access for smaller Credit and agency lines 1997 8 00 8.00&Bank -Credit Line savers & borrowers for on-lending to SME's

Commercial bank CAMENA Pakistan Union Commercial Access for smaller Credit and agency lines 1997 8.00 8.00Bank -Credit Line savers & borrowers for on-lending to SME's

Commercial bank Europe Czech Republic Zvnostenska Banka ll Access for smaller Credit and agency lines 1995 9.07 9.07savers & borrowers for on-lending to SME's

Commercial bank Europe Estonia Eestil hispank Access for smaller Credit and agency lines 1997 6.56 6 56 -


Commercial bank Europe Europe Region Bank Austria/ Access for smaller Credit and agency lines 1991 25 00 25.00 - - 25.00Landebank MLF, ACL savers & borrowers for on-lending to SME's

Commercial bank Europe Hungary Inter-Europa Bank Access for smaller Credit and agency lines 1996 10.00 10.00 - - 5.00RT CL savers & borrowers for on-lending to SME's

Commercial bank Europe Hungary Unicbank Rt II Access for smaller Credit and agency lines 1992 10 00 10 00 -


Annex (continued) Swaps, Under-



Commercial bank Europe Poland International Bank Access for smaller Credit and agency lines 1997 400 - - 4.00 - 8 00In Poland II savers & borrowers for on-lending to SME's

Commercial bank Europe Russian International Access for smaller Credit and agency lines 1993 15 00 15 00 - - -

Federation Moscow Bank savers & borrowers for on-lending to SME's

Commercial bank Europe Russian United Export Import Access for smaller Credit and agency lines 1996 15 00 15 00 - -

Federation Bank / UNEXIM Bank savers & borrowers for on-lending to SME's

Commercial bank Europe Slovak Repubic Istrobanka Access for smaller Credit and agency lines 1996 14.83 14.83 - - - 3.00savers & borrowers for on-lending to SME's

Commercial bank Europe Slovenia Banca di Credito Access for smaller Credit and agency lines 1994 5 00 5.00 - - - S00di Trieste savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Demirbank Turkey I Access for smaller Credit and agency lines 1994 15 00 15 00 - - - 35.00savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Demirbank Turkey II - Access for smaller Credit and agency lines 1996 15 00 15.00 - - - 30.00Credit Line savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Disbank Access for smaller Credit and agency lines 1989 12 50 12.50 - - - 47 50savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Finansbank, AS Access for smaller Credit and agency lines 1992 10.00 10.00 - - - 23 30so savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Interbank I ECP, Access for smaller Credit and agency lines 1988 15.00 1500 - - - 45.00Backstop Facility savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Kocbank Access for smaller Credit and agency lines 1996 10.00 10.00 - - - 60.00savers & borrowers for on-lending to SME's

ComrTiercial banik Europe Turkey Korfezbank Access for smaller Credit and agency lines 1992 8.00 8.00 - - - 18.70(Syndication) savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Korfezbank I MOF Access for smaller Credit and agency lines 1997 15.00 15.00 - - - 30.00savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Korfezbank 11 B Access for smaller Credit and agency lines 1997 - - - - - 5.00Loan Increase savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Oyak Bank, AS Access for smaller Credit and agency lines 1997 15.00 15.00 - - - 25 00savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Turkiye Ekonomi Bank Access for smaller Credit and agency lines 1995 20.00 20 00 - - - 20.00savers & borrowers for on-lending to SME's

Commercial bank Europe Turkey Turkiye Garanti Access for smaller Credit and agency lines 1993 20 00 20 00 - - - 80 00Bankasi II savers & borrowers for on-lending to SME's

Commercial bank Europe Ukraine FUIB Access for smaller Credit and agency lines 1996 16.50 10.00 6 50 -




Commercial bank Europe Yugoslavia Jugobanka-Udruzena Access for smaller Credit and agency lines 1985 30.30 30 30 - - - 5.00Banka Beograd savers & borrowers for on-lending to SME's

Commercial bank Europe Yugoslavia Vojvodlanska Banka I Access for smaller Credit and agency lines 1987 28 14 28.14 - - - 22 32savers & borrowers for on-lending to SME's

Commercial bank Europe Yugoslavia Vojvodjanska Banka ll Access for smaller Credit and agency lines 1989 23.82 23.82 - - - 7.47savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Credito de Access for smaller Credit and agency lines 1991 1000 10.00 -

Argentina savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco del Suquia Access for smaller Credit and agency lines 1997 10.00 - - 10.00Subordinated savers & borrowers for on-lending to SME'sConvertible Loan

Commercial bank LAC Argentina Banco Frances del Rio Access for smaller Credit and agency lines 1989 15 00 15.00de la Plata SA I savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Frances del Rio Access for smaller Credit and agency lines 1996 40.00 40.00 - - - -

de la Plata SA II savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco General de Access for smaller Credit and agency lines 1994 15 00 12 00 3.00co Negocios SA savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco General de Access for smaller Credit and agency lines 1987 10.00 10.00 -

Negocios, SA I AL savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco General de Access for smaller Credit and agency lines 1989 10.00 1000Negocios, SA 11 AL savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Rio de la Plata I Access for smaller Credit and agency lines 1987 30.00 30 00 - - - -


Commercial bank LAC Argentina Banco Rio de la Plata II Access for smaller Credit and agency lines 1992 20.00 20.00 - - - 20.00savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Roberts I AL Access for smaller Credit and agency lines 1986 10 00 10 00 -


Commercial bank LAC Argent na Banco Roberts II AL Access for smaller Credit and agency lines 1989 10.00 10.00savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Roberts Ill AL Access for smaller Credit and agency lines 1991 6.00 6 00 - - 2.00savers & borrowers for on-lending to SME's

Commercial bank LAC Argentna Banco Roberts NOA Access for smaller Credit and agency lines 1997 3000 3000 -

Credit Line savers & borrowers for on-lending to SME's

Commercial bank LAC Argentina Banco Roberts SA Banking & other Credit and agency lines 1995 20.00 - - 20 00Subordinated Loan credit institutions for on-lending to SME's




Commercial bank LAC Argentina Bansud CL Access for srnaller Credit and agency lines 1996 25.00 25 00 - -savers & borrowers for on-lerlding to SME's

Commercia bank LAC Bolivia Barico Mercantil CL Access for smaller Credit and agency lines 1996 1000 1t 000savers & borrowers for on-lending to SME's

Commercial bank LAC Brazil Banco Bradesco SA - Access for smaller Credit and agency lines 1996 40 00 40 00 - - - 60 00Syndicated Credit Line savers & borrowers for on-lending to SME's

Commercial bank LAC Brazil Banco Bradesco SA AL Access for smaller Credit and agency lines 1991 6000 60.00 - - 20.00savers & borrowers for on-lending to SME's

Commercial bank LAC Brazil Uniao de Bancos Access for smaller Credit and agency lines 1988 80 00 8000 00Brasileiros, S A / savers & borrowers for on-lending to SME'sUnibanco I

Commercial bank LAC Brazil Uniao de Bancos Access for smaller Credit and agency lines 1994 25 00 2500 - - -Brasileiros, S.A./ savers & borrowers for on-lendmig to SME'sUnibanco II

Commercial bank LAC Brazil Uniao de Bancos Access for smaller Credit and agency lines 1996 - -

Brasileiros, S.A. / savers & borrowers for on-lending to SME'sUnibanco IIl

Commercial bank LAC Costa Rica Banco Interfin S.A Access for smaller Credit and agency lines 1993 5.00 5 00Q0 de Costa Rica savers & borrowers for on-lending to SME's

Comniercial bank LAC Mexico Banca Serfin I Access for smaller Credit and agency lines 1989 60 00 60 00savers & borrowers for on-lending to SME's

Commercial bank LAC Mexico Banco B lbao Vizcaya Access for smaller Credit and agency lines 1997 110.00 80.00 - 30.00(BBV) Mexico SA savers & borrowers for on-lending to SME's

Commercial bank LAC Mexico Banco Nacional Access for smaller Credit and agency lines 1996 100 00 100 00 - - 200 00savers & borrowers for on-lending to SME's

Commercial bank LAC Mexico Banco Nacional de Access for smaller Credit and agency lines 1990 60 00 60 00 -Mexico/BANAMEX I savers & borrowers for on-lending to SME's

Commercial bank LAC Mexico Bancomer, S N.C Access for smaller Credit and agency lines 1990 20 00 20.00savers & borrowers for on-lending to SME's

Commercial bank LAC Mexico Banorte, C V Multi Access for smaller Credit and agency lines 1992 20.00 20 00product ACL savers & borrowers for on-lending to SME's

Commercial bank LAC Panama Banco Continental Access for smaller Credit and agency lines 1993 5.00 5 00Panama savers & borrowers for on-lending to SME's

Commercial bank LAC Panama Banco General SA Access for smaller Credit and agency lines 1997 25 00 25.00savers & borrowers for on-lending to SME's

Commercial bank LAC Peru Banco Credito del Peru Access for smaller Credit and agency ines 1994 15.00 15.00savers & borrowers for on-lending to SME's



Commercial bank LAC Peru Banco Interandino Access for smaller Credit and agency lines 1994 13.00 10.00 3.00 - - - -


Commercial bank LAC Uruguay Banco Comercial, SA Access for smaller Credit and agency lines 1993 5.00 5.00 -


Commercial bank LAC Uruguay Suramericana de Access for smaller Credit and agency lines 1996 6.00 - - 600Inversiones/Surinvest savers & borrowers for on-lending to SME'sCasa Bancaria SA IVSubordinated Loan

Commercial bank LAC Venezuela Banco Venezolano Access for smaller Credit and agency lines 1993 10.00 10.00de Credito ACL savers & borrowers for on-lending to SME's

Commercial bank LAC Venezuela Sociedad Financiera Access for smaller Credit and agency lines 1991 20.00 20.00Mercantil savers & borrowers for on-lending to SME's

Commercial bank World World Algemene Bank Access for smaller Credit and agency lines 1990 25.00 25.00 - - - 25.00Netherland AV MLF savers & borrowers for on-lending to SME's

Commercial bank World World Banque Nacional de Access for smaller Credit and agency lines 1991 25.00 25.00 - - - 25.00Paris MLF savers & borrowers for on-lending to SME's

Commercial bank World World Credit Lyonnais MLF Access for smaller Credit and agency lines 1991 25.00 25.00 - - - 25.00savers & borrowers for on-lending to SME's

Commercial bank World World ING Bank MLF Access for smaller Credit and agency lines 1990 25.00 25.00 - - 37.50savers & borrowers for on-lending to SME's

Commercial bank Africa Benin AEF Bank of Africa - Banking & other credit Institution building 1995 0.02 - - 0.02Benin Ill RI institutions

Commercial bank Africa Burkina Faso Ecobank-Burkina Faso Banking & other credit Institution building 1997 0.26 - 0.26 -

institutions

Commercial bank Africa Guinea Banque Internationale/ Banking & other credit Institution building 1986 1.00 - 1.00BICI-GUI institutions

Commercial bank Africa Madagascar BNI Credit Lyonnais Banking & other credit Institution building 1991 2.60 - 2.60

Madagascar SA institutions

Commercial bank Asia China JV Commercial Bank Banking & other credit Institution building 1993 7.50 - 3 75 - 3.75institutions

Commercial bank Asia India Centurion Bank Ltd/CBL Banking & other credit Institution building 1995 5.41 - 5.41institutions

Commercial bank Asia India Development Credit Banking & other credit Institution building 1996 1.89 - 1.89Bank institutions



Institution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US5m) (US$m) (US$m) (US$m)

Commercial bank Asia India Global Trust Bank Banking & other credit Institution building 1994 3.19 - 3.19 - - - -

institutions

Commercial bank Asia Korea Hana Bank I Banking & other credit Institution building 1971 0.70 - 0 70 - - - -

institutions

Commercial bank Asia Korea Hana Bank II Banking & other credit Institution building 1974 0.34 - 0.34institutions

Commercial bank Asia Korea Hana Bank IlIl Banking & other credit Institution building 1976 0.40 - 0.40institutions

Commercial bank Asia Korea Hana Bank IV Banking & other credit Institution building 1979 0.59 - 0.59institutions

Commercial bank Asia Korea Hana Bank IX Banking & other credit Institution building 1991 4 48 - 4.48institutions

Commercial bank Asia Korea Hana Bank V Banking & other credit Institution building 1980 0.63 - 0.63institutions

Commercial bank Asia Korea Hana Bank VI Banking & other credit Institution building 1982 0.66 - 0.66institutions

Commercial bank Asia Korea Hana Bank VIl Banking & other credit Institution building 1985 0.54 - 0.54institutions

Commercial bank Asia Korea Hana Bank VIII Banking & other credit Institution building 1989 2.70 - 2.70institutions

Commercial bank Asia Korea Hana Bank X RI Banking & other credit Institution building 1994 2.10 - 2.10institutions

Commercial bank Asia Korea Hana Bank Xl Banking & other credit Institution building 1989 2 18 - 2 18Institutions

Commercial bank Asia Korea Hana Bank Xl RI Banking & other credit Institution building 1997 0.65 - 0 65 - - - -

institutions

Commercial bank Asia Thailand Bank of Asia I Banking & other credit Institution building 1992 5.93 - 5.93institutions

Commercial bank Asia Thailand Bank of Asia 11 Banking & other credit Institution building 1993 0 49 - 0.49institutions

Commercial bank Asia Thailand Bank of Asia III RI Banking & other credit Institution building 1995 1.10 - 1 10institutions

Commercial bank CAMENA Egypt Commercial Banking & other credit Institution building 1993 16.50 - 16.50International Bank institutions

Commercial bank CAMENA Kazakhstan ABN-AMRO Bank Banking & other credit Institution building 1994 2 00 - 7 nolLtd/AABK I institutions



Commercial bank CAMENA Kyrgyz Republic Demirbank Krygyzstan Banking & other credit Institution building 1997 0.15 - 0.15International Bank II - institutionsAdditional Investment

Commercial bank CAMENA Uzbekistan ABN-AMRO Uzbek Banking & other credit Institution building 1996 1.00 - 1.00institutions

Commercial bank Europe Croatia T.S. Banka D.D Banking & other credit Institution building 1996 1.50 - 1.50institutions

Commercial bank Europe Czech Republic Zivnostenska Banka I Banking & other credit Institution building 1992 6.49 - 6.49institutions

Commercial bank Europe Hungary Unicbank Rt I Banking & other credit Institution building 1987 3.14 3.14institutions

