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How Private Sector Financing is Making a Difference in Asia and the Pacific

Video | 15 July 2019

Despite progress in Asia and the Pacific, reducing poverty remains an unfinished mission. As the region’s main source of jobs, growth, and innovation, the private sector is key to completing this mission.

Through its private sector operations department, the Asian Development Bank helps private companies to empower communities through better jobs, higher incomes, and improved access to energy, health and education. All while ensuring profitability and commercial sustainability for its clients.

Transcript

Asia and the Pacific has been the world’s fastest-growing region in recent decades. It is expected to account for more than half of global production by 2050. The Asian Development Bank has been a key partner in the region’s stunning transformation.

Despite this progress, reducing poverty remains an unfinished agenda. New challenges like climate change also need urgent attention. The vibrant, growing, and dynamic private sector is critical to meeting the overall goals of the Asian Development Bank.

"The Asian Development Bank has had a private sector operations for quite sometime now. During the 1980s the first private sector team was put together and became a fully functional department about 20 years ago. People often ask me why do we have a private operations in a development bank. Having a vibrant, a growing, a dynamic private sector is critical for meeting the overall goals of the Asian Development Bank, which is poverty reduction, sustainable growth, climate friendly growth for the region.

And that’s why we have a private sector operations, that’s why we support the private sector throughout the Asian region. We do banking in a slightly different way, with a slightly different focus. As I put it, we are bankers but we bank with a heart and with a mission," shares Michael Barrow, Director General of Private Sector Operations Department, ADB.

ADB works with private sector clients to empower communities in many ways: build the infrastructure they need, provide social services, boost farmer incomes and small and medium-sized enterprises, deliver clean energy.

The aim is to have development impact while ensuring profitability and commercial sustainability.

Barrow highlights ADB's private sector operations financial products. "We look for transactions that make a difference, that make a difference to people’s lives. Then we’ll carry forward those transactions as bankers would but always with that heart governing where we put our money. We provide debt financing, long-term, short-term debt financing. We are also an investor. We invest equity into companies into banks, into projects, and also into funds. We are an investor into private equity funds that are doing good developmental and investing in their own part. Through our guarantee products, we can work with finance investors and with banks. Where they are concerned about certain risk, we can take away some of the risks that they perceive to allow them to do financing. 

One of the interesting things we’ve done recently, and we’re really building up now, is tapping into the institutional investors, the insurance companies, the pension funds, who are interested in coming in to Asia but they’re looking not really at one-off loans but they’re looking at investing into bonds, for example."

As of 2018, ADB’s private sector transactions contributed to key strategic priorities in the region.

69% of commitments have specific gender elements.

34% of committed projects were in frontier economies or lower-middle-income countries.

$1.2 billion was committed for climate related activities—expected to avoid 12 million tons of CO2 emissions.

38% of the committed transactions — amounting to $1.6 billion — aim to provide sustainable and affordable clean energy.

By 2024, ADB expects the number of its private sector projects to be 1/3 of its total operations.

"We want to be present with private sector financing investment in all of our member countries. So it’s an expansion and a shift in terms of sectors, an expansion in terms of geographies that are often not on the map for international lenders and investors. Look at those opportunities, join us, cofinance, coinvest and make those projects happen," continues Barrow.

ADB’s vision is to achieve a prosperous, inclusive, resilient, sustainable Asia and the Pacific.

Partner with Asian Development Bank, and together let’s achieve this vision while sustaining efforts to eradicate extreme poverty.