Private Sector Cofinancing

Partnerships with the private sector is crucial to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific region by 2030. Under Strategy 2030, ADB has strengthened partnerships with the private sector and increasingly mainstreamed into each Country Partnership Strategy comprehensive market assessments and inputs relevant to private sector development and private sector operations. By 2024, ADB envisions that its private sector operations will reach one-third of its operations in number.

Private sector or nonsovereign cofinancing amplifies the impact of ADB’s private sector operations by attracting financing from other parties. It facilitates investment, trade, and capital flows into developing member countries (DMCs). Both private and public institutions provide nonsovereign cofinancing. The funds are usually sourced from financial markets and priced at commercial terms. Such arrangements are particularly effective for projects and programs that commercial partners would consider risky without ADB involvement.

In 2019, cofinancing for ADB’s nonsovereign operations amounted to $6.97 billion.1 Of this, $6.78 billion (97%) came from commercial cofinancing partners, and the rest from official sources.2 Of the 38 nonsovereign projects in 2019, 19 had cofinancing from partners.

2019 Nonsovereign Cofinancing per Region

$6.97 billion

$6.78 billion Commercial Cofinancing

Central and West Asia $1.15 billion

Country Project/Program Name Commercial Cofinancing $ million
Armenia Trade Finance Program 46.7
Georgia Trade Finance Program 5.7
Kazakhstan Baikonyr Solar Power Project 26.6
Total Eren Access M-KAT Solar Power Project 82.8
Pakistan Expanding Access to Credit for Women 10
Supply Chain Finance Program 0.4
Trade Finance Program 885.0
Tajikistan Trade Finance Program 1.3
Uzbekistan Trade Finance Program 79.1
Risk Transfer Arrangements 12.3

East Asia $123.8 million

Country Project/Program Name Commercial Cofinancing $ million
China, People’s Republic of CDH VGC Fund II, L.P. 43.0
Supply Chain Finance Program 7.8
Sustainable Dairy Farming and Milk Safety Project 4.5
Mongolia Trade Finance Program 11.5
Risk Transfer Arrangements 57

South Asia $2.51 billion

Country Project/Program Name Commercial Cofinancing $ million
Bangladesh Microfinance Risk Participation and Guarantee Program 28
Trade Finance Program 575.8
Supply Chain Finance Program 0.2
India Avaada Solar Project 50
Microfinance Risk Participation and Guarantee Program 106.4
Multiples Private Equity Fund III Limited 373.3
Supply Chain Finance Program 19.9
Nepal Upper Trishuli-1 Hydropower Project 120.3
Trade Finance Program 0.3
Sri Lanka Supply Chain Finance Program $0.7 million
Trade Finance Program 826
Risk Transfer Arrangements 408.2

Southeast Asia $2.72 billion

Country Project/Program Name Commercial Cofinancing $ million
Indonesia Riau Natural Gas Power Project 132
Supply Chain Finance Program 0.7
Trade Finance Program 3.4
Malaysia Supply Chain Finance Program 25
Myanmar Ascent Myanmar Growth Fund I, L.P. 37.3
Microfinance Risk Participation and Guarantee Program 2.8
Myingyan Natural Gas Power Project 1
Philippines Supply Chain Finance Program 0.6
Thailand Energy Absolute Green Bond for Wind Power 220
Eastern Economic Corridor Independent Power 1,057.1
Supply Chain Finance Program 4
Viet Nam Trade Finance Program 1,061.6
Risk Transfer Arrangements 171.8

$187.4 million Official Cofinancing

Central and West Asia $3.85 million

Country Project/Program Name Commercial Cofinancing $ million
Afghanistan Kandahar Solar Power 3.85

East Asia $9.1 million

Country Project/Program Name Commercial Cofinancing $ million
Mongolia Sermsang Khushig Khundii Solar 9.10

South Asia $55 million

Country Project/Program Name Commercial Cofinancing $ million
Nepal Upper Trishuli-1 Hydropower 30
India Avaada Solar 25

