The International Finance Corporation (IFC), the private-sector arm of the World Bank Group, together with U.S. bank Citigroup, signed a 1.6 billion rand ($98 million) borrowing facility aimed at broadening access to rand-denominated finance for South African private-sector borrowers, the institutions said on Tuesday.
The facility is structured to strengthen the IFC’s capacity to provide funding in local currency, addressing a common problem in developing economies where companies and projects typically generate revenues in domestic currency but frequently face difficulty obtaining long-term financing without taking on foreign-exchange risk. By offering rand liquidity, the new facility seeks to reduce the currency-mismatch exposures that can amplify volatility for borrowers.
According to the statement, the rand facility has already underpinned the IFC’s role as an anchor investor in the Cape Water outcome-based bond issued by FirstRand Bank. That anchor investment illustrates how the borrowing line can be deployed to support specific local-currency instruments and client transactions.
"Local currency financing is extremely important in this day and age … we are living in a very volatile world," said Jorge Familiar, vice president and World Bank Group treasurer. He noted that companies earning revenue in local currency can face significant challenges when borrowing in hard currency, and that local-currency funding is therefore an important tool for managing that risk.
Familiar described the rand transaction as building on an earlier arrangement in Kenyan shillings that IFC and Citi signed in 2024. "You could call that (Kenya facility) the pilot," he said, calling the new facility "proof that something that we piloted and has worked well can be replicated elsewhere." The comment highlights an iterative approach to developing local-currency financing solutions across different markets.
Familiar also said that in the last fiscal year, 30% of all of the World Bank’s own-account lending was conducted in local currency, and he framed the rand facility as part of the IFC’s wider efforts to help clients manage currency risk. The statement added that over the past decade IFC has committed more than $33 billion in local-currency financing across 71 local currencies.
Key implications
- The facility increases the IFC’s rand funding capacity for private-sector borrowers, providing a tool to match revenues and liabilities in the same currency.
- The transaction serves as a follow-up to a Kenyan shilling facility signed in 2024, indicating a replication strategy for local-currency financing models.
- The arrangement has been used to support the IFC’s anchor investment in a Cape Water bond issued by FirstRand Bank.
Risks and uncertainties
- Borrowers that continue to rely on hard-currency financing face foreign-exchange risk, a central motivation for the facility.
- The effectiveness of replication across markets may vary; the Kenyan transaction was described as a pilot, and the rand facility is presented as proof that successful pilots can be replicated.
- Broader reliance on local-currency instruments depends on sustained access to local-currency funding lines from development and commercial partners.