← This Week in Global Development
This Week in Global Development
A look ahead to the World Bank and IMF meetings
00:31:46
This week on the podcast, we unpack what to watch during the https://www.devex.com/organizations/world-bank-group-38382 and https://www.devex.com/organizations/international-monetary-fund-imf-44300 annual meetings in Washington, D.C. — from shifting...
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- [00:04]
A
My name is Adva Saldinger and you're listening to this Week in Global Development hosted by myself, Rumby Chikamba and David Ainsworth. Hello and welcome. This Week in Global development. I'm Adva Saldinger. I'm your host for today's episode. This week we are going to discuss the top development stories with special guest Faheen Alaboy, who is the managing director and global head of multilateral and development institutions at JPMorgan, and my colleague, Alyssa Miolene. So, Fahin and Alyssa, thank you so much for joining us. We are going to be diving into what you need to know ahead of next week's World bank and International Monetary Fund annual meetings and talking about the latest in the role of private capital and development, from ESG to nature based financing and more. So please tune in. This is this Week in Global development. Alyssa and Fahin, thanks for being here.
- [01:14]
B
Thank you for having us.
- [01:15]
A
We're all going to be running next week at meetings. And Faheen, maybe I'll turn to you first and would like to just start by getting a sense of sort of what are some of the big picture themes you're going to be looking at next week? What are you expecting? Yeah. What do you want to learn more about?
- [01:40]
B
Super. No, thank you guys for having me. And yes, I'm looking forward to a beautiful fall week and getting my steps in as we kind of do a tour de table of, you know, all the interesting people who will be in town and the topics in development finance. So I think first off, it's always great during the fall meetings to get an update on the kind of global economic outlook and hear what the IMF is saying about how different regions are going to grow and just what the resiliency of the global economy is given how many multiple shocks it's kind of faced. I think the other big topic, of course, is trade and tariffs and how that's going to impact different emerging markets and developing countries, how people are collaborating, cooperating, how they're building resiliency. So I think that's, you know, a topic that I'm interested to very much hear about. And then definitely, I think within the world banks, I think, Adva, you had, you know, a piece out this morning about, you know, new changes at the World Bank Group. And so I think we're curious to hear more about how organizations are shaping themselves to work more efficiently and work better with partners. And what I'm curious about is also what incentives may be put in place to do more with the private sector and to do more mobilization, which is the area that we work in a lot. A few other things I have lots of things that I'm curious about. I think another one is about the all of the energy power strategy that's been announced a while ago to get some more details on what the World bank and other development institutions plan to do in the energy space. Also in supporting critical supply chains. A lot of developing countries, but nations globally are looking to be more self sufficient in things such as pharmaceuticals and you know, industries that are key to their countries. So that's something that I'm also curious to hear about. So I think big themes, topics that that will be very interesting to get a global perspective on.
- [04:04]
C
Definitely. So like Faheen said, it's slated to be a busy week. I always really love this week in dc. I feel like you can just walk around and hear a million different languages and you never know who you're kind of running on the street and in coffee shops. So I'm excited though it will be busy. Like you said. We also have our own event, the Devex Impact House, where we're going to be having tons of other conversations about com about topics that are relevant to the World bank annuals. For me, that includes conversations about jobs and how that intersects with migration, conversations about agribusiness and the World Bank's real pivot to focus further on that along with really, as Fahin mentioned, private sector capital. I'm just coming off of the back of the Building Bridges conference in Geneva, Switzerland. I just got back earlier this week and there was a lot of really interesting conversations about how to get more private money into a number of different whether sustainable development goal oriented topics or climate topics or nature topics. So I'm curious to see how those conversations kind of weave their way into this setting that will be a little bit different. More World bank obviously mdb, DFI focused.
- [05:12]
A
Thanks Alyssa. I think Fahina, I want to come back to you and dive a little bit more into some of the details on on some of what we're seeing from the bank on this private, private capital mobilization because we have seen some progress and in recent weeks IFC announced a securitization. And so I really wanted to get your take on sort of what you make of the World Bank Group's efforts on the sort of private capital mobilization front of the recent securitization of other things that they're doing. And obviously you worked a long time at IFC and so to know firsthand, I think both some of the challenges and Some of what's needed to really get more private sector capital moving, especially at the sort of country level and project level.
