Private Sector Financing

ADB focuses on projects that help promote private investments in the region that will have significant development impact and will lead to accelerated, sustainable, and inclusive growth.

Financial Products

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ADB undertakes private sector operations to provide financing to eligible recipients in developing member countries (DMCs), comprising the provision of any financing arrangements to privately-held, state-owned, or subsovereign entities, in each case, (i) without a government guarantee; or (ii) with a government guarantee, under terms that do not allow ADB, upon default by the guarantor, to accelerate, suspend, or cancel any other loan or guarantee between ADB and the related sovereign.

Loans and Debt

ADB offers hard currency loans, both senior and subordinated, as well as mezzanine financing. We also offer local currency loans in selective markets on a case to case basis. Interest rates and other terms vary, depending on a company’s or project’s needs and risks.

  • Rates - In pricing its loans, ADB considers prevailing market rates in the relevant country and sector, factoring in country and transaction risks. ADB provides floating rate loans at a spread above the Secured Overnight Financing Rate (SOFR) or Euro interbank rate, depending on the currency. It also offers fixed-rate loans at the fixed-rate swap equivalent of floating-rate loans.
  • Fees - Market-based fees are charged. Typically, on floating-rate loans, ADB charges a once-only front-end fee as well as an ongoing commitment fee on the undisbursed balance. We may also charge a fee to cover upfront costs associated with due diligence. Project sponsors or clients will reimburse out-of-pocket expenses, such as travel and external advisory services (i.e., legal counsel, technical consultants, and environmental and insurance advisors, if any).
  • Security - We will seek security appropriate for the loan and type of financing.

1 Including, by way of example, (i) senior, subordinated, mezzanine, and convertible debt; (ii) project or limited recourse finance; (iii) tier 2 capital raised by banks; (iv) capital market debt instruments including synthetic or structured securities, and the related underwriting and liquidity support arrangements; (v) letters of credit, promissory notes, and bills of exchange (vi) performance, bid, advance, and other payment bonds and forms of bond issuances; and (vii) other forms of financial indebtedness or instruments.


Equity Investment

ADB offers financing through equity investments in enterprises and private equity funds. It focuses on non-controlling interests and may appoint board nominees or observers while exercising shareholder voting rights. ADB maintains regular contact with company management and requires periodic reports on performance, development outputs, and compliance with environmental and social safeguards. Upon achieving investment objectives, ADB divests shares at fair market prices, preferably to host country nationals, to broaden local ownership and develop capital markets.

For private equity funds, ADB may appoint an advisory board nominee, requiring detailed quarterly reports on investment progress and financial performance. ADB commits long-term capital, typically remaining invested throughout the fund’s life. This approach aligns with ADB’s focus on promoting private sector development in emerging markets.


Guarantees

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. 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.


Loan Syndications

ADB assists DMC governments and private sector borrowers in securing debt financing on commercial terms for ADB projects through engagement with commercial financial institutions.

ADB also partners with commercial banks, impact investors, institutional investors, and development finance institutions to provide debt for projects through B loan, complementary financing scheme, and parallel loan structures.


Blended Finance

ADB utilizes blended finance to de-risk private sector projects in Asia and the Pacific’s emerging economies. ADB blends small amounts of concessional capital, from dedicated funds under its management, with its own ordinary capital. Concessional capital involves the deployment of any number of instruments to absorb a share of a project’s real or perceived risk, mobilizing additional investment and serving to catalyze the private capital need to fill a market gap. Blended finance is leveraged, in particular, to kickstart and accelerate green growth, helping to propel the region’s transition to a sustainable and decarbonized future. By prioritizing climate mitigation, adaptation and fostering inclusion, ADB contributes to improvements in the standard of living and quality of life for all people while prioritizing poorer communities and those most at risk from the consequences of climate change.

People Planet Profit

The concept of blended finance emerged from a global effort to solve the problem of risk deterring investment in important and often pioneering private sector projects in emerging economies. ADB structures blended finance solutions that deliver the potential for investors to profit from these investments while driving positive and often transformative development impact in Asia and the Pacific.