Commercial bank Europe Latvia Latvian Joint Banking & other credit Institution building 1996 1.63 - 1.63Venture Bank institutions

Commercial bank Europe Poland International Bank Banking & other credit Institution building 1991 3.20 - 3.20in Poland I institutions

Commercial bank Europe Romania ABN AMRO Romania Banking & other credit Institution building 1995 2 00 - 2.00institutions

Commercial bank LAC Bolivia Banco Industrial, Banking & other credit Institution building 1976 0.55 - 0.55SA / BISA I institutions

Commercial bank Africa Cote d'Ivoire Banque Atlantique Banking & other credit Risk management & 1996 4 83 - - - 4.83Cote d'lvoire 11 institutions credit enhancement

Commercial bank Africa Kenya Credit Finance and Banking & other credit Risk management & 1997 10.00 - - - 10.00Commerce Bank Ltd - institutions credit enhancementLoan Option Facility orStand-by Loan

Commercial bank Asia Malaysia Development & Banking & other credit Risk management & 1992 10.00 - - - 10.00Commercial Bank institutions credit enhancementBerhad - Guarantee Loan

Commercial bank Asia Malaysia Oversea-Chinese Banking & other credit Risk management & 1992 1000 - - - 10.00Banking Corporation - institutions credit enhancementGuarantee Loan

Commercial bank CAMENA Kazakhstan Kazakstan Guarantee Banking & other credit Risk management & 1995 16.00 - - - 16.00 24.00Facility institutions credit enhancement

Commercial bank Europe Russian Tokobank RMF Banking & other credit Risk management & 1994 5.00 - - - 5.00 -

Federation institutions credit enhancement

Commercial bank Europe Turkey Turkiye Garanti Banking & other credit Risk management & 1993 20 00 - - - 20.00Bankasi I RMF institutions credit enhancement




Commercial bank LAC Bolivia Banco Irndustral, Bank ng & other credit Risk management & 1991 090 - - - 090SA / BISA 11 Swap institutions credit enhatncerrient

CommercLiai bank LAC Borvia Banco Industrial, Banking & other credit Risk management & 1990 2 12 2 12SA / BISA IlIl RMF institutions credit entancement

Commercial bank LAC Mexico Banca Serfin II RMF Banking & other credit Risk management & 1990 6.50 - 6 50institutons credit enhancement

Commercial bank LAC Mex co Banco Nacional de Banking & otner credit Risk management & 1 992 40 00 40 00Mexico/BANAMEX nstitutions credit erhancement11 RMF

Commercial bank CAMENA Morocco Banque Marocaine du Access to international Securities structurrig, 1996 - - 12 55Commercial Exterieur/ capital rmlarkets underwrit 0g & placementBMCE II GDR

Deveopment Africd Cote d'lvo re Cofinc I -Credit Line Bankinq & other credit Credit and agency lines 1986 4 56 4 56 - -

finance company nstitutiorns for on-lending to SME's

Development Africa East Africa SIFIDA Investment Co II Banking & other credit Credit and agency lines 1985 2 00 2 00 - - - 2 00finance company institutions for on-lending to SME's

Development Africa Kenya Development Finance Banking & other credit Cred t and agency lines 1983 4.76 4 76 -

finance company Co of Kenya Ltd/DCK II institutions for on-lending to SME's

Development Afr ca Kenya Kenya Commercial Banking & other credit Credit and agency lines 1981 500 5.00finance company Financial Co institutions for on-lending to SME's

Development Africa Kenya Loans to 10 Small & Banking & other credit Credit and agency lines 1977 2.00 2.00finance company Medium Enterprises institutions for on-lending to SME's

in Kenya

Development Africa Swaziland Swaziland Industrial Banking & other credit Credit and agency lines 1986 3 00 2 30 0 70 -

finance company Development Co Ltd I institutions for on-lending to SME's

Development Asia China Orient Finance Access for smaller Cred t and agency lines 1997 10 00 10.00 - - - 20 00finance company Company -Loan Facility savers & borrowers for on-lending to SME's

Development Asia Korea Korea Long Term Banking & other credit Credit and agency lines 1976 8 91 8.91 - - - 8.90finance company Credit Bank IlIl inistitutions for on-lending to SME's

Development Asia Philippines Loan to 7 Corps for Banking & other credit Credit and agency lines 1981 19.24 18.50 0.74 -

finance company SMSIEs in the Philippines institutions for on-lending to SME's

Development Asia Sri Lanka Bank of Ceylon I Banking & other credit Credit and agency lines 1978 2 00 2 00 -

finance company institutions for on-lending to SME's

Development Asia Sri Lanka Bank of Ceylon II Banking & other credit Credit and agency lines 1981 5 00 5.00finance company institutions for on-lending to SME's

Development Asia Thailand Siam Commercial Bank Banking & other credit Credit and agency lines 1978 2 00 2 00finance company institutions for on-lending to SME's



Development CAMENA Morocco Banque Nat'le pour le Banking & other credit Credit and agency lines 1983 20.00 20.00 - - - 20.00

finance company Dev't Economique / institutions for on-lending to SME'sBNDE III

Development CAMENA Morocco Banque Nat'le pour le Banking & other credit Credit and agency lines 1985 20.00 20.00 - - - 20 00

finance company Dev't Economique / institutions for on-lending to SME'sBNDE IV

Development CAMENA Morocco Credit Immoblier Banking & other credit Credit and agency lines 1987 25.28 2528 - - - 883

finance company et Hotelier I institutions for on-lending to SME's

Development CAMENA Morocco Creditimmoblier Banking & other credit Credit and agency lines 1990 40.61 40.61 - - - 51.51finance company et Hotelier II institutions for on-lending to SME's

Development CAMENA Pakistan Pakistan Industrial Access for smaller Credit and agency lines 1987 3 00 - 3.00 -

finance company Credit & Investment savers & borrowers for on-lending to SME'sCorp / PICIC IV AL

Development Europe Turkey KOC American - Access for smaller Credit and agency lines 1992 6.00 6.00 - - - 14.00

finance company Mu tiborrower Facility savers & borrowers for on-lending to SME's

Development Europe Turkey Turkiye Sinai Kalkinna Banking & other credit Credit and agency lines 1976 5.00 5.00 - - 20 00

finance company Bankasi AS/TSKB VII nstitutions for on-lending to SME's

Development LAC Bolivia Banco Industrial, Banking & other credit Credit and agency lines 1988 10 00 10 00 -

finance company SA / BISA 11 institutions for on-lending to SME's

Development LAC Bolivia Banco Industrial, Banking & other credit Credit and agency lmes 1995 17.70 15.00 2.70 - 1000

finance company SA / BISA IV insttut ons for on-lending to SME's

Development LAC Chile Banco Bice Banking & other credit Credit and agency ines 1991 10.00 10 00 - -

finance company institutions for on-lending to SME's

Development LAC Chile Banco O'Higgins Access for smaller Credit and agency lines 1991 10.00 10.00finance company Credit Agency Line savers & borrowers for on-lend ng to SME's

Development LAC Colombia Corporacion Financiera Banking & other credit Credit and agency lines 1985 6 00 6 00finance company Colonibiana II nstitutions for on-lending to SME's

Development LAC Colomb,a Corporacion Financiera Banking & other credit Credit and agency lines 1981 10 00 10 00finance company Colombiana III-CFC institutions for on-lending to SME's

BOND

Development LAC Colombia Corporacion Financtera Banking & other credit Credit and agency lines 1994 6.20 5.00 1.20

finance company de Santander / institutions for on-lending to SME'sCORFINANSA I

Development LAC Colombia Corporacion Financiera Banking & other credit Credit and agency mnes 1985 6.00 6 00 -

finance company del Valle / CF del Valle II institutions for on-lend ng to SME's

Development LAC Colombia Corporacion F nanciera Access for smaller Credit and agency lines 1988 9 50 - 4.50 5.00

finance company del Valle / CF del savers & borrowers for on-lending to SME'sValle III AL

Annex (continued)



Development LAC Colombia Corporacion Financiera Banking & other credit Credit and agency lines 1995 42.00 40 00 - - 2.00 60.00finance company del Valle / CF del institutions for on-lending to SME's

Valle VilI

Development LAC Colombia Corporacion Financiera Banking & other credit Credit and agency lines 1985 6.00 6 00 - - - - -

finance company Nacional / CF Nacional ll institutions for on-lending to SME's

Development LAC Colombia Corporacion Nacional Banking & other credit Credit and agency lines 1995 42.00 40.00 - - 2.00 40.00finance company y Suramericana SA institutions for on-lending to SME's

Development LAC Costa rica Corporacion Banex, SA Banking & other credit Credit and agency lines 1991 5 85 5 00 0 85 - - -

finance company & Banex International institutioris for on-lending to SME's

Development Africa Botswana Botswana Development Banking & other credit Institution building 1979 0 36 - - 0 36finance company Corporation Ltd/BDC I institutions

Development Africa Botswana Botswana Development Banking & other credit Institution building 1983 0.24 - - 0.24finance company Corporation Ltd/BDC II institutions

Development Africa Cote d'ivoire Banque Ivorieene de Banking & other credit Institution building 1978 0.22 - 0.22 -

finance company Developpement institutionsIndustrieal / BIDI I

.o Development Africa East Africa SIFIDA Investment Co Banking & other credit Institution building 1976 0.18 - 0.18 - - -

finance company institutions

Development Africa East Africa SIFIDA Investment Co I Banking & other credit Institution building 1971 0 50 - 0.50finance company institutions

Development Africa Kenya Development Finance Banking & other credit Institution building 1980 1 37 - 1 37finance company Co of Kenya Ltd/DFCK I institutions

Development Africa Liberia Liberian Bank for Banking & other credit Institution building 1977 0.31 - 0.31finance company Development & institutions

Investment II

Development Africa Liberia Liberian Bank for Banking & other credit Institution building 1984 0.15 - 0.15finance company Development & institutions

Investment IlIl

Development Africa Malawi INDEBANK Financial Banking & other credit Institution building 1979 0.61 - 0.61finance company Services Ltd institutions

Development Africa Senegal Sofisedit I Banking & other credit Institution building 1974 0.21 021finance company institutions

Development Africa Senegal Sofisedit II Banking & other credit Inst tution bulIding 1981 0.17 - 0.17finance company institutions

Development Africa Swaziland Swaziland Industrial Banking & other credit InOttiut,on building 1993 0 39 0.39finance company Development Co Ltd II institutions



Development Africa Uganda Development Finance Banking & other credit Institution building 1984 0.38 - 0.38

finance company Co of Uganda/DFCU I institutions

Development Africa Uganda Development Finance Banking & other credit Institution building 1992 0.60 - 0.60

finance company Co of Uganda/DFCU II institutions

Development Africa Zaire Societe Financiere de Banking & other credit Institution building 1984 0.58 - 0.58

finance company Developement II institutions

Development Africa Zambia Development Bank of Banking & other credit Institution building 1976 0.54 - 0.54

finance company Zambia/DBZ institutions

Development Asia Bangladesh Industrial Promotion & Banking & other credit Institution building 1980 1.05 - 1.05

finance company Development Co of institutionsBangladesh

Development Asia Indonesia PT PDFCI Bank/PDFCI Banking & other credit Institution building 1974 0.48 - 0.48

finance company institutions

Development Asia Korea Korea Long Term Credit Banking & other credit Institution building 1974 0.36 - 0.36

finance company Bank II institutions


finance company Bank IV institutions

Development Asia Korea Korea Long Term Credit Banking & other credit Institution building 1988 2.73 2.73

finance company Bank IX RI institutions


finance company Bank V institutions


finance company Bank VI institutions


finance company Bank V I institutions


finance company Bank VIII institutions

Development Asia Philippines BPI Agricultural Banking & other credit Institution building 1986 0.97 - - 0.97

finance company Development Bank/ institutionsBPIADB

Development Asia Sri Lanka Development Finance Banking & other credit Institution building 1978 0.10 - 0.10 -

finance company Co of Ceylon/DFCC I institutions

Development Asia Sri Lanka Development Finance Banking & other credit Institution building 1980 0.05 - 0.05

finance company Co of Ceylon/DFCC II institutions

Development Asia Sri Lanka Development Finance Banking & other credit Institution building 1983 0.30 - 0.30

finance company Co of Ceylon/DFCC IlIl institutions

Annex (continued)



Development CAMENA Morocco Banque Nat'le pour Banking & other credit Institution building 1978 1.20 - 1.20 - - - -finance companyle Dev't Economique/ institutions

BNDE 11

Development CAMENA Oman Oman Bank Banking & other credit Institution building 1979 2 03 - 2.03finance company institutions

Development CAMENA Pakistan Pakistan Industrial Banking & other credit Institution building 1975 0.03 - 0.03finance company Credit & Investment institutions

Corp / PICIC III

Development CAMENA Pakistan Pakistan Industrial Banking & other credit Institution building 1989 0.09 - 0.09finance company Credit & Investment institutions

Corp / PICIC V RI

Development CAMENA Pakistan Pakistan Industrial Banking & other credit Institution building 1 993 0 47 - 0.47finance company Credit & Investment institutions

Corp / PICIC VI RI

Development CAMENA Tunisia Banque de Dev't Banking & other credit Institution building 1978 1.15 - 1.15finance company Economique Tunisie/ institutions

BDET IIl

Development Europe Turkey Turkiye Sinai Kalkinna Banking & other credit Institution building 1972 0 43 - 0 43o finance company Bankasi AS/TSKB IV institutions

Development Europe Turkey Turkiye Sinai Kalkinna Banking & other credit Institution building 1982 0.61 - 0.61finance company Bankasi AS/TSKB IX institutions

Development Europe Turkey Turkiye Sinai Kalkinna Banking & other credit Institution building 1980 1.09 - 1.09finance company Bankasi AS/TSKB VIII institutions

Development LAC Colombia Corp de Ahorro y Banking & other credit Institution building 1973 0.32 - 0.32finance company Vivienda institutions

Development LAC Colombia Corporacion Financiera Banking & other credit Institution building 1995 0.24 - 0 24finance company de Santander / institutions

CORFINANSA 11 RI

Development LAC Colombia Corporacion Financiera Banking & other credit Institution building 1973 0.02 - 0 02finance company del Norte/CF del Norte 11 institutions

Development LAC Colombia Corporacion Financiera Banking & other credit Institution building 1993 0.07 - 0.07finance company del Valle/CF del Valle IV institutions

Development LAC Colombia Corporacion Financiera Banking & other credit Institution building 1993 4.84 - 4 84 - - - 14.40finance company del Valle/CF del Valle VI institutions