- [06:05]
B
No, I think that's, that's an excellent question. So I, in the past couple of years, I must say I have been impressed by how the development finance system as a whole has kind of coalesced around priorities, right? So I think the G20 report really made all of these institutions try to focus on their capital adequacy to shore up how much equity they had and to think very critically about the risk they were taking, their debt to equity ratios, basically, to do more. Right? So I think all of the institutions globally looked at that and that was kind of the first step. And these securitizations were actually part of that strategy, right, which was how do we get some loans off of our balance sheet, have the private sector take some of that exposure with the whole objective of creating more space, headroom capacity for all the institutions to do more. So I think that that exercise has run its course. And you know, the institutions have taken these recommendations of the G20 seriously and implemented them to the best of their ability. The, the second piece is local currency, right? That was there. This is demanded mostly by the beneficiary countries, right, who want, who don't want that mismatch. And I think this is still something that's a work in progress. You know, how do we get the markets to get deep and liquid local currency, you know, markets in place in developing countries? How do the banks facilitate this? I think this is something that's still a work in progress. And then the last piece, I think the third leg of kind of where these institutions have been going is the mobilization piece. And there too, I think there's been a lot of success, but a lot more to do. So I think the parts that have done well, and it takes two to tango, right? So, you know, the development banks can create the outreach and want to do more, and then the private sector has to respond and adjust to it. So I'm happy to go into some examples later of things that have worked, but just what I think that these institutions, I can tell you what we've done on our end to try and work more with the development banks. And I think that's important because it has to, as I said, go both ways. So we have seen that willingness that volunteer from the development banks to work with us. And we have really established a dedicated team focused in knowing the right people in the making sure that we have, you know, the teams in place from emerging markets the correct products that can work together with the development banks knowing what industry verticals, which development banks focus on, which geographies so that in house team has been put in place so that we can effectively manage the relationships and the transactions that we do. And then I think setting our own targets on where we want to do more, what products make sense and then also being very clear eyed about what doesn't make sense for us, you know, be it the size of a transaction, be it how long a transaction will take, what, what have you. So I think this is then moving towards the development banks and what perhaps they need to do and continue to do as they've been on this journey is what are the right incentives that they've put in place. I know everyone has a target to increase their mobilization ratios, right? To say go from 1 to 2 to 1 to 5 to 1 to 10 or whatever that may be. But what are the ratio, what are the incentives internally? And that speaks a little bit to the changes that we expect to hear next week, I hope on how are they allocating staff to who know how to work with the private sector and with financial institutions. Are they hiring the right people? Are they adapting timelines to suit the market and are they adapting their product suite to work with private capital? And then for them also to be very clear eyed to say, listen, pension funds can do this, investment banks can do that, private equity funds can do this, right? And not kind of go to all three for the same project and really understand who the right partners are for the different deals and the different sectors that they want to work on. So I think this is the kind of, it's a work in progress. I think both sides are trying to make it work and we just need to get better at it, better at understanding each other's languages, what each other's priorities are and who can do what in which geography.
- [11:17]
A
I think that's such a good point. I think one of the things that the private sector Investment Lab, which Ajay Banga convened to try to help the bank get better at some of these things, one of their early recommendations was merging the bank's guarantee instruments. And that's something that has happened. And I know that you guys work with Miga and have had some interesting deals and I think we're going to dive into that at our DEVEX event next week a little bit. But I do think that it presents some sort of interesting examples of how the bank can be creative and can adapt what it's doing. But I think it, it still is a Little bit to be determined how, you know, ifc, the bank's main private sector arm, is really going to potentially change or adapt or how does, what is its. I know they're working on sort of a new strategy going into the future. What does that look like? And then, you know, how does the sort of broad changes that we're seeing in terms of some of the internal reorganization that Ajay Mangar wrote to staff about in an email yesterday that I report on how that impacts all of this, right. How. And I think the intention is really to continue Banga's efforts to streamline the bank and to make it more efficient. But there are questions then about staffing. What happens is that staff consolidation, what does that mean for delivery times, et cetera? Because I think in any change there's some degree of, you know, uncertainty, potentially delays, et cetera, as things get worked out. So I think we'll see where things go on that. But I think one of the, one of the other things.