Blended finance involves ADB utilizing small amounts of scarce concessional resources from dedicated donor funds or facilities under its management. Concessional finance is provided on softer terms to mitigate project risk and may be structured as any or a combination of debt, equity, guarantees or grants, which may be performance-based. These are then blended with regular near to market-priced loans from ADB in tailored solutions that meet both project and donor requirements and crowd in additional commercial capital, public and private.

ADB selects projects for their potential to drive economic growth, environmental protection and social inclusion, as interdependent priorities. ADB’s blended finance investments today span 11+ counties, across various sectors including agribusiness, finance, energy, transport, and infrastructure with all projects transacted through the lenses of climate mitigation or adaptation and gender equality. All blended finance transactions benefit from ADB’s development expertise and vast network of contacts in government and big business.

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Blended Finance FAQs

ADB adheres to the Development Finance Institutions' definition of blended finance – “Combining concessional finance from donors or third parties alongside DFIs’ normal own account finance and or commercial finance from other investors, to develop private sector markets, address the Sustainable Development Goals (SDGs), and mobilize private resources”.

Most investments in lower-income markets are below investment grade and simply carry too high a risk to be considered by commercial investors. These include political, currency, commercial, and liquidity risks; weak local financial markets; challenging investment climates; and poor regulatory and legal frameworks. Perceptions of risk that are higher than actual risk, can result in market failures. ADB seeks to address these failures by demonstrating that projects can deliver on financial sustainability and development impacts in challenging environments.

ADB structures blended finance transactions that mitigate risk and remove constraints that ordinarily deter commercial investors who require market-rate returns and lower risk (often due to regulatory requirements), kickstarting beneficial, and often pioneering projects, that might not otherwise happen.

On the one hand, ADB engages in dialogue with large multinational businesses and policymakers to stimulate the establishment of supportive and enabling environments1; and on the other, ADB structures blended finance solutions to strategically combine public or philanthropic funds (concessional financing) with a development bank’s own capital (usually market priced). Concessional financing, with submarket return rates or softer terms, helps to overcome bankability hurdles, absorbing a share of the project’s risk, making it possible for ADB to crowd in commercial financing from external partners to bridge finance gaps and drive these projects to market.1 External partners include other development finance Institutions, commercial banks, private equity funds, and institutional investors.

Sustainability in developing markets will depend on increasing the current level of investment from billions of dollars to trillions of dollars, with an estimated $2.5 trillion financing gap in developing markets2. Given the complexity of global challenges, ADB corrals diverse actors from across society, to work in partnership to accelerate change. The private sector is responsible for approximately 70% of jobs3, globally and has an instrumental role to play in strengthening businesses in Asia and the Pacific, spurring innovation, entrepreneurship, and productivity.

Blended finance can also free government and development agencies to correct market failures without having to divert public funds to finance entire projects. As a finance structuring model, ADB uses blended finance to demonstrate ways in which investing in developing regions can be profitable thereby opening new possibilities for commercial investors, development finance institutions, commercial banks, private equity funds, and institutional investors.


2 OECD. 10 November 2020. COVID-19 crisis threatens Sustainable Development Goals financing. OECD.org
3  https://onlinelibrary.wiley.com/doi/abs/10.1111/puar.13355

Concessional finance refers to donor capital provided on terms that are softer than those available commercially, in relation to tenor, rates, security and rank. This provides the borrower with greater flexibility and liquidity while offsetting risks to the lender, such as defaulting or value loss associated with politics, currency volatility, liquidity, commercial constraints, and challenging legal and regulatory environments. Partners are welcome to contribute to these funds through cofinancing.

Concessional finance may be built into the capital structure or constituted in a number of other risk mitigation instruments. ADB may structure the concessional funds as debt, provided with softer terms such as, lower pricing, variable pricing, extended grace periods, bullet repayments, longer tenors, and subordination of cash and or securities. It may be structured as equity, providing early-stage seed capital, convertible instruments, capped and collared returns. It may provide guarantees such as, political risk guarantees, partial credit guarantees and pricing with softer terms. Donor funds may also be used as grants for capital expenditure, interest rate subsidies, absorption of foreign exchange differences (currency risks), and insurance premiums; grants may be linked to performance-based incentives. Finally, hedging instruments, swaps and derivatives can provide for local currency hedges and swaps, and securitization. ADB manages a number of funds and facilities, each with commitments to a range of development priorities for deployment during a set time period.