Southeast Asia $94.4 million

Country Project/Program Name Commercial Cofinancing $ million
Indonesia Riau Natural Gas Power 20
Philippines Tertiary Education 10
Thailand Eastern Economic Corridor Independent Power 45
Viet Nam Floating Solar energy 19.40

Regional $25 million

Project/Program Name Commercial Cofinancing $ million
Asia-Pacific Remote Broadband Internet Satellite 25

$411 million Regional

REGIONAL

ADB’s Strategy 2030 sets a cofinancing target ratio3 of $2.50 for every $1.00 of ordinary capital resources (OCR) deployed for private sector operations. In 2019, the cofinancing ratio was 1.5; every $1.00 of ADB’s own funds was matched by $1.50 cofinancing. Steady progress toward this goal is underway as ADB continues to work on projects with the private sector.

Nonsovereign Cofinancing 2017-2019
  • 2017

    $5.76 billion Commercial Cofinancing

    $185 million Official Cofinancing

    $5.95 billion

    1.8 Cofinancing Ratio

  • 2018

    $6.81 billion Commercial Cofinancing

    $341 million Official Cofinancing

    $7.15 billion

    1.2 Cofinancing Ratio

  • 2019

    $6.78 billion Commercial Cofinancing

    $187 million Official Cofinancing

    $6.97 billion

    1.5 Cofinancing Ratio

  • 2017

    $3.02 billion Long-Term Cofinancing

    $2.93 billion Short-Term Cofinancing

    $5.95 billion

  • 2018

    $3.30 billion Long-Term Cofinancing

    $3.86 billion Short-Term Cofinancing

    $7.15 billion

  • 2019

    $3.41 billion Long-Term Cofinancing

    $3.56 billion Short-Term Cofinancing

    $6.97 billion

Cofinancing by Product

ADB relies on its full suite of financing products to meet the S2030 target and achieve scale. These cofinancing products—including lending instruments, credit enhancement products, risk transfers, blended finance structures, and parallel cofinancing—can be categorized as short- or long-term.

Short-term cofinancing has tenor of less than one year. Of the $6.97 billion nonsovereign cofinancing in 2019, about $3.56 billion came from short-term cofinancing (through the ADB’s trade finance program and supply chain finance program) while $3.41 billion were long-term cofinancing through a range of financial products. The long-term cofinancing was against ADB’s own nonsovereign financing commitment of $2.4 billion (net of risk transfers).4

Short- vs Long-Term Nonsovereign Cofinancing 2019
$181.5 million B-Loans
$138.1 million Guarantee Cofinancing
$2.26 billion Parallel Loans and/or Equity
$649.3 million Risk Transfer
$187.4 million Official Cofinancing

Long-Term Cofinancing

$59.3 million SCFP
$3.50 billion TFP

Short-Term Cofinancing

Short-Term Products

The $3.56 billion short-term cofinancing in 2019 was pooled using the following products:

Trade Finance Program (TFP). The TFP fills market gaps for trade finance by providing guarantees and loans to banks to support trade. It works with over 200 banks to provide companies with the financial support they need to engage in import and export activities with Asia. A substantial portion of TFP’s portfolio supports small- and medium-sized enterprises (SMEs), and many transactions occur either intra-regionally or between ADB’s developing member countries (DMCs). The program supports a wide range of transactions, from commodities and capital goods to medical supplies and consumer goods.

In 2019, the TFP supported 4,832 transactions worth $5.4 billion—including $3.5 billion in cofinancing— and this helped 4,069 SMEs. This enabled TFP to more than double the amount of trade it supports at any given time under its current $2.1 billion program limit. Financial institutions in the United Kingdom, Germany and Switzerland were the largest sources of cofinancing for TFP in 2019. Moreover, TFP works closely with key donors such as Australia’s Department of Foreign Affairs and Trade, which provides funding for efforts such as TFP’s gender initiatives and a study on global gaps in trade finance; the Government of Luxembourg, which assists in gender initiatives and anti-money-laundering work; and the Rockefeller Foundation and the governments of Switzerland and the United Kingdom, which support the upgrading of safeguard measures.