Development LAC Colombia Corporacion Financiera Banking & other credit Institution building 1993 0.21 - 0.21 -finance company cle Valle/CF del Valle VII institutions



Development LAC Colomb a Soc Col de Financiera Banking & other credit Institution building 1973 0.65 - 0.65finance company institutions

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1973 0.05 - 0 05 - - - -

finance company Ecuatoriana/COFIEC II institutions

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1975 0.03 - 0.03finance company Ecuatoriana/ insttutions

COFIEC IlIl RI

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1981 0.03 - 0 03finance company Ecuatoriana/COFIEC IV insttutions

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1977 0.07 - 0.07 - - - -

finance company Ecuatoriana/COFIEC IV institutions

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1982 0.08 - 0.08firldnce conipaiiy Ecuatoriana/COFIEC VI insttutionis

Development LAC Ecuador Compania Financiera Banking & other credit Institution building 1987 4 07 - 0 07 4.00 -

finance company Ecuatoriana/COFIEC VII institutions

Development LAC Trinidad & Tobago Development Fnance Banking & other credit Institution bu(iding 1989 5.1 5 0.47 - 4.68 - -

finance company Ltd/DL I Reorg/Bond insttutionsGuarantee

Development LAC Trinidad & Tobago Development Finance Banking & other credit Institution bulIding 1992 0.13 - 0.13finance company Ltd/DFL II insttutions

Development Europe Turkey Turkiye Sinai Kalkinna Banking & other credit Risk management & 1992 13.44 - - 13.44finance company Bankasi AS/TSKB X insttutions credit enhancement

RMF

Factoring Asa Indonesia PT BBD Heller Access for smaller Institution building 1992 0.60 - 0.60company Factoring Co savers & borrowers

Factoring Asa Sri Lanka Lanka Orx Factors Ltd Access for smaller Institution building 1997 1 80 1.50 0 30company savers & borrowers

Factoring CAMENA Morocco Attijari Factoring-Maroc/ Access for smaller InstitutEon building 1995 0.56 - 0.56company BCM Factoring savers & borrowers

Factoring Europe Czech Republic OB Heller AS Access for smaller Institution building 1992 0.21 - 0.21company savers & borrowers

Factoring Europe Poland Handlowy-Heller Access for smaller Institution building 1994 0 60 - 0 60company savers & borrowers

Factoring Europe Slovenia Ljubljanska Banka- Access for smaller Institution building 1994 0.20 - - 0 20company Intermarket Factoring Co savers & borrowers

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (USSm) (USSm) (US$m) (USSm) (US$m) (US$m) (US$m)

Factonng Europe Turkey Heiler Factoring Access for smaller Institution buiding 1992 0.61 - 0 61 - -

company savers & borrowers

Factoring LAC Ecuador Facturas Access for smaller Institut on building 1987 0 15 0 15company Internacionales SA savers & borrowers

Factoring LAC Mexico Aurum-Heller Access for srnaller Institutiorl bu Iding 1994 0.98 - 0 98company Factoraje, SA de CV I savers & borrowers

Factoring LAC Mexico Aurum-Heller Fdctoraje, Access for smaller Institution building 1996 0 97 - 0 97company SA de CV 11 CRP savers & borrowers

Fund management Asia India Twentieth Century Access to international Institution building 1994 0 16 - 0 16company Asset Mgmt Corp capital markets

Fund nianagement LAC Argentina Corp de Inversiones Access to international irstitutron building 1990 0 08 0.08 - - - 129 62company y Pnrv/CIP/APDT capital markets

Fund management CAMENA CAMENA Region Framiington Asset Access to nternational Institution buildng 1996 0 01 - 0 01 - - -company Management capital markets

Kazakhstan Ltd

Fund management CAMENA CAMENA Region Iramington Cenral Access to nternational nstitrrt on bui ding 1996 0 01 001company Asia Investment capital markets

Management re and

Fund manaqement CAMENA CAMENA Region Framlington Maghreb Access to international nstitut on bui ding 1995 0 00 0 00company SA (fm) capital markets

Fund manageriernt CAMENA Pakistan Equity nternational Access to nternationa Institution building 1991 0.26 - 0 26company (Private) Ltd/EIL capital markets

Fund management Europe Russian Pioneer First Access to nternational Institution building 1996 4 00 4.00company Federation Russia Inc capital markets

Fund management LAC Chi e Morieda Asset Access to international InstitUtion build rig 1994 0 20 - 0 20company Mgmt SAI capital markets

Fund management LAC Chile Moneda Asset Access to internatconal Institution build nq 1996 0 13 - 0.13company Mgmrt SA 11 RI capital markets

Fund management LAC Ch l Meineda Asset Access to interriat onal Institit on buildirig 1997 0 14 - 0 14company Mqmt SA I1 Rl capital markets

Fund management LAC LAC Regiona Terra Capital Fund Access to international Institut on bu Iding 1997 0.05 -0 05 -

company Managernent Company capital markets

Fund managernent LAC Mex co Invers ones de Capita Access to internaliorwia rust tit on bu Idirg 1993 0 1S 0 15company Bancomer, SA de CV capital markets


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (U5$m) (US$m) (US$m) (US$m) (US$m) (US$m) (US$m)

Fund management World World Emerging Mkts Invest Access to international Institution building 1989 5.00 - 5 00 - - - -

company Fund/EMIF 11 capital markets

Fund management World World Emerging Mkts Invest Access to international Securities structuring, 1990 - - - - - - 113.00

company Fund/EMIF IlIl capital markets underwriting & placementUnderwriting

Fund management Asia Asia Region Asian Infrastructure Access to international Institution building 1994 0 30 - 0 30company Fund Mgmt Co LDC capital markets

Fund management CAMENA Morocco Fin Euratlas/Siparex- Access to international Institution building 1994 0.09 - 0.09company Wafa Mgmt Co capital markets

Fund management LAC Argentina The Tower Investment Access to international Institution building 1995 0 15 0.15company Management Company capital markets

Fund management LAC Peru Peru Priv'n Fund Mgmt/ Access to international Institution building 1994 0 01 - 0.01company PPF Cayman/Montagu capital markets

Fund management World World Emerg Markets Growth Access to international Institution building 1993 0.12 - 0.12 - - -

company Fund Mgmt Co/ capital marketsEMGF MC

Fund management Asia Sri Lanka CKN Fund Mgmt Co I Access to international Institution building 1992 0.06 - 0.06company capital markets

Fund management CAMENA Pakistan AIM-BSJS Asset Mgmt Access to international Institution build ng 1995 0 30 - 0.30company Co/ABAMCO capital markets

Fund management Africa East Africa Fast Africa Venture Access to international Institution building 1996 0.04 - 0.04company Capital Fund Mgmt Co capital markets

Fund management Africa South Africa South Africa Franchise Access to international Institution building 1995 0.06 - 0 06company Fund Mgmt Co Ltd capital markets

Fund management Africa West Africa CFA Gestion S.A Access to international Institution building 1995 0.25 - 0 25company capital markets

Fund management Afrca Zimbabwe Zambezi Fund Access to international Institution building 1995 0 06 - 0.06company Management Co capital markets

Fund management Asia China China Walden Mgmt Access to international Institution building 1994 0 01 - 0 01company Ltd capital markets

Fund management Asia China H&Q Fund Management Access to international Institution building 1994 - -

company Company capital markets

Fund management Asia India Creditcapital Asset Access to international Institution building 1994 0.32 - 0.32company Mgmt Co capital markets

Fund management Asia Ind a Creditcapital Venture Access to international Institution building 1992 0.51 - 0 51company Fund Mgmt Co I capital markets

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US$m) (US$m) (USSm) (US$m)

Fund management Asia ndia Creditcapital Venture Access to international Institution building 1995 0 60 - 0 60company Find Mgmt Co 11 capital markets

Fund management Asia ndia Indus Venture Capital Access to internat onal InstitLution building 1992 0 01 - 001company Mgmt Co capital markets

Fund management Asia India Walden-Nikko India Access to .nternational Institution building 1997 0 08 008 - - -

company Ventures Company/ capital marketsWalden Management

Fund management Asia Indonesia PAMA (Indonesia) Ltd Access to international Institution building 1994 0.00 - 0.00company Mgmt Co capital markets

Fund management Asia Philippines All Asia Capital Access to international institution building 1996 0.04 - 0 04company Managers Inc capital markets

Fund management Asia Philippries Asia Ventures Ltd 11 Access to international Institution building 1996 0.01 - 0 01company capital markets

Fund management Asia Philippines Walden AB Ayala Access to International Institution buhlding 1994 0 05 - 0.05company Mgmt Co/WAAM capital markets

Fund management CAMENA Egypt Horus Investments Ltd Access to nternational Institution budlding 1993 0 01 - 0.01company capital markets

Fund management CAMENA Tunisia Tunisia Private Equity Access to international Institution building 1995 0.07 0.07company Fund Mgmt Co/ capital markets

TUNIVEST GESTION

Fund management Europe Europe Region Advent Central Mgmt Access to internationai Institution building 1993 0.02 - 0.02company Co / ACEM capital markets

Fund management Europe Hungary First Hungarian Access to internationai Institution building 1990 7 50 - - 7.50 - - 36 25company Investment Advisory capital markets

RI/FHIA

Fund management Europe Rassian Sector Capital Access to international Institution building 1995 047 047 -0 4-company Federation Development Company capital markets

Ltd

Fund management LAC Brazil CR Management Co Access to international Institution building 1992 0 03 - 0 03company capital markets

Fund management LAC Mexico Baring Venture Partners Access to international Institution building 1995 0 15 - 0 15company de Mexico SA de CV I capital markets

Fund management LAC Mexico Baring Venture Partners Access to international Institution building 1996 0 03 - 0.03company de Mexico SA de capital markets

CV 11 RI



Fund management LAC Mexico Chiapas Fund Access to international Institution building 1997 0.02 - 0.02

company Management Company capital markets

Housing finance Asia India Housing Development Access for smaller Credit and agency lines 1978 5.21 4.00 1.21

company Finance Corp/HDFC I savers & borrowers for on-lending to SME's

Housing finance Asia India Housing Development Access for smaller Credit and agency lines 1991 44.80 40.00 - - 4.80 60.00

company Finance Corp/HDFC IV savers & borrowers for on-lending to SME's

Housing finance Asia Indonesia PT Papan Sejahtera/ Access for smaller Credit and agency lines 1980 5.20 4.00 1 20 - -

company Papan savers & borrowers for on-lending to SME's

Housing finance CAMENA Pakistan Internatioldl Housing Access foi smaller Credit and agency lines 1991 5.57 500 0.57 -

company Finance Co Ltd I savers & borrowers for on-lending to SME's

Housing finance CAMENA West Bank & Arab Bank - Loan Access for smaller Credit and agency lines 1997 32.00 30.00 - - 2.00

company Gaza Option Facility for the savers & borrowers for on-lending to SME'sWest Bank & Gaza

Housing finance Europe Poland Polish American Access for smaller Credit and agency lines 1996 15.00 1500 - -

company Mortgage Bank savers & borrowers for on-lending to SME's

Housing finance Africa Botswana Botswana Housing Access for smaller Institution building 1991 1 19 - 1.19

D company Finance Corp/BHFC savers & borrowers

Housing finance Africa Senegal Banque de l'Habitat Access for smaller Institution building 1980 0.46 - 046

company du Senegal/BHS savers & borrowers

Housing finance Asia India Gujarat Rural Housng Access for smaller Institution building 1985 0 20 - 0.20

company Finance savers & borrowers

Housing finance Asia India Housing Development Access for smaller Institution buiding 1987 0.39 - 0 39

company Finance Corp/HDFC II savers & borrowers

Housing finance Asia India Housing Development Access for smaller Institution buiiding 1991 0.51 - 0.51company Finance Corp/HDFC IlIl RI savers & borrowers

Housing finance Asia India Housing Development Access for smaller Institution building 1993 2.29 - - 2.29

company Finance Corp/HDFC V RI savers & borrowers

Housing finance CAMENA Lebanon Bank of Near East Access for smaller Institution building 1975 1 25 - 1 25

company SAUBNE savers & borrowers

Housing finance CAMENA Pakistan International Housing Access for smaller Institution building 1995 0.40 - 0.40

company Finance Co Ltd II R Isavers & borrowers

Housing finance LAC Bolivia Banco Hipotecario Access for smaller Institution buiiding 1976 0.34 - 0.34

comnpany Nacional/BHN savers & borrowers

Housing finance LAC Eastern Eastern Caribbean Access for smaller Institution buioding 1996 0.40 - 0.40

company Carribean Home Mortgage Bank savers & borrowers

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (USSm) (US$m) (US$m) (US$m)

Housing finance LAC Mexico General Hipotecaria Access for smaller Institution building 1997 2 50 - 2.50company savers & borrowers

Housing finance LAC Trinidad & Home Mortgage Bank Access for smaller Institution building 1984 0 66 - 0 66 - - - -

company Tobago savers & borrowers

Industrial / LAC Mexico CICASA Constr Banking & other credit Risk management & 1986 20 00 - - - 20 00manufacturing Guarantee Facility institutiorns credit enhancementcompany

Industr.al As a India Gujarat Ambuja Access to international Securities structuring, 1994 - - - - - 17.60manufacturing Cements Ltd II capital markets underwriting & placementcompany Convertible Bond Issue

Industrial/ Asia Inda Indo Rama Access to international Securities structuring, 1996 2.17 - 2.17 - - 10.00manufacturing Synthetics Ltd capital markets underwritirig & placementcompany

Industrial / Asia India Tata Electric IV Access to international Securities structuring, 1994 - - - - 17.75manufacturing International capital markets underwriting & placementcompany Securities Issues

Industrial / Asia Ind a TISCO -Tata Iron and Access to international Securities structuring, 1994 - - - - - - 30.00manufacturing Steel Co - Securties capital markets underwriting & placementcompany Issue

Industrial / CAMENA Egypt ANSDK GDR Access to international Securities structuring, 1997 - - - - 30.00manufacturing capital markets underwriting & placementcompany

Industrial / CAMENA Pakistan DG Khan Cement Access to international Securities structuring, 1994 30 00 25.00 5 00 - - 40 00 21.60manufacturing Co Ltd capital markets undervwriting & placernentcompany

Industrial / Europe Turkey Medya Holding I Access to interriational Securities structuring, 1996 5 00 - - 5.00 - - 6.63manufacturing Bond Offering capital markets underwriting & placementcompany