ADB’s Private Sector Operations Department currently provides access to $967 million in concessional financing through 6 funds or facilities:

These facilities support a range of development themes including climate, clean energy, sustainable transport, energy efficiency, agribusiness, financial services, water and waste, and oceans and the blue economy, with a focus on climate disaster risk management, and nature-based solutions.

ADB’s deployment of concessional finance also intersects with the commitment to advancing gender equality, aligning with ADB Strategy 2030 and ADB Operations Plan for Priority 2 (OP2) Accelerating Progress in Gender Equality, 2019-2024. The private sector represents opportunities to drive greater gender equality, diversity, and inclusion, to help foster creativity and innovation; boost business performance; generate better returns on investment; secure a larger talent pool and reach new market segments. Seeking to increase gender equality in business will significantly enhance a project’s capacity to advance sustainable development in the region as a whole.

In line with the DFI definition of blended finance, ADB subscribes to the use of a set of enhanced blended concessional finance principles to ensure the efficient and effective application of blended finance:

Rationale for Using Blended Concessional Finance: DFI support for the private sector should make a contribution that is beyond what is available, or that is otherwise absent from the market, and should not crowd out the private sector. Blended concessional finance should address market failures.

Crowding-in and Minimum Concessionality: DFI support for the private sector should, to the extent possible, contribute to catalyzing market development and the mobilization of private sector resources and minimize the use of concessional resources.

Commercial Sustainability: DFI support for the private sector and the impact achieved by each operation should aim to be sustainable. DFI support must contribute towards the commercial viability of clients. Level of concessionality in a sector should be revisited over time.

Reinforcing Markets: DFI support for the private sector should be structured to effectively and efficiently address market failures and minimize the risk of disrupting or unduly distorting markets or crowding out private finance, including new entrants.

Promoting High Standards: DFI private sector operations should seek to promote adherence to high standards of conduct in their clients, including in the areas of corporate governance, environmental impact, social inclusion, transparency, integrity, and disclosure.

Trade and Supply Chain Finance Program (TSCFP)

TSCFP has two broad streams of activity. First, it provides guarantees and loans to fill market gaps. Second, TSCFP undertakes special initiatives, in partnership with key stakeholders, to make global trade green, resilient, inclusive, transparent, and socially responsible.


Microfinance Program

A credit enhancement program designed to address a market gap by sharing risks to promote local currency lending to microfinance institutions. Because of its risk-sharing nature, the program encourages private sector participation.


Technical Assistance (TA)

In addition to financial products, ADB also offers technical assistance, on a selective basis, for public and private sector operations. This may include the following:

  • Transaction TA (TRTA), which directly benefits a project or is financed by ADB (e.g., project preparation, project implementation support, or policy advice). TRTA can also help develop a public–private partnership as part of transaction advisory services.
  • Knowledge and support TA (KSTA) includes all TAs other than transaction TA (e.g., general institutional capacity building, policy advice, and research).

Our Team

Suzanne Gaboury photo
Suzanne Gaboury

Director General

Catherine Marsh photo
Catherine Marsh

Deputy Director General

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Craig Roberts

Senior Advisor

Mayank Choudhary photo
Mayank Choudhary

Director, Infrastructure Finance Division 1

Daniel Wiedmer
Daniel Wiedmer

Director, Infrastructure Finance Division 2

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Janette Hall

Director, Private Sector Investment Funds & Special Initiatives Division

Mark Kunzer photo
Mark Kunzer

Advisor, Private Sector Transaction Support Division

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Marife Apilado

Director, Portfolio Management Division

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Asif Cheema

Director, Financial Institution Division

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Bart Raemaekers

Advisor and Head, Guarantees and Syndications Unit

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Timo Teinila

Advisor and Head, Risk Analytics Unit

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Joseph Bergin

Advisor and Head, Equity Investments Unit concurrently OIC, Business Development Team

Profile: Martin Lemoine
Martin Lemoine

Unit Head, Agribusiness

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Aniruddha Patil

Unit Head, Social Sectors Team

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Steven Beck

Advisor and Head of Trade and Supply Chain Finance

Contacts

Private Sector Operations Department
Asian Development Bank
6 ADB Avenue, Mandaluyong City 1550, Metro Manila, Philippines
Tel +632 8632 5280
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Country Focal Points

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