Supply Chain Finance Program (SCFP). The SCFP works with corporate and partner financial institutions to enhance access of SMEs to working capital. It provides supply chain finance by leveraging the strength of a larger corporate entity and incorporating the history of performance and interdependence of relationships with SMEs in a supply chain. Like the TFP, it relies on funding support to accomplish its goals and those of its donors. Since its inception, SCFP has supported more than 1,100 transactions with a volume of about $750 million, including cofinancing of $375 million. In 2019, cofinancing under SCFP reached $59.3 million.

Partnering with other organizations allows TFP and the SCFP to multiply the effect of their actions, both in the transactions they support and the knowledge products they produce. Many DMCs need training and capacity building so that they can take part in the global trade finance system before they can fully benefit from the programs’ support. With the help of other organizations, TFP and SCFP provide the building blocks for partner banks to make the necessary upgrades. Examples of these partnerships include a certification program for anti-money laundering presented along with the Association of Certified Anti-Money Laundering Specialists and webinars on digitizing trade finance with the International Chamber of Commerce. Other partners include the Bankers Association for Finance & Trade, Financial Stability Board, Global Legal Identifier Foundation, Government of Singapore, International Finance Corporation, International Trade Factoring Association, SWIFT, Wolfsburg Group, Women’s Network, and the World Trade Organization.

Long-Term Products

The $3.41 billion worth of long-term cofinancing in 2019 was generated through the following products:

B-Loan. This is where ADB acts as lender of record while commercial lenders provide funding. It enables ADB to introduce new sources of financing to its clients, thereby mobilizing more funds for development projects. A B-loan is an intermediate product used in markets when lenders may not require partial risk guarantees but may not be ready to lend on a fully uncovered basis.

Participants in B-loan syndications are typically international and regional commercial banks lending cross-border in US dollars but may also include institutional investors and impact funds. ADB can assist borrowers in putting together lending groups, often in exchange for a mobilization fee. In 2019, ADB closed three B-loans for $181.5 million. A local currency product has been developed (the local currency complementary financing scheme), which can be used to mobilize onshore finance in local currency. ADB has also expanded its staff resources and product expertise to increase B-loan operations.

Guarantees. To catalyze capital flows into and within its developing member countries for eligible projects, ADB extends guarantees for eligible projects which enable financing partners to transfer certain risks that they cannot easily absorb or manage on their own to ADB. ADB’s guarantees support infrastructure projects, financial institutions, capital market investors and trade financiers, and cover a wide variety of debt instruments. Guarantees can be provided when ADB has a direct or indirect participation in a project or related sector, through a loan, equity investment or technical assistance.

ADB extends both partial credit guarantees (PCGs) and partial risk guarantees (PRGs). ADB’s PCGs provide lenders and investors with comprehensive credit cover on the portion of the loan or bond guaranteed by ADB while its PRGs cover lenders against nonpayment by the borrower caused by political risk events only. From 2015 to 30 June 2019, ADB issued $1.22 billion in PCGs and PRGs. In 2019, ADB closed two PRGs in support of ADB B-loan participants funding infrastructure projects in Indonesia and Myanmar. Another project, MYA: Myingyan Natural Gas Power Project, generated $0.98 million, bringing the total for guarantee cofinancing to $138 million.

Official Cofinancing. This refers to cofinancing with bilateral and multilateral agencies. To extend the impact and effectiveness of private sector operations, ADB manages trust funds from official sources, such as the Leading Asia’s Private Sector Infrastructure Fund, supported by the Japan International Cooperation Agency. These trust funds allow ADB to expand mobilization efforts, particularly in areas such as infrastructure and climate change.

