Innovative facility providing credit guarantees in local currency

Summary

InfraZamin in Pakistan is an innovative commercial credit enhancement facility that aims to crowd-in funding from local markets for sustainable and socially responsible infrastructure. It was funded with equity capital from InfraCo Asia and Karandaaz Pakistan. It was initiated by PIDG company GuarantCo following its experience in creating and operationalising a similar concept in Nigeria, InfraCredit. Since it was established in November 2020, InfraZamin Pakistan has achieved a number of milestones: It was given an AAA rating by the Pakistan Credit Rating Agency (PACRA) and completed its first transaction with Multinet, a Pakistan-based fibre optic and connectivity provider. The Multinet loan facility was provided by Pakistan’s Habib Bank Limited (HBL) and supported by a partial risk credit guarantee from InfraZamin Pakistan. The funds will support the company in its plans to extend fibre optic access into small- to medium-size cities in the country and grow its customer base to cover even more SMEs. More recently, InfraZamin provided the credit guarantee that enabled the Kashf Foundation to issue Pakistan’s inaugural “Gender Bond”. The proceeds will be used to provide 30,000 new micro-infrastructure loans for women in Pakistan.

Key Takeaways:

Catalytic finance in local currency to make a project viable: Existing credit guarantee mechanisms are often in dollars or euros, whereas it creates exchange rate risk that often requires hedging, which is often too costly to make a project viable.

Replicating what works: InfraZamin leverages the prior experience of InfraCo Asia and GuarantCo in supporting infrastructure projects in Pakistan, to efficiently replicate successful mechanisms.

Stimulating domestic capital markets: Building a track record and trust between borrowers and financiers is key to helping deepen domestic capital markets.

Innovative facility providing credit guarantees in local currency

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