- [13:02]
B
If I could mention just something else as you speak to that, right, and you mentioned the private sector lab. I think what the development banks have also done in the past few years to facilitate this is to really sit there and look at what are the key blocking factors more globally for these different institutions to work together. And I think what's been really interesting is launching labs like this, having the discussions on what could we do more. And I think two things that I'd like to highlight there is how the IIF for example has worked on kind of highlighting the regulatory barriers, right to banks being able to do more in emerging markets. It's very simple as a topic. But like if you can't do, if you have red cap rules in place that make working in emerging markets more difficult and we haven't talked about that, that's you can change all sorts of staffing and targets, but those are very important things to talk about. So industry wide, having also highlighted that, I think is really important. And then on our end what we've also tried to do is have a set, set of standards, right. So as you, we've had this discussion before with some of my colleagues where last year we kind of worked with an industry consortium to put impact disclosure guidelines right into the market so that everyone can be working off the same base and everyone can be reporting the same impact data to make sure that the private sector is also wanting to report on impact data. So I think industry wide efforts have also been going on beyond what just the MDBs are doing and what the private sectors are doing to kind of make the whole, you know, the whole environment conducive to doing more in the emerging markets.
- [14:59]
A
Yeah, I think those are both such good points. And I know, you know, post financial crisis, the sort of Basel III rules definitely pose constraints. And in terms of the ways also that institutions can lend what they can hold on their balance sheets, and that's definitely made a difference in sort of their risk appetite in some of these markets that that we're talking about. And I do think that one of the things that we're seeing is, is the importance of these sort of standards as well. Because I think one of the things I've been talking to some people about on the back of IFC securitization is how, you know, other organizations might think about that. And when you're packaging loans into a securitization, you need certain standards. It helps the market would prefer if they're sort of more standardization within the loan portfolio. And so I think that that's something also top of mind. And how, you know, could the IFC, you know, future securitizations include loans from other DFIs or MDBs, I think is also an open question. As they talk about this very much as looking to, you know, help build us, you know, build a new asset class in development finance. Alyssa, I want to turn to you because you spent last week talking to a bunch of folks in the financial sector at the Building Bridges conference and really looking at, you know, some aspects of how, you know, private finance can play a role in development. And I think that that's also part of this broader conversation about how do you start to, you know, build more sort of asset classes and think about these things in more structured ways. And just curious, you know, what some of your sort of thoughts or takeaways on that were. And I know that you got into some of the politics around climate finance, which is something that we'll be watching next week as well.
- [17:02]
C
Yeah, there were so many different pieces to kind of pull out of that conference. And I think a lot of it relates to what you and Fahin have just described, which is, you know, really this development asset class. Right. This development finance asset class, how to really work with that and use that, speaking to kind of the broader conversations about whether that be insurance companies and how they kind of get involved and play play a role here, institutional and other institutional investors like pension funds, and looking at how to kind of bring that cash or bring those investments into this space. But a couple of other pieces that I think are worth throwing out was Nature finance and really how to balance, or rather how to put nature on the balance sheet as a value was something that continued to come up repeatedly throughout the course of the three day conference. So I just found that interesting because it seemed like, you know, we're, we're kind of when you compare and contrast leaps and bounds ahead with carbon markets and just the ways in which we value other types of climate incentives. But this nature piece seems to be something that people are really interested in and particularly there was quite an interest from insurance companies and I spoke with several institutional investors who were just saying it's both in our benefit like insurance companies. You know, I used to live in California and I feel like I heard constantly like insurance company X is pulling out of this place because of fire, fires and Y place because of flooding. And, and you know, kind of the conversations that I had with folks are we don't want to pull out because it's less of a market opportunity for us. How do we figure out how to pull our own levers to influence mitigation, but also to make sure that we expand, expand that reach and make more investable opportunities. So lots of interesting examples, I think in the United Kingdom there's a program called Flood Re, which is working with the government to kind of help with areas where houses are built, where floods are increasingly coming in. I will just caveat. You know, I live in Washington D.C. as I think all, all three of us do. And the vibe was very different in Europe. I think it was cool to kind of hear from folks both across the Europe, across Europe and across the UK just how they're looking at nature as again this emerging asset class. And I am curious again just drawing us back to next week, whether that will translate to more of the American complex.