ADB also offers concessional finance for its nonsovereign borrowers. Concessional finance refers to finance deployed on terms that are more favorable than those provided to market-based financing transactions. It may involve lower pricing, longer grace periods and/or tenors, subordination, sculpted repayment profiles, reduced security and/or collateral, and/or capped or collared returns. When combined with market-based financing, concessional financing is deployed as a “blended finance” product. By improving the commercial financiers’ risk and/or return profiles, blended finance transactions help crowd in private capital, de-risk investments, and bring projects to market that would not otherwise proceed in the absence of concessional financing. ADB manages $835 million worth of concessional financing through ten blended finance funds and facilities. Since 2012, ADB has signed 19 transactions using a blended finance approach. ADB resources of $908 million, combined with ADB-managed concessional capital of $377 million (from the Clean Technology Fund and the Canadian Climate Fund for the Private Sector in Asia I and II and the Leading Asia’s Private Infrastructure Fund), have helped mobilize $2.3 billion in commercial financing and $1.5 billion in additional public financing. This has resulted in the development of projects with a total cost of over $5.1 billion.

In 2019, official cofinancing, funded by Canadian Climate Fund for the Private Sector in Asia I and II and the Leading Asia’s Private Infrastructure Fund, totaled $187.3 million.

Parallel Cofinancing. Consists of loans, bonds, and equity simultaneously provided by other lenders or investors on commercial terms for the same project that ADB is financing. In this arrangement, ADB often acts as the anchor lender or investor to attract other lenders. ADB prioritizes cofinancing with commercial funding providers, such as commercial banks, but it also extensively cofinances with international public financial institution peers for transactions where commercial cofinancing is insufficient. In 2019, ADB’s parallel cofinancing (parallel loans and equities), reached $2.26 billion.

For parallel cofinancing, ADB also participates in several initial public offerings (IPOs) as anchor and/or cornerstone investor for equity investments. This facilitates the book-building exercise and crowding in other direct equity investors. It similarly generates opportunities for fund managers and other limited partners to co-invest with ADB in target geographies and sectors.

Moreover, ADB supports capital market issuances, particularly green and climate bonds. This deepens local currency–denominated capital markets by attracting new institutional and financial investors. Green bonds lessen the reliance on banks as the primary source of financing in DMCs, provide new investment and savings products, and enhance transparency and corporate governance to support local currency–denominated capital markets. ADB’s value addition consists of its expertise in climate and environmental issues, the support ADB can provide to the issuer to obtain formal green bond certification, and the confidence that ADB creates in investors by acting as an anchor investor. In 2019, ADB facilitated the provision of certification services by existing commercial players through specialist advice and/or acted as anchor investor in two green bond issuances, mobilizing $310 million from third-party investors.

Risk Transfers. Risk transfers are contracts between ADB and third parties such as insurance companies and banks, where ADB’s counterparty agrees to assume a portion of the credit risk in a loan or guarantee provided by ADB in exchange for payment of a premium. Risk transfers allow ADB to lend or guarantee amounts that are beyond ADB’s prudential limits or risk appetite without the need for the borrower to interact with additional lenders. In 2019, ADB transferred $861 million of its credit exposure on loans and guarantees to independent counterparties, translated into $649 million cofinancing with adjustments for counterparty risk on ADB’s counter parties, and adjustments for effective cover.

Among MDBs, ADB has pioneered the unfunded risk transfer5 product for private sector loans. Insurance companies provide a flexible and important distribution channel of private sector exposure, often at attractive terms, or where commercial banks lack credit appetite or local currency capabilities. Generally, however, ADB will prioritize funded distribution options to banks and investors, where markets are available, over unfunded risk transfers because of counterparty and documentation risks that are inherent to risk transfers.