Industrial / LAC Argentina Alpargatas SAIC - Access to international Securities structuring, 1996 15 00 15 00 - - - 160.00 -

manufacturing USCP Facility capital markets underwriting & placementcompany

Industral / LAC Bra7il Riocell SA I Access to international Securities structuring, 1992 - - - - - - 30.00manufacturing capital markets underwnit ng & placementcompany

Industrial / IAC Mexico APASCO IV Access to international Securities structuring, 1993 11 43 10 00 - - 1 43 45.71 4 68manufacturing capital markets underwriting & placementcompany

swiaps, Under-Quasi- guarantee Syndi- writing and

Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (LIS$m) (US$m) (US$m) (US$m) (US$m)

Industrial / LAC Mexico Grupo Irsa, SA de Access to international Securities structuring, 1996 40.00 30 00 - 10.00 - 115.00manufacturing CV I - USCP Facility capita markets underwriting & placementcompany

Industria / LAC Mexico Vitro Sociedao Anonima Access to international Securities structuring, 1982 10.50 1 0.50 - -

manufacturing (VISA) ADS Bond Issue capital markets underwriting & placementcompany

Insurance Afrca Cote d'lvoire Union Afncaine -IARD/ Securities market Institution building 1996 0.67 - 0 67company UA-IARD institutions

rInsuranice Africa Kenya East Africa Reinsurance Secunties market Institution building 1994 1.10 1.10 - - -

company Co Ltd institutions

Insurance Africa South Africa Africa Life Assurance Securities market Institution building 1995 11 70 11 70company Co Ltd I institutions

Insurance Afr ca South Africa Africa Life Assurance Securities market Institution building 1996 3.17 - 3 17company Co Ltd 11 RI institutions

Insurance Afrca Uganda Jubilee Insurance Co Securities market Institution building 1993 0.10 - 0.10company institutions

J Insurance Afrca Zimbabwe AEF Solid Insurance Securities market Institution building 1996 0.20 - 020company Co (Pvt) Ltd institutions

Insurance Asia Indonesia PT Asuransi Jiwa Securities market Institution building 1985 0.36 - 0.36company Dharmala Manulife/ institutions

Manulife

Insurance Asia Sti Lanka Union Assurance Ltd I Securities market Institution building 1988 0.48 - 0 48company institutions

Insurance Asia Sri Lanka Union Assurarce Securities market Institution building 1995 0 50 - 0.50company Ltd II RI institutions

insurance Europe Hungary First American Securities market Institution building 1991 3 26 - 3.26company Hungarian Insurance institutions

Co Rt

Insurance Europe Turkey Turkey Life Insurance Securities market Institution building 1994 0.60 - 060company institutions

Insurance LAC Argentina Roberts AFJP Group- Securities market Institution building 1994 3 30 - 3.30company LBAV institutions

Insurance LAC Argentina Roberts AFJP. LBAR Securities market Institution building 1994 1.32 - 1.32company institutions

Insurance LAC Colombia Suramericana de Securities market Institution building 1993 8.00 - 8.00

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (IUS$m) (US$m) (US$m) (US$m) (US$m) (US$m) (US$m)

company Seguros SA institutionsInvestment bank Asia Thailand National Finance & Securities market Credit and agency lines 1996 4000 40.00 - - 25000 -

Public Securit es Ltd institutions for on-lending to SME's

Investment bank CAMENA Pakistan Atlas Investment Bank Securities market Credit and agency lines 1996 8.50 7 50 - - 100 2.50institutions for on-lending to SME's

Inivestmnent banik CAMENA Pdkistdai Cresceni Investmenit Securities market Credit and agency lines 1996 16 00 15.00 - - 1.00 5.00Bank institutions for on-lending to SME's

Investment bank CAMENA Pakistan First International Securities market Credit and agency lines 1996 8.50 7 50 - - 1 00 2.50Investment Bank! institutions for on-lending to SME'sInterbank Ill RMF

Investment bank Europe Portugal Banco Portuguese de Securities market Credit and agency lines 1987 800 8.00 - - - 2.00Investimento / BPI IV institutions for on-lending to SME's

Investnient bank LAC Brazil Banco Liberal SA Securities market Credit and agency lines 1996 10 00 10.00 -

institutions for on-lending to SME's

Investment bank LAC Paraguay BUSAIF Credit Line Access for smaller Credit and agency lines 1991 5.00 5 00savers & borrowers for on-lending to SME's

o Investrent bank CAMENA Egypt Commercial Securities market Institution builidng 1996 4.50 - 4 50co International Investment institutions

Company

Investment bank CAMENA Pakistan First International Securities market Institution building 1990 0.69 - 0 69Investment Bank/ institutionsInterbank I

Investment bank CAMENA Pakistan First International Securities market Institution building 1992 080 - 0.89 - - - -

Investment Bank' institutionsInterbank 11

Investment bank CAMENA Pakistan Orix Investment Securities market Institution building 1994 0.33 - 0.33Finance Co Pakistan Ltd institutions

Investment cank CAMENA Pakistan Orix Investment Securities market Institution building 1996 0.31 - 0.31Finance Co Pakistan institutionsLtd 11

Investment bank Europe Cyprus Cyprus Investment & Securities market Institution builidng 1982 0.10 - 0 10Securities Co institutions

Investment bank Europe Hungary Nomura Magyar Securities market Instituton building 1991 1.63 - 1 63Beefektetesi Bank institutionsRt/NMBB

Investment bank Europe Portugal Banco Portuguese de Securities market Institinion bciIdn,g 1985 0.23 0.23Investirnento/8P II institutions



Investment bank Europe Portugal Banco Portuguese de Securities market Institution building 1988 1 19 - 1.19 - - - -

Investimento/BPI III institutions

Investment bank Europe Portugal Banco Portuguese de Securities market Institution building 1990 2.01 - 2.01Investimento/BPI VI institutions

Investment bank Europe Portugal Banco Portuguese de Securities market Institution building 1990 0.02 0 02Investimento/BPI VII institutions

Investment bank Europe Portugal Banco Portuguese de Securities market Institution building 1991 0.01 - 0 01Investimento/BPI Vil RI institutions

Investment bank LAC Chile Compania Chilena de Securities market Institution building 1982 0.20 - 0 20Inversiones SA/Inverchile institutions

Investment bank LAC Venezuela Financorp Securities market Institution building 1991 0 62 - 0.62institutions

Investment bank LAC Venezuela Socaedad Financiera Securities market Institution building 1974 0.35 - 0.35Valinvenca institutions

Leasing company Africa Benin Equipbail Access for smaller Credit and agency lines 1994 090 0.74 0.17savers & borrowers for on-lending to SME's

S Leasing company Africa Ghana Ghana Leasing Ill Access for smaller Credit and agency lines 1993 5.00 5 00 -


Leasing company Africa Malawi Leasing & Finance Co, Access for smaller Credit and agency lines 1986 0 72 0.63 0.09Malaw I savers & borrowers for on-lending to SME's

Leasing company Africa Senegal Societe Generaie de Access for smaller Credit and agency lines 1994 1 18 1.03 0 15Credit Automobile/ savers & borrowers for on-lending to SME'SSOGECA I

Leasing company Africa Swaziland Finance Corporation of Access for smaller Credit and agency lines 1985 1 63 1.50 0.13Swaziland savers & borrowers for on-lending to SME's

Leasing cornpany Afrca Tanzania ulc Tanzania Leasing Access for smaller Credit and agency lines 1994 5.97 500 097savers & borrowers for on-lending to SME's

Leasing company Afrca Uganda Uganda Leasing Access for smaller Credit and agency lines 1996 2 00 2 00 -

Company II savers & borrowers for on-lending to SME's

Leasing company Africa Zimbabwe udc L rnited I Access for smaller Credit and agency liries 1984 2.34 2.00 0.34savers & borrowers for on-lending to SMEs

Leasing compdny Africa Zimbabwe udc Lmited li-1,2 Access for smaller Credit and agency lines 1988 9.42 942 -

savers & borrowers for on-lend ng to SME's

Leasing company As a Asia Region KDLC Lease & Access for sinaller Credit and agency lines 1995 17 00 15 Co - 2 00Finance savers & borrowers for or-lending to SME's

Annex (continued)



Leasing company Asid Bangladesh Industrial Devt Leasing Access for smal er Credit and agency lines 1985 2.00 1.80 0 20Co I savers & borrowers for on-lending to SME's

Leasing company Asia Fyij Merchant Bank of Fij/ Access for smaller Credit and agency lines 1986 2 34 2 00 0 34 - -

Fiji Barik savers & borrowers for on-lending to SME's

Leasing company Asia India 20th Century Finance Access for smaller Credit and agency lines 1993 8.00 800 - 10.00Corp Ltd I savers & borrowers for on-lending to SME's

Leasing company Asia India 20th Century Finance Access for smaller Credit and agency lines 1 997 15 00 15.00Corp Ltd II savers & borrowers for on-lending to SME's

Leasing company Asia india CEAT Financial Services Access for smaller Credit and agency lines 1997 20.00 20 00savers & borrowers for on-lending to SME's

Leasing company Asia India India Equipment Access for smaller Credit and agency lines 1983 5.45 5 00 0 45Leasing Ltd I savers & borrowers for on-lending to SME's

Leasing company Asia India India Equipment Access for smaller Credit and agency lines 1993 3 00 3 00 -

Leasing Ltd II savers & borrowers for on-lending to SME's

Leasing company Asia India India Infrastructure & Access for smaler Credit and agency lines 1997 10.00 1000Export Leasing Project savers & borrowers for on-lending to SME'sWIPRO Finance Ltd CL

Leasing company Asia India India Lease Access for smaller Credit and agency lines 1985 5.41 5.00 0 41Development I savers & borrowers for on-lending to SME's

Leasing company Asia India Irsdia Lease Access for srnaller Credit and agency lines 1990 3 94 3.50 - 0.44Development II savers & borrowers for on-lending to SME's

Leasing company Asia India Infra Leasing / IL & Access for smaller Credit and agency lines 1990 16.95 15 00 - 1 95FS I savers & borrowers for on-lending to SME's

Leasing company Asia India Infra Leasing (IL & FS) Ill Access for smaller Credit and agency lines 1994 25 00 25.00 -


Leasing company Asia India ITC Classic Access for smaller Credit and agency lines 1997 3000 2000 - 1000savers & borrowers for on-lending to SME's

Leasing company Asia India Kotak Mahindra Access for smaller Credit and agency lines 1992 0.80 - - 080Finance Limited savers & borrowers for on-lending to SME's

Leasing company Asia India Leasing Corporation Access for smaller Credit and agency lines 1983 5 46 5 00 0 46of India Ltd savers & borrowers for on-lending to SME's

Leasing company Asia India N1cco Uco Financial Access for smaller Credit and agency lines 1997 5 00 5 00 - - 5 00Services Ltd/NUFSL savers & borrowers for on-lending to SME's



Leasing company Asia India Nicco-Uco Financial Access for smaller Credit and agency ines 1992 3.25 3.00 0.25 - - - -

Services Ltd savers & borrowers for on-lending to SME's

Leasing company Asia India SREI International Access for smaller Credit and agency lines 1997 18 00 15.00 3 00Finance Ltd savers & borrowers for on-lending to SME's

Leasing company Asia India SRF Finance Ltd Access for smaller Credit and agency lines 1995 20.00 15.00 5.00savers & borrowers for on-lending to SME's

Leasing company Asia Indonesta Dharmala Finance Access for smaller Credit and agency lines 1993 5 00 S 00 - - - - -


Leasing company Asia Indonesia KDLC Bali Finance Access for smaller Credit and agency lines 1994 16 lb 15.00 1 16 - - -


Leasing company Asia Indonesia Panin Finance II Access for smaller Credit and agency lines 1996 6.00 6.00 - - - 4.00savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia Panin II B-Loan Access for smaller Credit and agency lines 1996 - - - - - 4 00Increase savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia PT BBL Dharmala Access for smaller Credit and agency lines 1996 15.00 15.00 - - - 35.00Finance IIl savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia PT Bunas Finance Access for smaller Credit and agency lines 1995 10 00 10.00 - - - 6.00savers & borrowers for on-lending to SME's

Leasirg company Asid Indonesia PT Saseka Gelora Access for smaller Credit and dyericy lfies 1982 2 30 2 00 0 30 - - 2.00Finance I savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia PT Saseka Gelora Access for smaller Credit and agency lines 1984 3.06 3.00 0.06 - - 4.00Finance II savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia PT Saseka Gelora Access for smaller Credit and agency lines 1 991 5 00 5.00 - - - 15.00Finance IV savers & borrowers for on-lending to SME's

Leasing company Asia Indonesia PT Saseka Gelora Access for smaller Credit and agency lines 1993 1.52 1 52Finance V savers & borrowers for on-lending to SME's

Leasing company Asia Korea Korea Development Access for smaller Credit and agency lines 1977 537 5.00 0.37 - - 10.00Leasing Corporation I savers & borrowers for on-lending to SME's

Leasing company Asia Philippines All Asa Capital & Access for smaller Credit and agency lines 1980 2 15 2 00 0.15 - - 3,00Leasing I savers & borrowers for on-lending to SME's

Leasing company Asia Philippines All Asia Capital & Access for smaller Credit and agency lines 1982 2.00 2 00 - - - 8.00Leasing II savers & borrowers for on-lending to SME's

Leasing company Asia Philippines All Asia Capital & Access for smaller Credit and agency lines 1994 25.00 25 00Leasing VII savers & borrowers for on-lending to SME's

Annex (continued)



Leasing company Asia Sr Lanka Lanka Orient Leas ng Accews for smaller Credit and agency lines 1996 10 00 10 00 - - - - -

Co IV savers & borrowers for on-lendmg to SME's

Leasing company Asia Thailand Ayudhya DevelopiTlent Access for sma ler Credit and agency lines 1996 10 00 10 00 - - - 15 00Leasimg Co Ltd / savers & borrowers for ori-lendng to SME'sADLC IV

Leasing company Asia Vietnam Vietnam International Access for smaller Credit and agericy lines 1996 5 75 5 00 0.75 - - 10 00Leas ny Co Ltd savers & borrowers for on-lending to SMtl's

Leasing company CAMENA Egypt ORIX Ledsing EGT Access for smaller Credit and agency lines 1996 5 88 5.00 0 88 --

savers & norrowers for on-lending to SME's

Leasing company CAMENA Kazakhstarn C. A Leasing Access for smaller Credit and agency lines 1997 5.32 500 032 - 500savers & borrowers for on-lending to SME's