- [19:32]
D
Hi, I'm Kate Warren, Executive Editor at devex. If you are listening to this podcast, you are likely working to achieve the sustainable development goals. But are you subscribed to devex Newswire? Global development can be a fast moving, complex sector. Our team of global reporters work every day to bring you the news you need to make sense of it all. In devex Newswire, we keep you up to date on issues ranging from from climate change financing to gender equality and global health to transforming the food system. All in a fun to read free newsletter delivered directly to you five days a week. Join the hundreds of thousands of global development professionals who receive Devex Newswire and visit devex.comnewsletters to sign up to this free newsletter today.
- [20:22]
A
I was just going to say that I do think there are distinct differences, especially today in the European and the US markets when it comes to things like nature related financing and even the conversation about ESG or environmental social governance financing, which has kind of become a taboo thing in the us not to say that there isn't still plenty of investment with an eye towards sustainability or to some impact. But I think it's being called different things, as you wrote about Alyssa. And I think it's sort of trying to find a maybe new way of talking about it. And I do think this issue of climate will come up next week. One of the things that I'm hearing is that, you know, the World Bank's European shareholders would really like the bank to meet its objectives on climate and, you know, stay aligned to the Paris climate agreement. And obviously what we've seen from this Trump administration is that they want the World bank to focus much more on poverty and not on climate. And so I think we could very well see attention there and sort of this different set of viewpoints playing out next week, even though there's maybe not a ton of formal discussions about climate. Because I think, as one person I was speaking to yesterday put it, there's a lot of things that are sort of happening now, you know, under the radar or just trying. The World Bank's trying to sort of quietly continue doing its work on things like climate or gender, where maybe the politics are not in their favor with their largest shareholder today. But Fahin, I'm happy to come back to you and talk about some sort of practical examples or what does it look like when you guys work with the bank? What does that mean for next week? Are you looking to meet with people to see how you can put together deals, transactions? Because that's sort of the, in real life, how are we looking at, you know, potentially mobilizing a big, you know, private investor into some of, into some of these markets?
- [22:30]
B
No, absolutely. So next week is going to be full of definitely meeting with investors, meeting with the development banks, also those coming in from overseas as well as the DC based ones, to really have an eye for what we can continue to do together. As I said, we're pretty geared up internally on how to do it. And on Wednesday we're hopefully signing a transaction. Let's see if that all comes together and if it does, and we'll talk more about on Thursday at Devex House. But I just thought I would give some examples because Abbott, to your point, I think whilst both European and US shareholders may have their own objectives, I think the people Whose voices you should always listen to are the beneficiaries, countries. Right. And what they want and what their priorities are as well. And I think that some of the examples that we've worked in, in private sector mobilization and they all want investment and they want investment across the board, you know, definitely in infrastructure, in agribusiness, in financial services as well as climate related as people face, you know, issues of, of flooding and droughts and other things. So I think some nice examples that have closed and jobs, I mean that's something that everyone globally is very much focused on, I think how to create jobs for their citizens. So I think some nice examples recently were we worked with a Chilean pulp and paper company that is investing in one of the largest pulp mills in Brazil which is expected to create 14,000 jobs during construction, 6,000 jobs in totality when up and running. It's also going to have solar as one of its power sources. And what was really nice here is that you had Finvera, the Finnish ECA worked together with IFC and IDB and we at JP Morgan were the financial advisor of that entire financing. Right. And that's a really nice example of industry export led job creation and energy efficiency like all in one because, you know, and that's something, that's a strong suite of Brazil to work in that sector. Another nice example from this year is, you know, we Axion Telecom it is, you know, a Pan African telco player that's been expanding its operations into countries such as Senegal and the drc. They're Madagascar based and they were able to do a second bond which is really impressive. You know, they