Solar Power Meets Hydropower

In 2018, ADB partnered with the Da Nhim-Ham Thuan-Da Mi Hydro Power Joint Stock Company on the Viet Nam: Floating Solar Energy Project to install a 47.5 MW peak floating solar power facility on the Da Mi reservoir. The project is one of the first renewable energy projects that ADB has financed on a nonsovereign basis guarantee from the Government of Viet Nam.

Project

Viet Nam: Floating Solar Energy Project

Project Cost

Not Disclosed

Financing Partners

  • Canadian Climate Fund for the Private Sector in Asia $11 million
  • Canadian Climate Fund for the Private Sector in Asia II $4 million
  • Leading Asia’s Private Infrastructure Fund $4.4 million
Approval Date:

October 2018

Signing Date:

26 September 2019

Powering Up Thailand's Economic Corridor

An ADB-supported private investment project—cofinanced with the Leading Asia’s Private Infrastructure Fund, Japan Bank for International Cooperation, commercial lenders, and others—will help Thailand advance to its desired high-income status by 2032 by establishing an independent power plant in its Eastern Economic Corridor. With this power plant, the economic corridor will become a hub of trade and investment and the modern gateway to the region.

Project

Eastern Economic Corridor Independent Power Project

Project Cost

Not Disclosed

Financing Partners

  • ADB B-Loan (funded by commercial lenders) $85 million
  • Japan Bank for International Cooperation
  • Leading Asia’s Private Infrastructure Fund $45 million
  • Other commercial lenders
Approval Date:

24 October 2019

Signing Date:

18 November 2019

Achieving Climate-Friendly Energy Security

Through an ADB-supported private investment project, cofinanced with the Canadian Climate Fund for the Private Sector in Asia II, Nepal moves closer to achieving energy security. After project completion, Nepal will see a new hydropower plant generate electricity for its national grid, helping lessen the country’s dependence on energy imports and lifting the quality of the lives of the surrounding communities.

Project

Upper Trishuli-1 Hydropower Project

Project Cost

$644 million

Financing Partners

  • Canadian Climate Fund for the Private Sector in Asia II $30 million
  • Others $584 million
Approval Date:

12 April 2019

Signing Date:

28 October 2019

Broadband Satellite for Remote Communities

With the launch of the Kacific1 satellite in December 2019, people in remote areas in Southeast Asia and the Pacific are now able to join the global online community and enjoy the benefits of internet connectivity. The satellite, owned by Singapore-based Kacific Broadband Satellites International Limited, was financed by ADB and its Leading Asia’s Private Infrastructure Fund, among other cofinanciers.

Project

Regional: Asia-Pacific Remote Broadband Internet Satellite Project

Project Cost

Not Disclosed

Financing Partner

  • Leading Asia’s Private Infrastructure Fund $25 million
Approval Date:

July 2019

Signing Date:

30 November 2019

  • 1 This amount excludes amounts mobilized after an Office of Public–Private Partnership advisory mandate.
  • 2 Cofinancing with multilateral agencies, and with bilateral agencies under ODA or sovereign recourse (https://www.adb.org/sites/default/files/institutional-document/31483/om-e1.pdf)
  • 3 The cofinancing ratio is the ratio of long-term cofinancing to NSO borrowers divided by private sector operations ordinary capital resources (net of risk transfers). Long-term cofinancing to NSO borrowers includes concessional funding, B-loans, parallel cofinancing, bonds and equity, risk transfers of ADB exposure to independent counterparties, the uncovered portion of loans and bonds guaranteed by ADB, and financing by third parties of projects that are closed following an OPPP advisory mandate.
  • 4 Risk transfers are contracts between ADB and third parties, where ADB’s counterparty agrees to assume a portion of the credit risk in a loan or guarantee provided by ADB in exchange for payment of a premium.
  • 5 An agreement between ADB and an Eligible Counterparty under which, further to a legally binding guarantee, insurance policy, risk participation agreement or other similar contract, the Eligible Counterparty assumes a portion or all of ADB’s risk of loss occurring as a result of primary borrower default under one or more of ADB’s transactions.