Leasing company CAMENA Lebdrron Lebanese Leasmg Access for srrialler Credit and agency lines 1995 8.24 7 50 0 74 - - 7.51savers & borrowers for on-lending to SME's

Leasing company CAMENA Morocco Maghrebail Access for smaller Credit and agency lines 1993 10 00 10 00 - - - 10.00savers & borrowers for on-lending to SME's

Leasing company CAMENA Morocco Sogelease-Maroc Access for smaller Credit ana dgency lines 1993 10 00 10 00 - - 10 00savers & borrowers for on-lending to SME's

Leasing company CAMENA Morocco Unioni Bail Access for smaller Cred t and agency lines 1993 5 00 5 00 - 5.00savers & borrowers for on-lending to SME's

Leasing company CAMENA Morocco Wafabail Access for smaller Cred t and agency lines 1993 1000 1000 - - - 1000savers & borrowers for on-lending to SME's

Leasing company CAMENA Oman Oman National Access for smaller Credit and agency lines 1993 5 52 5.00 0 52 -

Leasing Company savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistadi Atlas BOT Lease Co Access for smialler Credit aiid agency lues 1994 10.00 1000 - 2 20savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan BRR Capital Modaraba I Access for smaller Credit arid agency lines 1994 10 00 - 10.00 -


Leasing company CAMENA Pakistan BRR Capital Modaraba II Access for smaller Credit and agency lines 1995 5 00 - - 500 - 5 00savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan First Crescent Access for smaller Credit and agency lines 1995 5 00 - - 500 - S 00savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan First Grindlays Access for smaller Credit and agency lines 1995 15 00 - 15 00 15.00savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan First Leasing Access for smaller Credit and agency lines 1994 5 00 5 00Corporation I savers & borrowers for on-lending to SMEs



Leasing company CAMENA Pakistan First UDL Modaraba Access for smaller Credit and agency lines 1995 10.00 - - 10.00 - 10.00savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan Modaraba Al Mali Access for smaller Credit and agency lines 1995 5.00 - - 500 - 5.00Corporation savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan National Development Access for smaller Credit and agency lines 1984 4.51 4.06 045 - -

Leasing Corp I savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan National Development Access for smaller Credit and agency lines 1994 12.50 12.50 - - - 3 30Leasing Corp 11 for on-lending to SME's

Leasing company CAMENA Pakistan Orix Leasing Pakistan Access for smaller Credit and agency lines 1994 12 50 12 50 - - 3.30Ltd savers & borrowers for on-lending to SME's

Leasing company CAMENA Pakistan Pakistan Industrial Access for smaller Credit and agency lines 1994 5 00 5.00 -

Commercial Leasing/ savers & borrowers for on-lending to SME'sPICL

Leasing company CAMENA Pakistan Pakistan Industria Access for smaller Credit and agency lines 1991 5.00 5.00 -

Leasing Corp Ltd / savers & borrowers for on-lending to SME'sPILCO I

Leasing company CAMENA Pakistan Pakistan Industrial Access for smaller Credit and agency lines 1994 10 00 10.00 - - - 2.20Leasing Corp Ltd / savers & borrowers for on-lending to SME'sPILCO 11

Leasing company CAMENA Tunisia Tunisie Leasing I Access for smaller Credit and agency lines 1986 2.93 2 93 - - - - -


Leasing company CAMENA Uzbekistan Uzbekistan Leasing Access for smaller Credit and agency lines 1995 5 60 5 00 0 60savers & borrowers for on-lending to SME's

Leasing company CAMENA Uzbekistan UzCase Agroleasing Access for smaller Credit and agency lines 1997 6.00 5.00 1.00 - 5.00 -


Leasing company Europe Bu garia Interlease Inc Access for smaller Cred t and agency lines 1996 3 90 3 50 0 40savers & borrowers for on-lending to SME's

Leasing company Europe East Europe Leasehold ng BV Access for smaller Credit and agency lines 1997 2 00 2.00savers & borrowers for on-lending to SME's

Leasing company Europe Eston a Estonia Leasing Access for smaller Credit and agency lines 1995 2.14 1 90 0 24 - -

Company savers & borrowers for on-lend ng to SME's

Leasing company Europe PortIgal Sofinloc 11 Access for smaller Credit and agency lines 1984 { 48 3 00 0 48 - - 9 00savers & borrowers for on-lending to SME's

Leas ng company Europe Romania Romlease Access for smaller Credit and agency lines 1994 5 45 5.00 0.45 -


Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US5m) (US$m) (US$m) (US$m)

Leasing company Europe Slovenia LB Leasing Access for smalle Credit and agency lines 1994 3.15 3.15 - - - 3 15 savers & borrowers for or-lending to SME's

Leasing company Europe Turkey Demir Finansal Access for smaller Credit and agency lines 1997 1000 1000 -

Kiralma AS CL savers & borrowers for on-lending to SME's

Leasing company Europe Turkey Finans Finansal Access for smaller Credit and agency lines 1997 6 00 6.00Kiralama AS savers & borrowers for on-lending to SME's

Leasing company Europe Turkey Garanti Leasing Access for smaller Credit and agency lines 1994 7 00 7 00savers & borrowers for on-lending to SME's

Leasing company Europe Turkey Is Genel Finansal Access for smaller Credit and agency lines 1993 5 14 500 0.14 - - - -Kiralama/IGFK Ill savers & borrowers for on-lending to SME's

Leasng company Europe Turkey Koc Finansal Kiralma Access for smaller Credit and agency lines 1996 15.00 15 00AS / Koclease I CL savers & borrowers for on-lend ng to SME's

Leasing company Europe Turkey Rant Leasing I Access for smaller Credit and agency lines 1997 4 85 4.85savers & borrowers for on-lending to SME's

Leasing coorpany Europe Turkey Tekfen Investment Access for smaller Credit and agency lines 1994 7.00 7.00Bank 11 savers & borrowers for on-lending to SME's

Leasing company Europe Turkey Toprak Finansal Access for smaller Credit and agency lines 1997 8.00 800Kralama AS savers & borrowers for on-lending to SME's

Leasing company Europe Turkey Yapi Kredi Finansal Access for smaller Credit and agency lines 1997 8.00 8.00Kiralama AS savers & borrowers for on-lending to SME's

Leasing company LAC Brazil Banco de Investimento Access for smaller Credit and agency lines 1982 10.45 10.00 045 - - 20.00Planibanc SA savers & borrowers for on-lending to SME's

Leasing company LAC Chile Leasing Andino I Access for smallem Credit and agency lines 1990 500 500 - - - 5.00savers & borrowers for on-lending to SME's

Leasing company LAC Chile Leasing Andino 11 Access for smaller Credit and agency lines 1994 15.00 15 00 - - - 15.00savers & borrowers for on-lending to SME's

Leasing company LAC Colomb a Leasing Bol var I Access for smaller Credit and agency lines 1981 3 17 3.00 - 0.17 - 600savers & borrowers for on-lending to SME's

Leasing company LAC Colombia Leasing Bolivar 11 Access for smaller Credit and agency lines 1985 0.02 - - 0 02savers & borrowers for on-lending to SME's

Leasing company LAC Colornbia Leasing Bolivar III Access for smaller Credit and agency lines 1987 3.00 300 - - 2.00savers & borrowers for on-lending to SME's

Leasing company LAC Colomb a Leasing Bolivar VI Access for smalle, Credit and agency lines 1992 0 02 - - 0 02 -

savers & borrowers for on-lpnding to SME's



Leasing company LAC Colombia Leasing Bolivar VII Access for smaller Credit and agency lines 1993 0.25 - - 0.25savers & borrowers for on-lending to SME's

Leasing company LAC Colombia Leasing Bolivar VIII Access for smaller Credit and agency lines 1994 10 00 10 00 - - - - -


Leasing company LAC Colombia Suleasing Access for smaller Credit and agency lines 1997 30 00 30 00savers & borrowers for on-lending to SME's

Leasing company LAC Domincan Compania Dominicana Access for smaller Credit and agency lines 1983 3 15 3.00 0.15Republic de Leasing SA savers & borrowers for on-lending to SME's

Leasing company LAC Ecuador Compania Ecuatoriana Access for smaller Credit and agency lines 1982 3.20 3 00 0.20 - - 6.00de Leasing savers & borrowers for on-lending to SME's

Leasing company LAC Peru Sogeweise Leasing SA I Access for smaller Credit and agency lines 1982 3.15 3.00 0 15 -


Leasing company LAC Peru Sogeweise Leasing SA II Access for smaller Credit and agency lines 1992 6 50 5.00 1 50 - - 5.00savers & borrowers for on-lending to SMEsi

Leasing company LAC Peru Sogeweise Leasing SA IlIl Access for smaller Credit and agency lines 1995 12.00 10 00 - - 2.00 20 00Synd, RMF savers & borrowers for on-lending to SME's

Ln Leasing company Africa Botswana ULC (Proprietary) Ltd I Access for smaller Institution building 1988 0 43 - 0.43savers & borrowers

Leasing company Africa Botswana ULC (Proprietary) Ltd. III Access for smaller Institution build ng 1992 0 37 - 0.37savers & borrowers

Leasing company Africa Ghana Ghana Leasing I Access for smaller Institution building 1992 0.60 - 0.60savers & borrowers

Leasing company Africa Ghana Ghana Leasing II Access for smaller Institution building 1993 0 15 - 0 15savers & borrowers

Leasing company Africa Malawi Leasing & Finance Co, Access for smaller Institution building 1990 0.11 - 0.11Malawi 11 savers & borrowers

Leasing company Africa Senegal Societe Generale de Access for smaller Institution building 1996 0 18 - 0.18Credit Automobile/ savers & borrowersSOGECA IlIl RI

Leasing company Africa Uganda Uganda Leasing Access for smaller Institution building 1995 0.41 - 0.41Company I savers & borrowers

Leasing company Africa Zimbabwe udc Limited II Access for smaller Institution building 1987 0 22 - 0.22savers & borrowers

Leasing company Africa Zimbabwe udc Limited IV Access for smaller Institution building 1989 0.33 - 0.33savers & borrowers

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (USSm) (US$m) (US$m) (US$m) (US$m)

Leas ng company Africa Z mbabwe udc Lirr ted V R Access tor smaller Institution bL Iding 1996 0.41 - 041savers & borrowers

Leas ng company Asia India India Equjipment Access for smaller Irist tution bulding 1994 0 14 0 14Leasirng Ltd Ill savers & borrowers

Leasing company Asia India Ind a Equipmernt Access for smaller Institution uird ng 1995 0 33 - 0.33Leas ng Ltd IV R savers & borrowers

Leasing company Asia Irndia India Lease Access for smaller Institutiorn buildirg 1994 0 30 - 0 30Deve opment IIl savers & borrowers

Leasing company Asia ndia Infra Leas ng / IL & Access for smaller Institution bu ding 1993 3 71 3.71FS I savers & borrowers

Leasing company Asia India Nicco-Uco Financial Access for smaller Institut on buildirng 1997 0.13 - 0 13Serv ces Ltd - Roghts savers & borrowersIssue 11

Leasing company Asia Indonesia Panirr Finarnce I Access for smaller Institution building 1995 2.00 - 2 00savers & borrowers

Leasing corsrparry Asia Indonesia PT Saseka Gelora Access for smaller Institutiorn building 1990 0.07 - 0 07Finance III savers & borrowers

Leasing company Asia Korea Korea Development Access for smaller Institution building 1979 0 25 - 0.25Leasing Corporation 11 savers & borrowers

Leasing company Asia Korea Korea Development Access for smaller Institution building 1987 0 25 - 0 25Leasing Corporation Ill savers & borrowers

Leasing company Asia Korea Korea Development Access for smaller Institution building 1990 0.90 - 0.90 - - - -

Leas ng Corporation IV savers & borrowers

Leasing company Asia Philippines All Asia Capital & Access for smaller Institution building 1989 0.28 - 0.28Leas ng IV savers & borrowers

Leasing company Asia Philippines All Asia Capital & Access for smaller Institution building 1990 0 26 - 0 26Leasing V savers & borrowers

Leasing company Asia Philippines All Asia Capital & Access for smaller Institution building 1994 0.37 - 037Leasing VI savers & borrowers

Leasing company Asia Philippines All Asia Capital & Access for smaller Institution building 1995 1 69 - 1.69Leasing VI RI savers & borrowers

Leasing company Asia Sr lanka Lanka Orient Leasing Access for smaller Institution building 1980 0.28 - 0.28Co I savers & borrowers

Leasing company Asia Sn lanka Lanka Orient Leasing Access for smaller Institution building 1984 0.09 0 09Co 11 savers & borrowers



Leasing company Asia Thailand Ayudhya Development Access for smaller Institution building 1991 0 23 - 0 23Leasing Co Ltd / ADLC I savers & borrowers

Leasing company Asia Thailand Ayudhya Development Access for smaller Institution building 1993 0.36 - 0.36Leasing Co Ltd / ADLC II savers & borrowers

Leasing company Asia Thailand Ayudhya Development Access for smaller Institution building 1996 0.89 - 0.89Leasing Co Ltd / ADLC savers & borrowersIll RI

Leasing company Asia Thailand Krung Thai IBJ Access for smaller Institution building 1992 0.35 - 0.35savers & borrowers

Leasing company Asia Thailand Thai Orient Leasing Co Access for smaller Institution building 1979 0.15 - 0.15savers & borrowers

Leasing company CAMENA Jordan Jordan Leasing Co Access for smaller Institution building 1981 0 29 - 0.29 - - - -

savers & borrowers

Leasing company CAMENA Pakistan BRR Investments Private Access for smaller Institution building 1995 0.27 - 0.27Ltd - Management savers & borrowersCompany

Leasing company CAMENA Pakistan Crescent Management Access for smaller Institution building 1995 0.05 - 0.05savers & borrowers

Leasing company CAMENA Pakistan First Leasing Access for smaller Institution building 1996 0.69 - 0.69Corporation II RI savers & borrowers

Leasing company CAMENA Pakistan Grindlays Management Access for smaller Institution building 1995 0.16 - 0.16savers & borrowers

Leasing company CAMENA Pakistan Modaraba Al Mali Access for smaller Institution building 1995 0.06 - 0.06Corporation - savers & borrowersManagement Company

Leasing company CAMENA Pakistan Pakistan Industrial Access for smaller Institution building 1995 0 54 - 0.54Leasing Corp Ltd / savers & borrowersPILCO IlIl

Leasing company CAMENA Pakistan UDL Modaraba Access for smaller Institution building 1995 0.07 - 0.07Management (Pvt) Ltd - savers & borrowersManagement Company