did one during COVID and were able to refinance and the likes of BII and Proparco and DEG as well as IFC came into that as anchor investors. So kind of showing the market that the MDBs had done their diligence and were, you know, supporting this very interesting African telco player as it expands its operations across the continent as it moves technology up to, you know, 4G in many places, builds out critical fiber and telecom connectivity. I think is something that we take so much for granted. Right. But is not always there. And so many emerging markets are still looking to shore up and make better. I think another great example is Mung Thai Capital. This is a Thai bank that also went to the public markets where DFIs came in as anchor investors. And this is a Thai bank that really focuses on the SME sector. And if I recall correctly, they have 3.5 million retail customers and they literally Lend to the farmer that's going to buy a tractor and to a street vendor may use their motorcycle as collateral. And having an expertise in that and growing that out within the Thai context, I think is another excellent example. And then to your point, earlier last year we did work on a debt for nature transaction in El Salvador in a small country. But a critical river preservation was what was looking to be preserved. So the Lempa Rio or the Rio Lempa that goes all through Central America and it is a critical source of drinking water, but also hydroelectricity and irrigation. Right. So preserving and shoring up funds to improve the river quality has so many economic impacts as well. So just great examples where we, and in that transaction we worked with the USDFC and with cafe. So so many development banks have mobilization as their agenda. They're gearing up to do it better and we're looking forward to doing more with them and getting, but making it be faster and to make it something that we can replicate.
- [27:52]
A
Yeah, and I think that's so key in all of this. How do you create structures that are either scalable or replicable? And that's, you know, something that I hear all the time from folks in the private sector and the speed issue and I think that that's one place where, if you look at where things stand on World bank reforms like Ajay Banga came in from the private sector and said things are moving too slow. We don't need 100 check marks of approvals to get this out the door. And, and the bank has made progress on speeding up approvals though probably still a lot slower than you can do things in the private sector. But I think that's something where the bank is sort of continuing to focus and something, you know, maybe we'll hear a little bit more about some of those reforms and how it's looking to make changes next week. I did also want to pick up on one of the things you said, which is, you know, I think, you know, as powerful as the bank's big shareholders are, it is a demand driven institution. Right. And it can be in the focus on the geopolitics of the day. It can be easy to sometimes forget that. But ultimately it's what countries want to borrow for, for, you know, the sort of public side of the World bank group. And so to your point, if they want to borrow for infrastructure or for climate or for climate, resilient infrastructure or for whatever it may be, that's, that's what you're going to see as the priorities. And that's I think the way the bank has designed it to sort of be as responsive as possible to the needs of borrowing countries. I did want to just mention that jobs is definitely sort of top of the agenda again this at these meetings, as it was in the spring meeting. So I think we'll certainly be looking for any other sort of details from the bank on how it intends to sort of double down on this focus on jobs and on agribusiness in particular. We are expecting an announcement on Tuesday, I believe on, on agribusiness. And so I think we'll see what, what the bank is working on there specifically. So I think a lot for us to keep our eyes on next week across sort of the bank's work between its reform, some of the, you know, geopolitical tensions and certainly across sort of how it's looking at private, private sector mobilization sort of across the board from a transaction level to the big picture, sort of creating markets level. And we didn't talk a lot about the International Monetary Fund today, but also plenty to watch there. And I know there will be some discussions on debt though I don't think we expect too much forward movement on decisions there. But we're hearing that there may be some sort of G20 document, but unclear if that will come together in time for some Thursday meetings. So plenty to keep an eye on. So I suggest you all stay tuned to our coverage on devex.com if you are in D.C. check out our event at Devex Impact House. You can find more details on the devex website. And join us next week for a live recording of our podcast talking all about what we're learning at the meetings. So, Alyssa Fahin, thank you so much for joining me. This has been this week in Global Development.