Private sector-oriented international financial institutions (IFIs) address challenges in four key ways:
1. Providing financing to private companies that lack access to private capital through various financial instruments.
2. Providing advisory services to improve investment climates, strengthen project performance, and enhance environmental and social standards.
3. Mitigating risks in challenging environments to catalyze more financing from other investors.
4. Demonstrating viability of private solutions in difficult areas to create new markets and innovations.
1. O R I E NT E D I FI S I N AD D R E S S I N G P R I VAT E
S E C T O R S C HAL L E N GE S
2. Private sector-oriented IFIs are at the interface of public are
private sectors with a unique mission and perspectives that
allows them to provide a special role in projects. Private
Sectors Oriented IFIs addresses the public sectors challenges
by providing finance and knowledge and catalyzing others:
3. 1. Providing financial product to private companies that lack sufficient
access to private sources of capital. IFIs may be able to bring in funds in
a configuration for which the private sector has no risk appetite at
present. Asa group, IFs provide a mix of instruments, including debt,
equity, guarantees Islamic finance, local currency loans, and political
risk insurance.
4. 2.Providing Related advisory (technical assistance) products to extend the
specialized and source knowledge essential for effective investments such as
to:
a. improve the investments climate
b. Strengthen project performance and impact
c. Facilitate privatization and Project risk sharing
d. Enhance environmental, social and corporate governance
5. 3. Providing comfort world challenging environments to catalyze, or
help bring in financing from investors. Comfort comes when IFIs help
mitigate a number of risk, including country risk (for example,
currency convertibility, breach of contract, expropriation, or other non
business events that threathen company operation) and also project risk
through the due diligence and standard setting that the IFIs provide
with respect to the project, sponsor, and the compony's encironmental,
social, and corporate government procedures
6. 4. Demonstrating the viability of private solutions in
difficult or new era areas, leading to further investments
and creating or developing new markets, fastering "safe"
innovation. Innovative IDI transaction can also help
push the reform agenda, facilitating further investments
7. 5. Networking - helping firms get to know other firms, banks, IFIs, and
the like through together IFIs works with firms in situation whemn
alternative financing is scarce but good projects are still done and
improved with adequate finance and advice. In this sense, the IFIs are
addressing market failures, helping fill market gaps, and improving the
development impact of projects, as opposed to providing special
subsidies, IFIs genrally charge market rates to ensure the the crowd in a
new finance and do not undermine existing commercial finance
8. High Impact FocusAreas. Many IFIs have chosen to focus on strategic
areas when they can achieve high development impact and also reflect
their particular strengths, The focus areas of various IFIs provides
complementary strengths that can be leveraged through partnerships.
Here includes some of the factors that have influenced various IFIs in
choosing their stragetic areas
9. 1.Growth, such as infrastructure, access to finance, education,
trade innovation, regional intergration, and the investment climate
2.Affect the poor, such as the business models that specifically target
services and employment for poor populations (inclusive business models,
or base of the pyramids programs); infrastructure, health and education
investments likely to benefit poor populations; pr sectors such as SMEFs,
microfinance, and agribusiness likelyto employpoor prople or contribute
to poberty reduction
10. 3.Major Global trends suggest the need for significant investments; such
as food security, urbanization, water scarcity, youth employment regional
integration, and climate change.
4.Large gaps in the availibility of commercial finance, such as with SMEs,
base of the pyramid projects, new prublic-private partnership models, and
in lower-income and fragile countries.
11. These factors are then considered in regard to (vis-a-visa) the particular
strengths of each IFIs and the particular needs of an individual country,
taking into account the levelof development strategies, and private sector
gaps.