Leasing company CAMENA Tunisia Tunisie Leasing I Access for smaller Institution building 1984 0.57 - 0.57savers & borrowers

Leasing company Europe Czech Republic OB Sogelease AS Access for smaller Institution building 1992 0.57 - 0.57savers & borrowers

Annex (continued)



Leasing company Europe Estonia Estonia Leas ng - Access for smaller Institution building 1997 0 22 - 0 22Rights Issue savers & borrowers

Leasing company Europe Portugal Sofinloc I Access for smaller Institution building 1983 0 31 - 0.31savers & borrowers

Leasing company Europe Turkey Is Genel Fnansal Access for smaller Institution building 1988 0 44 0.44 - - - -

Kiralama/IGFK I savers & borrowers

Leasing company Europe Turkey Is Genel Finansal Access for smaller Institution building 1990 0 23 - 023Kiralama/IGFK 11 savers & borrowers

Leasing company Europe Turkey Is Genel Finansal Access for smaller Institution building 1993 0.36 0.36Kiralama/lGFK IV savers & borrowers

Leasing company LAC Colombia Leasing Bolivar IV Access for smaller Institution building 1989 0 03 - 0 03savers & borrowers

Leasing company LAC Colombia Leasing Bolivar V Access for smaller Institution building 1991 002 - 002savers & borrowers

Leasing company Africa Botswana ULC (Proprietary) Ltd. Access for smaller Risk management & 1992 1 45 - - - 1 4511 GF savers & borrowers credit enhancement

Leasing company Africa Cote d'ivoire Societe Africaine de Access for smaller Risk management & 1995 5 13 - - - 5 13Credit-Automobile / savers & borrowers credit enhancementSAFCA GF

Leasing company Africa Cote d'lvoire Societe Afrcaine de Access for smaller Risk management & 1995 4 10 - - - 4 10Credit-Bail GF savers & borrowers credit enhancement

Leasing company Africa Senegal Societe Generale de Access for smaller Risk management & 1996 1 18 - - - 1 18Credit Automobile/ savers & borrowers credit enhancementSOGECA 11 (rev) GF

Leasing company Africa Zimbabwe UDC Limited III GF Access for smaller Risk management & 1997 12.00 - - - 12.00savers & borrowers credit enhancement

Leasing company Asia Bangladesh Industrial Devt Leasing Access for smaller Risk management & 1995 3 00 - - - 3 00Co 11 GF savers & borrowers credit enhancement

Leasing company Asia Sri Lanka Lanka Orient Leasing Access for smaller Risk management & 1985 3.96 - - - 3.96Co Ill Loan Guarantee savers & borrowers credit enhancementFacility

Merchant bank Africa Ghana Continental Access for smaller Credit and agency lines 1991 3.00 3.00 -

Acceptances 11 savers & borrowers for on-lending to SME's

Merchant bank Africa Ghana Continental Access for smaller Credit and agency lines 1993 5 00 5 00Acceptances III savers & borrowers tor on-lending to SME's



Merchant bank Africa Ghana Ecobank Ghana Ltd I Access for smaller Credit and agency lines 1993 6.00 6.00 -


Merchant bank Africa Ghana Ecobank Ghana Ltd II Access for smaller Credit and agency lines 1996 5.00 5.00 - - 2.00savers & borrowers for on-lending to SME's

Merchant bank Africa Nigeria NAL Merchant Access for smaller Credit and agency lines 1988 10.00 10.00 - - - - -

Bank Ltd savers & borrowers

Merchant bank Africa Nigeria Nigerian International Access for smaller Credit and agency lines 1993 10.00 10 00Bank savers & borrowers for on-lending to SME's

Merchant bank Africa Nigeria Nigerian-American Access for smaller Credit and agency lines 1991 10 00 10 00 - - - -

Merchant Bank savers & borrowers for on-lending to SME'sCredit Line

Merchant bank Africa Zimbabwe Bank of Zimbabwe- Access for smaller Credit and agency lines 1990 10.11 10.t1 - - - 10.00Barclays (Zim) savers & borrowers for on-lending to SME's

Merchant bank Africa Zimbabwe First Merchant Bank Access for smaller Credit and agency lines 1990 17.85 1495 2.90 -

of Zimbabwe / savers & borrowers for on-lending to SME'sFMB-Holdings Ltd I

Merchant bank Africa Zimbabwe First Merchant Bank Access for smaller Credit and agency lines 1990 15 21 15.21 - - - 15.00of Zimbabwe / savers & borrowers for on-lending to SME'sFMB-Holdings Ltd II

Merchant bank Africa Zimbabwe First Merchant Bank Access for smaller Credit and agency lines 1992 15.00 15.00 -

of Zimbabwe / FMB- savers & borrowers for on-lending to SME'sHoldings Ltd IV ACL

Merchant bank Africa Zimbabwe Merchant Bank of Access for smaller Credit and agency lines 1990 12.71 12.71 - - 12.50

Central Africa savers & borrowers for on-lending to SME's

Merchant bank Africa Zimbabwe National Merchant Bank Access for smaller Credit and agency lines 1994 5.00 5 00of Zimbabwe/NMBZ 11 savers & borrowers for on-lending to SME's

Merchant bank Africa Zimbabwe Scotfin Zimbabwe Access for smaller Credit and agency lines 1990 7.50 7.50 -

Banking Corp. savers & borrowers for on-lending to SME's

Merchant bank Africa Zimbabwe Standard Chartered Access for smaller Credit and agency lines 1990 1 5 21 15 21 - 15.00Merchant Bank savers & borrowers for on-lending to SME's

Merchant bank Africa Zimbabwe Syfrets Merchant Access for smaller Credit and agency lines 1990 12.71 12.71 - - 12.50Bank Ltd. savers & borrowers for on-lending to SME's

Merchant bank LAC Jamaica Eagle Merchant Bank Access for smaller Credit and agency lines 1989 1500 15.00 -


Annex (continued)



Merchant bank LAC Panama Banco Latinoamericano Access for smaller Credit and agency lines 1985 37.50 37 50 - - - -

de Exportaciones / savers & borrowers for on-lending to SME'sBLADEX 11

Merchant bank LAC Panama Banco Latinoamericano Access for smaller Credit and agency lines 1986 13 86 13 86 - - - 8.64de Exportaciones / savers & borrowers for on-lending to SME'sBLADEX III

Merchant bank LAC Panama Banco Latinoamericano Access for smaller Credit and agency lines 1988 5 00 5 00 -

de Exportaciones / savers & borrowers for on-lending to SME'sBLADEX IV

Merchant bank LAC Uruguay Suramericana de Access for smaller Credit and agency lines 1986 3 00 1.50 1 50 - - - -

Inversiones / Surinvest savers & borrowers for on-lending to SMEsCasa Bancaria SA 11

Merchant bank LAC Uruguay Suramericana de Access for srnaller Credit and agency lines 1988 200 200 - - 1000 -

Inversiones / Surinvest savers & borrowers for on-lending to SME'sCasa Bancaria SA IIl

Merchant bank World World Banque lndosuez Access for smaller Credit and agency lines 1990 25.00 2500 - - - 25.00savers & borrowers for on-lending to SME's

, Merchant bank Africa Ghana Continental Banking & other credit Institution building 1989 0.98 - 0 98Acceptances I institutions

Merchant bank Africa Kenya African Finance Banking & other credit Institution building 1992 0 22 - 0.22Consultants Ltd institutions

Merchant bank Africa Kenya Diamond Trust of Banking & other credit Institution building 1982 1.09 1 09Kenya Ltd institutions

Merchant bank Africa Malawi Indebank Financial Banking & other credit Institution building 1994 0.51 - 0 51Services Ltd - institutionsIndefinance

Merchant bank Africa Zimbabwe First Merchant Bank of Banking & other credit Institution building 1992 0.53 - 0.53Zimbabwe / FMB- institutionsHoldings Ltd IIl

Merchant bank Africa Zimbabwe First Merchant Bank of Banking & other credit Institution building 1995 0 82 - 0.82Zimbabwe / FMB- institutionsHoldings Ltd V

Merchant bank Africa Zimbabwe National Merchant Bank Banking & other credt Institution building 1994 0 55 - 0.55of Zimbabwe / NMBZ I institutions

Merchant bank CAMENA CAMENA Region MidEast Capital Banking & other credit Institution building 1996 3 00 3 00institutions



Merchant bank CAMENA Tunisia International Maghreb Banking & other credit Institution building 1995 0.32 - 0.32 -

Merchant Bank SA institutions

Merchant bank Europe Portugal Finantia Sociedade de Banking & other credit Institution building 1988 0.76 - 0.25 0.51 - - -

Investimentos / institutionsBanco Finantia I

Merchant bank Europe Portugal Finantia Sociedade de Banking & other credit Institution building 1991 2.78 - 2 78 -

Investimentos / institutionsBanco Finantia II

Merchant bank Europe Portugal Finantia Sociedade de Banking & other credit Institution building 1989 0.25 - - 0 25 - -

Investimentos / institutionsBanco Finantia III RI

Merchant bank Europe Portugal Finantia Sociedade de Banking & other credit Institution building 1994 2 95 2.95Investimentos / institutionsBanco Finantia IV RI

Merchant bank Europe Turkey Merchant Bank of Banking & other credit Institution building 1985 0.31 - 0 31 - -

Turkey I institutions

Merchant bank LAC Mexico Grupo Financiero Banking & other credit Institution building 1992 7.50 - 7 50Probursa I institutions

Merchant bank LAC Mexico Grupo Financiero Banking & other credit Institution building 1996 0.80 - 0.80Probursa II RI institutions

Merchant bank LAC Mexico Grupo Financiero Banking & other credit Institution building 1996 0.23 - 0 23Probursa IlIl RI institutions

Merchant bank LAC Mexico Grupo Financiero Banking & other credit Institution building 1997 0.35 - 0 35Probursa IV RI (subscr) institutions

Merchant bank LAC Mexico Grupo Financiero Banking & other credit Institution building 1997 0.25 - 0 25Probursa V RI institutions

Merchant bank LAC Panama Banco Latinoamericano Banking & other credit Institution building 1979 3 00 - - 3 00de Exportaciones / institutionsBLADEX I

Merchant bank LAC Uruguay Suramericana de Banking & other credit Institution building 1980 10.67 - 0 67 10.00 -

Inversiones / Surinvest institutionsCasa Bancaria SA I

Merchant bank CAMENA Egypt National Bank of Egypt Banking & other credit Risk management & 1996 10.00 - - - 1000RMF institutions credit enhancement

Microfinance Africa South Africa Cashbank Subordinated Access for smaller Credit and agency lines 1996 2 53 - 2.53 -

Loan savers & borrowers for on-lending to SME's

Annex (continued)



Microfinance CAMENA West Bank & Arab Bank Micro- Access for smaller Credit and agency lines 1997 3.00 - - 3.00Gaza Lending savers & borrowers for on-lending to SME's

Microfinance CAMENA West Bank & Commercial Bank of Access for smaller Credit and agency lines 1997 1 50 - - 1 50 - -

Gaza Palestine Micro-Lending savers & borrowers for on-lending to SME's

Microfinance CAMENA West Bank & Jordan National Bank Access for smaller Credit and agency lines 1997 3.00 - - 3.00Gaza Micro-Lending savers & borrowers for on-lending to SME's

Microfinance Africa Kenya AEF K-Rep Bank Access for smaller Institution building 1996 1.00 1 00 -

savers & borrowers

Microfinance CAMENA Bosniia and Microcredit Bank - Access for smaller Institution building 1997 0 61 - 0 61Herzegovina Bosnia and Herzegovina savers & borrowers

Microfinance LAC LAC Regional Profund International Access for smaller Fund 1996 3.00 3.00SA savers & borrowers

Multi-purpose CAMENA West Bank & Arab Palestine Access for smaller Credit and agency lines 1994 18.80 15.00 3.80bank Gaza Investment Bank! savers & borrowers for on-lending to SME's

ABICOT

Multi-purpose Europe Turkey Ekspres Bank Access for smaller Credit and agency lines 1995 10.00 10.00 -

bank savers & borrowers for on-lending to SME's

Multi-purpose LAC Argentina Banco de Galicia y Access for smaller Credit and agency lines 1996 30 00 30 00 - - - 200 00bank Buenos Aires SA savers & borrowers for on-lending to SME's

Other Securities Asia Korea Korea Business Research Securities market Institution building 1987 0 19 - 0 19 -

Market Players, & Information institutionsNiches

Other Securities CAMENA CAMENA Region Inter Arab Rating Securities market Institution building 1995 1 00 1 00Market Players, Company institutionsNiches

Other Securities CAMENA Pdkistan Pakistan Credit Rating Securities market Institution bufiding 1994 0 20 - 0 20Market Players, Agency (PACRA) institutionsNiches

Other Securities Europe Turkey Turkey Credit Rating Securities market Institution building 1996 0 10 - 0.10Market Players, Agency institutionsNiches

Other Securities Africa Ghana Securities Discount Securities market Institution building 1991 0 23 - 0 23Market Players, Co Ltd iristitutionsNiches

Other Securities Africu Nigcn3 First Securitics Discount Securities market Institution building 1992 0 56 - 0 56Market Players, House I institutionsNiches



Other Securities Africa Nigeria First Securities Discount Securities market Institution building 1993 0.44 - 0.44 - - - -

Market Players, House II institutionsNiches

Other Securities Africa Zambia Intermarket Discount Securities market Institution building 1997 0.50 - 0 50Market Players, House Zambia Ltd institutionsNiches

Other Securities CAMENA Morocco MediaFinance I Securities market Institution building 1994 050 - 0 50Market Players, institutionsNiches

Other Securities CAMENA Morocco MediaFinance II Securities market Institution building 1996 0.63 - 0.63Market Players, institutionsNiches

Other Securities CAMENA Pakistan Prudential Discount & Securities market Institution building 1991 0.41 - 0.41Market Players, Guarantee House institutionsNiches

Other Securities Asia Thailand Dhana Siam Finance & Securities market Credit and agency lines 1994 30.00 30 00 - - - - -

Market Players, Securities Company institutions for on-lending to SME'sNiches

w Other Securities CAMENA Pakistan Central Depository Securities market Institution building 1993 0.25 - 0.25Market Players, Company of Pakistan institutionsNiches

Other Securities Asia Korea Korea Securities Securities market Credit and agency lines 1975 5.58 5 00 0 58Market Players, Finance Co I institutions for on-lending to SME'sNiches

Other Securities World World Moody's Emerging Securities market Institution building 1996 1 00 - 1.00Market Players, Markets institutionsNiches

Other Securities Europe Russian Troika Dialog Securities market Institution building 1997 2.99 - - 2 99Market Players, Federation institutionsNiches

Other Securities Asia Korea Korea Securities Securities market Institution building 1977 0.50 - 0.50 -

Market Players, Finance Co II institutionsNiches

Other Securities Asia Korea Korea Securities Securities market Institution building 1980 0.82 - 0.82 - -

Market Players, Finance Co IlIl institutionsNiches

Other Securities Asia Korea Korea Securities Securities market Institution building 1982 0 35 - 0.35Market Players, Finance Co IV institutionsNiches

Annex (continued)



Other Securites Asia Korea Korea Securities Securities market Institution building 1983 1.18 - 1.18 - - - -Market Players, Finance Co V institutionsNiches

Other Securities CAMENA Pakistan First Underwriting Securities market Institution building 1995 0.98 - 0.98Market Players, Ltd/FUL institutionsNiches

Other Securties Europe Russian National Registry Securities market Institution building 1995 1.50 - 1.50Market Players, Federation Company/ Russia institutionsN ches Registry

Pension fund LAC Argentina Maxima SA AFJP - Securities market Institution building 1997 4.20 - 4.20management Maxima EQ Rights Issue institutionscompany

Pension fund LAC Argentina Roberts AFJP: Maxima I Securities market Institution building 1994 10.78 - 10 78management institutionscompany

Pension fund LAC Argentina Roberts AFJP. Maxima II Securities market Institution building 1995 4 00 - - 4.00management institutionscompany

Pension fund LAC Peru AFP Horizonte SA I Securities market Institution building 1994 0.70 - 0.70management institutionscompany

Pension fund LAC Peru AFP Horizonte SA II Securities market Institution building 1994 0 35 - 0.35management Institutionscompany

Pension fund LAC Peru AFP Horizonte SA IlIl RI Securities market Institution building 1996 0.02 - 0.02management institutionscompany

Portfolio debt World World Emerging Markets Local Access to international Fund 1997 10.00 - 10.00 - - - 40.00fund Currency Debt Fund capital markets

Portfolio debt World World TCW Emerging Markets Access to international Fund 1997 10.00 - - 10.00 -

fund Fixed Income Fund capital markets

Portfolio equity Africa Africa Region Africa Fund Access to international Fund 1993 7.50 - 7.50 - - - 22.50fund capital markets

Portfolio equity Africa Mauritius Mauritius Fund Access to international Fund 1993 5 00 - 5.00 - - - 20 00fund capital markets

Portfolio equity Asia Indonesia Nomura Jakarta Fund Access to international Fund 1990 1.45 - 1.45 - - - 1 55fund capital markets



Portfolio equity Asia Korea Korea Fund Inc I Access to international Fund 1984 21.80 - 21.80 -

fund capital markets

Portfolio equity Asia Korea Korea Fund Inc 11 Access to international Fund 1986 1.73 - 1.73 - - 1 0.92fund capital markets

Portfolio equity Asia Malaysia Malaysia Fund Inc Access to international Fund 1987 - - - - - 37.95fund capital markets

Portfolio equity Asia Thailand Thai Fund Access to international Fund 1987 - - - - - 9.33fund capital markets

Portfolio equity CAMENA CAMENA Region Emerging Middle East Access to international Fund 1995 7 50 - 7.50 - - - -

fund Fund/EMEF capital markets

Portfolio equity CAMENA CAMENA Region First ANZ International Access to international Fund 1997 5.00 - 5.00fund Modaraba capital markets

Portfolio equity CAMENA CAMENA Region Framlington Central Access to international Fund 1996 3.00 - 3.00 - - 27.00fund Asia Fund capital markets

Portfolio equity CAMENA CAMENA Region Framlington Maghreb Access to international Fund 1995 6.10 - 6.10 -

fund Fund (fmf) capital markets

NJ

u Portfolio equity CAMENA CAMENA Region Near Eastern Fund/NEF Access to international Fund 1994 5.00 - 5.00 25.00fund capital markets

Portfolio equity CAMENA Central Asia AIG Central Asia Fund Access to international Fund 1997 5.20 - 5.20 -


Portfolio equity CAMENA Egypt The EgyptTrust Access to international Fund 1997 500 - 5.00 - - - 31 45fund capital markets

Portfolio equity Europe Bosnia Enterprise Fund Access to international Fund 1997 2.00 - 2.00 -

fund Herzegovina capital markets

Portfolio equity LAC Argentina Argentina Investment Access to international Fund 1989 2.10 - 2.10 -

fund Corporation/AIC capital markets

Portfolio equity LAC Brazil Brazil Investment Access to international Fund 1992 3.00 - 3 00 - - - 0 50fund Fund Inc capital markets

Portfolio equity LAC Brazil Equity Fund of Brazil Access to international Fund 1988 17.50 - 17.50 -


Portfolio equity LAC Brazil Equitypar Access to international Fund 1988 10.00 - 10.00fund capital markets

Portfolio equity LAC Chile Chile Investment Access to international Fund 1988 7 56 7 56fund Company/CIC capital markets

Annex (continued)



Portfolio equity LAC Chile International Invest Access to international Fund 1989 7.26 - 7.26 -

fund Corp of Chile/IICC capital markets

Portfolio equity LAC Chile Pionero Fondo de Access to international Fund 1994 10.00 - 1000 - - - 1500furnd Irnversion Mobiliarid capital mdrkets

Portfolio equity LAC LAC Regional Latin American Capital Access to international Fund 1992 5.00 - 5.00 - - - 5.00fund Fund capital markets

Portfolio equity LAC LAC Regional Latin American Access to international Fund 1993 1 5.00 - 15 00 - 60.00fund Corporate Debt Fund capital markets

Portfolio equity LAC South & Central New World Investment Access to international Fund 1989 12 50 - 12 50 -

fund America Fund/NWIF capital markets

Portfolio equity World World Commonwealth Equity Access to international Fund 1991 7.50 - 7.50fund Fund capital markets

Portfolio equity World World Emerging Markets Access to international Fund 1986 8 70 - 8 70fund Growth Fund/EMGF I capital markets

Portfolio equity World World Emerging Markets Access to international Fund 1987 15.00 - 15.00fund Growth Fund/EMGF II capital markets

Portfolio equity World World Emerging Markets Access to international Fund 1995 20.00 - 20.00 - - - 130.00fund Income Fund capital markets

Portfolio equity World World Emerging Markets Access to international Fund 1988 5 00 - 5 00 -

fund Investment Fund/EMIF I capital markets

Portfolio equity World World Emerging Markets Access to international Fund 1995 10.00 - - 10.00 -

fund Leasing Fund capital markets

Portfolio equity Asia Malaysia Malaysia Growth Fund Access to international Securities structuring, 1989 - - - - - - 45.00fund capital markets underwriting & placement

Portfolio equity Asia Philippines First Philippine Fund Inc Access to international Securities structuring, 1990 - - - - - - 20.00fund capital markets underwriting & placement

Portfolio equity Asia Philippines Manila Fund Inc Access to international Securities structuring, 1990 - - - - - - 7.00fund capital markets underwriting & placement

Portfolio equity Asia Thailand Thai Fund Inc Access to international Securities structuring, 1988 - - - - - - 17.10fund capital markets underwriting & placement

Portfolio equity Asia Thailand Thai Prime Fund Access to international Securities structuring, 1989 - - - - - - 15 50fund capital markets underwriting & placement

Portfolio equity Europe Europe Region Morgan Stanley Access to international Securities structuring, 1994 - - - - - - 15.00fund European Emerging capital markets underwriting & placement

Markets Fund



Portfolio equity Europe Portugal Portuguese Investment Access to international Securities structuring, 1990 - - - - - - 6.00fund Fund Ltd capital markets underwriting & placement

Portfolio equity Europe Turkey Turkish Inivestment Access to internationial Securities structuring, 1990 - - - - - - 10.00fund Fund Inc/TKF capital markets underwriting & placement

Portfolio equity LAC Brazil Brazil Fund - Access to international Securities structuring, 1988 - - - - - - 63 25fund Underwriting capital markets underwriting & placement

Portfolio equity LAC Chile Five Arrows Chile Access to international Securities structuring, 1990 - - - - - - 600fund Fund Ltd capital markets underwriting & placement

Portfolio equity LAC Mexico Mexico Equity & Access to international Securities structuring, 1991 - - - - - - 5.98fund Income Fund capital markets underwriting & placement

Portfolio equity World World Emerging Markets Access to international Securities structuring, 1991 - - - - - - 8 00fund Investment Fund/EMIF capital markets underwriting & placement

IV Underwriting

Portfolio index Asia Asia Region Asia Index Fund Access to international Fund 1996 5.00 - 5.00 - - - 95.00fund capital markets

Portfolio index LAC LAC Regional IFC Latin America Access to international Fund 1995 1000 - 1000 - - - 9000fund Index Fund capital markets

Portfolio index World World Emerging Markets Access to international Fund 1994 10.00 - 10.00 - - - 190.00fund Index Fund (Global capital markets

Index Fund)

Private equity Asia Asia Region Asian Infrastructure Access to international Fund 1994 50 00 - 50.00 -

fund Fund capital markets

Prvate equity fund Asia Philippines First Philippine Capital Access to international Fund 1987 12.50 - 12.50Fund LP capital markets

Private equity fund CAMENA Egypt Egypt Tourism Access to international Fund 1991 2.43 - 2.43Investment Co capital markets

Private equity fund CAMENA Morocco Euratlas Capital/Siparex- Access to international Fund 1994 8.00 - 8 00Wafa Development capital marketsCap Fund

Private equity fund CAMENA Morocco INTERFINA Access to international Fund 1993 4.25 - 4.25capital markets

Private equity fund LAC Argentina Argentine Equity Access to international Fund 1993 4.00 - 4.00 -

Investments Ltd/AEIL I capital markets

Private equity fund LAC Argentina Roberts Argentina Access to international Fund 1995 20.00 - 20.00 - - - 80.00Investment Capital capital marketsFund LP

Annex (continued)


Financial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (US$m) (US$m) (US$m) (US$m) (US$m) (USSm)

Private equity fund LAC Brazil GP Capital Partners LP Access to international Fund 1994 20 00 - 20 00 - - - -

capital markets

Private equity fund LAC LAC Regional Scudder Latin American Access to international Fund 1997 1000 - 10.00Trust for Independent capital marketsPower 11

Private equity fund LAC Peru Peru Privatization Fund Access to international Fund 1994 20.00 - 20.00capital markets

Private equity fund LAC South & Central Scudder Latin American Access to international Fund 1993 2500 - 25.00 - - - 100.00America Trust for Independent capital markets

Power I

Private equity fund World World Gold Fund Access to international Fund 1993 20 00 - 20 00 - - - 110.00capital markets

Securities Asia India JM Share & Stock Securities market Credit and agency lines 1995 2.45 1.20 1 26 -

brokerage Brokers Ltd/JSB India 11 institutions for on-lending to SME's

Securities Asia Thailand Phatra Thanakit Public Securities market Credit and agency lines 1997 13.04 13.04 - - - - 13.04brokerage Co Ltd institutions for on-lending to SME's

K Securites Europe Russian Nikitas Brokerage Securities market Credit and agency lines 1997 7 01 7 00 0.01 -

00 brokerage Federation institutions for on-lending to SME's

Securities LAC Brazil Capital Market Securities market Credit and agency lines 1973 5.00 5.00 -

brokerage Development Fund / institutions for on-lending to SME'sFUMCAP

Securities Africa Malawi AEF Strockbrokers Securities market Institution building 1995 0 11 - 0 11brokerage Malawi Ltd institutions

Securities Asia India IL&FS Stockbroking and Securities market Institution building 1995 0.64 - 0.64brokerage Investment Co/IS C institutions

Securities Asia India JM Share & Stock Securities market Institution building 1989 0.55 - 0 55brokerage Brokers Ltd/JSB India I institutions

Securities CAMENA Egypt Misr Financial Securities market Institution building 1985 1.86 - 0.36 1.50brokerage Investment Co institutions

Securities CAMENA Pakistan Jahangir Siddique Co Securities market Institution building 1992 0.86 - 0.86 -

brokerage Ltd / JSCL I institutions

Securities CAMENA Pakistan Jahangir Siddique Co Securities market Institution building 1996 0 29 - 0 29brokerage Ltd / JSCL 11 RI institutions

Securities Europe Turkey Global Security I Securities market Institution building 1994 0 71 - 0 71brokerage institutions



Securities Europe Turkey Global Security 11 RI Securities market Institution building 1995 0.60 - 0.60brokerage institutions

Securities Europe Turkey G,Iobal Security Ill RI Securities market Institution building 1996 1.46 - 1.46brokerage institutions

Securities LAC Argentina MBA Bolsa/Merchant Securities market Institution building 1996 - - - - - - -

brokerage Bankers Associados SA institutions

Securities LAC Argentina MBA Sociedad de Securities market Institution building 1992 0 18 - 0.18brokerage Bolsa SA institutions

Securities LAC Barbados Caribbean Financial Securities market Institution building 1984 0.30 - 0.30brokerage Services Corp institutions

Securities LAC Colombia Apex SA I Securities market Institution building 1992 0.95 - 0 95brokerage institutions

Securities LAC Colombia Apex SA 11 -RI Securities market Institution building 1993 0.48 - 0.48brokerage institutions

Securities LAC Venezuela Sociedad Financiera/ Securities market Institution building 1975 0.70 - 0.70brokerage SOFIMECA institutions

5 Securitization of Asia Asia Region Global Guarantee Securities market Institution building 1997 22.50 - 15.00 7.50assets institutions

Securitization of Asia Indonesia PT Citimas Capital Securities market Institution building 1995 1.35 - 1.35 -

assets institutions

Securitization of LAC Argentina Argie Mae Mortgage Securities market Institution building 1997 35.40 0.40 35.00 65.00assets Securitization Ware- institutions

housing Facility GF

Stock exchange LAC Venezuela Sistema Elelctronico de Securities market Institution building 1995 0.55 - 0 55 -

Transacciones CA institutions

Trade finance Europe Yugoslavia Ljublanska Banka- Access for smaller Credit and agency lines 1985 45.30 45.30 - - - 10 00company Udruzena Banka 11 savers & borrowers for on-lending to SME's

Trade finance Europe Yugoslavia Loans to 8 Banks for Access for smaller Credit and agency lines 1980 26.00 26 00 - - - 6 82company Small Scale Enterprises savers & borrowers for on-lending to SME's

in Yugoslavia

Trade finance Europe Yugoslavia Ljublanska Banka- Access for smaller Institution building 1983 35 40 - 35.40 -

company Udruzena Banka I savers & borrowers

Trade finance Europe Europe Region Intra-Regional Trade Banking & other credit Risk management & 1996 30.00 - - - 30.00company Enhancement Facility institutions credit enhancement

Trade finance Europe Russian Russian Trade Banking & other credit Risk management & 1995 10.00 - - 10 00company Federation Enhancement Facility institutions credit enhancement

Annex (continued)



Trade finance Europe Turkey Interbank II ECP Access to international Risk management & 1991 - - - - - 60.00 -

company Backstop Facility capital markets credit enhancement

Trade finance Europe Turkey Interbank Ill Access to international Securities structuring, 1992 5 00 5 00 - - 5 00company Underwriting FRN capital markets underwriting & placement

Trade finance Europe Turkey KOC Holding / Ram Dis Access for smaller Securities structuring, 1989 2 75 2.75 - - - - 4.83company Tiscaret A.S. savers & borrowers underwriting & placement

Unit trust/mutual Asia India Centurion Growth Access for smaller Fund 1994 2 39 - 2 39fund company Scheme savers & borrowers

Unit trust/mutual Asia India Taurus the Starshare/ Access for smaller Fund 1994 7.17 7.17fund company Cubic Growth Fund/ savers & borrowers

CGF

Unit trust/mutual Asia Sri Lanka Pyramid Unit Trust Access for smaller Fund 1992 0 25 - 0.25fund company savers & borrowers

Unit trust/mutual Asia Thailand Mutual Fund Co Ltd Access for smaller Fund 1977 0.29 - 0 29fund company of Thailand I savers & borrowers

Unit trustmutual Asia Thailand Mutual Fund Co Ltd Access for smaller Fund 1990 0.26 - 0.26fund company of Thailand 11 savers & borrowers

Unit trust/mutual CAMENA Pakistan BSJS Balanced Fund Access for smaller Fund 1995 0 65 - 0.65 - -

fund company savers & borrowers

Unit trust/mutual CAMENA Pakistan Unit Trust of Pakistan Access for smaller Fund 1995 1 95 - 1 95fund company savers & borrowers

Venture capital Africa Cote d'lvoire Industrial Promotion Access for smaller Fund 1988 1.17 - 1.17fund Services Cd/IPS(IVC) savers & borrowers

Venture capital Africa Last Africa East Africa Venture Access for smaller Fund 1996 3.00 - 3.00fund Capital Fund savers & borrowers

Venture capita) Africa Kenya Industrial Promotion Access for smaller Fund 1982 0.75 0.75fuind Services Ltd/IPS(K) I savers & borrowers

Venture capital Africa Kenya Industrial Promotion Access for smaller Fund 1986 1.50 - 1.50fund Services Ltd/IPS(K) 11 - savers & borrowers

AEL

Venture capital Africa Madagascar Madagascar (Venture) Access for smaller Fund 1994 1 11 - 1.11fund Capital Development savers & borrowers

Fund

Venture capital Africa Mauritius Mauritius Venture Access for smaller Fund 1994 1.14 - 0.01 1.13fund Capital Fund I savers & borrowers



Venture capital Africa Mauritius Mauritius Venture Access for smaller Fund 1996 0 56 - 0.01 0.56 - - -

fund Capital Fund II savers & borrowers

Venture capital Africa South Africa South Africa Capital Access for smaller Fund 1995 20.00 - 20.00 -

fund Growth Fund savers & borrowers

Venture capital Africa South Africa South Africa Franchise Access for smaller Fund 1995 3.52 - - 3.52

fund Equity Fund Ltd savers & borrowers

Venture capital Africa West Africa CFA Capital Access for smaller Fund 1995 8.75 - 8.75 - - - 18.75

fund Development Fund savers & borrowers

Venture capital Africa Zimbabwe Venture Capital of Access for smaller Fund 1991 1.55 - 1.55

fund Zimbabwe savers & borrowers

Venture capital Africa Zimbabwe Zambezi Fund Access for smaller Fund 1995 6.00 - 6.00 - - - -

fund savers & borrowers

Venture capital Asia China China Dynamic Growth Access for smaller Fund 1994 20.00 - 20.00

fund Fund LP/Dynamic Fund savers & borrowers

Venture capital Asia China China Walden Venture Access for smaller Fund 1994 7.50 - 7.50

fund Investment Ltd savers & borrowers

Venture capital Asia China JF China Investment Access for smaller Fund 1987 3.04 3.00 0.04

fund Fund savers & borrowers

Venture capital Asia China Newbridge Investment Access for smaller Fund 1995 10.00 - 10.00

fund Partners LP savers & borrowers

Venture capital Asia East Asia Region Advent ASEAN Venture Access for smaller Fund 1984 1.05 - 1.05

fund Capital Fund savers & borrowers

Venture capital Asia East Asia Region JF Asia Select Ltd Access for smaller Fund 1990 11.25 - 11.25 - - - 38.75


Venture capital Asia East Asia Region SEAVI III Trust Access for smaller Fund 1994 10.00 - 10.00 -


Venture capital Asia East Asia Region Southeast Asia Venture Access for smaller Fund 1984 1.00 - 1.00

fund Investment Co savers & borrowers

Venture capital Asia India Creditcapital Venture Access for smaller Fund 1996 8.00 4.00 4.00 -

fund Fund Ltd AL savers & borrowers

Venture capital Asia India India Direct Fund Access for smaller Fund 1996 7.50 - 7.50


Venture capital Asia India Indus II Access for smaller Fund 1996 5.00 - 500


Annex (continued)



Venture capital Asia India Indus Venture Capital Access for smaller Fund 1992 1 16 1 16fund Fund/Indus VCF I savers & borrowers

Venture capital Asia India Into Tech Fund Access for smaller Fund 1992 0 74 0 74fund savers & borrowers

Venture capital Asia India South Asia Regiorial Access for snialler Fund 1995 7 97 - 7.97fund Apex Fund savers & borrowers

Venture capital Asia India TDICI-VFCAUS II Access for smaller Fund 1990 2.87 - 2 87fund savers & borrowers

Venture capital Asia India Walden-Nikko Indian Access for smaller Furid 1997 6.00 - 6.00fund Ventures CompanyAWIV savers & borrowers

Venture capital Asia Indoriesia Prudential Asia Access for smaller Fund 1994 6 75 - 6 75fund Indonesia Trust savers & borrowers

Venture capital Asia Indonesia PT PAMA Indonesia Access for smaller Fund 1994 0.71 - 0.71fund savers & borrowers

Venture capital Asia Indonesia SEAVI lndonesia Access for smaller Fund 1991 1 50 - 1.50 fund savers & borrowers

JVenture capital Asia Korea Korea Development Access for smaller Fund 1985 5.00 - 5.00fund Investment Corporation savers & borrowers

ACL

Venture capital Asia Korea Korea Development Access for smaller Fund 1983 0 98 - 0 98fund Investment savers & borrowers

Corporation I

Venture capital Asia Korea Korea Development Access for smaller Fund 1991 0 89 - 0 89fund Investment savers & borrowers

Corporation 11

Venture capital Asia Malaysia SEAVI Malaysia Access for smaller Fund 1991 0 99 - 0.99fund Ventures Berhad II savers & borrowers

Venture capital Asia Philippines All Asia Capital Growth Access for smaller Fund 1996 4 00 4.00fund Ventures BVI Ltd I savers & borrowers

Venture capital Asia Philippines H&Q Philippine Venture Access for smaller Fund 1989 2 42 - 2 42fund Capital Fund savers & borrowers

Venture capital Asia Philippines H&Q Philippine Access for smaller Fund 1993 2.50 - 2.50fund Ventures II savers & borrowers

Venture capital Asia Philippines Venture in Industry and Access for smaller Fund 1980 0.27 - 0 27fund Business Enterprises Inc savers & borrowers



Venture capital Asia Philippines Walden AB Ayala Access for smaller Fund 1994 3.75 - 3.75 - - - -

fund Ventures / WAAV savers & borrowers

Venture capital Asia Sri Lanka Capital Development & Access for smaller Fund 1991 2 96 - 2 96fund Investment Corp savers & borrowers

Venture capital Asia Thailand SEAVI Thailand I Access for smaller Fund 1984 1.00 - 1.00fund savers & borrowers

Venture capital Asia Thailand SEAVI Thailand II Access for smaller Fund 1991 1.50 - 1.50fund savers & borrowers

Venture capital CAMENA Egypt International Egyptian Access for smaller Fund 1993 6.00 - 6.00 - - - 10.00fund Investments savers & borrowers

Venture capital CAMENA Pakistan Equity International Access for smaller Fund 1991 0.87 - 0.87 -

fund Modaraba savers & borrowers

Venture capital CAMENA Tunisia Tunisia Private Equity Access for smaller Fund 1995 625 - 6 25 - - - -

fund Fund/TUNIVEST savers & borrowersInternational

Venture capita Europe Albania Albania Fund Access for smaller Fund 1997 1.50 - 1.50fund savers & borrowers

Venture capital Europe Bulgaria Euromerchant Balkan Access for smaller Fund 1994 5 00 - 5.00fund Fund savers & borrowers

Venture capital Europe East Europe Advent PEF Czech Access for smaller Fund 1993 2.50 - 2.50 - - - 1250fund Republic savers & borrowers

Venture capital Europe East Europe Alliance Scaneast Access for smaller Fund 1994 8 00 - 8 00 -

fund Fund LP savers & borrowers

Venture capital Europe Europe Region Advent Private Equity Access for smaller Fund 1993 10.00 - 10.00 - - - 30.00fund Fund Central Europe savers & borrowers

Venture cap tal Europe Europe Region New Europe East Access for smaller Fund 1993 10.00 - 1000 -

fund Investment Fund savers & borrowers

Venture capital Europe Europe Reg on Renaissance Capital Access for smaller Fund 1994 5 00 - 5 00fund savers & borrowers

Venture capita Europe Hungary Creditanstalt Access for smaller Fund 1995 2.50 - 2.50fund savers & borrowers

Venture capital Europe Hungary Euroventures Hungary Access for smaller Fund 1992 2.74 2 74 -

fund BV savers & borrowers

Venture cap tal Europe Poland Advent PEF. Poland Inv Access for smaller Furid 1993 2.50 - 2.50 - - - 12 50fund Fund savers & borrowers

Annex (continued)


Finanrial Fiscal Net Loan Equity equity facilities cations placementInstitution Region Country Project name sector segment Product year (US$m) (USSm) (US$m) (USSm) (US$m) (US$m) (US$m)

Venture cap tal Europe Poland Central Poland Fund Access for sma ler Fund 1997 5.00 - 5.00fund savers & borrowers

Venture capital Europe Portugal Finantia Capital Devt Access for sma ler Fund 1990 4 00 - 4 00 - - - 1 000fund Fund/Fin-Cap savers & borrowers

Venture capital Europe Portugal Inter-Risco I Access for smaller Fund 1988 0.22 - 0.22 -fund savers & borrowers

Venture capital Europe Portugal Inter-Risco II Access for smaller Fund 1990 0.02 - 0.02fund savers & borrowers

Venture cap tal Europe Romania Danube Fund Access for smaller Fund 1996 2.00 - 2.00 -fund savers & borrowers

Venture cap tal Europe Russian First NIS Regional Access for smaller Fund 1995 15.00 - 15.00 - - - 70.42fund Federation Federation Fund savers & borrowers

Venture capital Europe Russian Framlington Russian Access for smaller Fund 1994 8.00 - 8 00 - - -

fund Federation Investment Fund savers & borrowers

Venture capital Europe Russian Russian Technology Access for smaller Fund 1995 2.00 - 2.00fund Federation Fund savers & borrowers

Venture capital Europe Russian Sector Capital Fund Ltd Access for smaller Fund 1995 4.55 - 4.55fund Federation savers & borrowers

Venture capital Europe Slovenia Slovenian Devt Capital Access for smaller Fund 1995 5.00 - 5.00fund Fund Ltd savers & borrowers

Venture capital Europe Spain SEFINNOVA Access for sma ler Fund 1978 0.88 - 0.88 - - -


Venture capital Europe Spain SEFINNOVA II Access for sma ler Fund 1983 0.40 - 0 40fund savers & borrowers

Venture cap tal Europe Ukraine Ukraine Venture Capital Access for smaller Fund 1994 2.00 - 2.00fund Fund I savers & borrowers

Venture cap tal Europe Ukraine Ukraine Venture Capital Access for smaler Fund 1996 1.50 - 1.50fund Fund II savers & borrowers

Venture capital LAC Argentina SA de Inversiones de Access for sma ler Fund 1985 2.05 2.05fund Cap de Riesgo/SADICAR savers & borrowers

Venture capital LAC Brazil Brasilpar SA Access for sma ler Fund 1981 1.50 - 1 50fund savers & borrowers

Venture capital LAC Brazil Companhia Access for sma ler Fund 1982 1.00 - 1 00fund Riograndense de savers & borrowers

Participacoes



Venture capital LAC Brazil CRP-Caderi Capital de Access for smaller Fund 1992 2.00 - 2.00 - - - 12.00fund Risco savers & borrowers

Venture capital LAC Chile Proa Fondo de Inversion Access for smaller Fund 1996 10.00 - 10.00 -

fund de Desarro lo de savers & borrowersEmpresas

Venture capital LAC Jamaica Falcon Fund Access for smaller Fund 1985 7.30 - - 7.30fund savers & borrowers

Venture capital LAC LAC Regional LAC Enterprise Fund Access for smaller Fund 1995 20.00 - 20.00 -


Venture capital LAC LAC Regional Terra Capital Fund Access for smaller Fund 1997 5.00 - 5.00fund savers & borrowers

Venture capital LAC Mexico Baring Venture Mexico Access for smaller Fund 1995 10.00 - 10.00fund Fund I savers & borrowers

Venture capital LAC Mexico Fondo Chiapas SA de Access for smaller Fund 1997 5.00 - - 5.00fund CV Sociedad de savers & borrowers

Inversiones deCapitales

Venture capital LAC Mexico Kapta Integracion Access for smaller Fund 1993 9 85 - 9.85fund Capitales SA de CV savers & borrowers

Venture capital LAC Mexico Mexico Partners Trust Access for smaller Fund 1997 20.00 - 20.00fund savers & borrowers

Abbreviations: LAC-Latin America and the Caribbean; CAMENA-Central Asia, Middle East, and North Africa.

ISBN 0-8213-4343-2

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