Pandemic has IFC pumping $1.7 billion into local companies

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The pandemic has led to the International Finance Corporation (IFC) massively ramping up its impact investment in the country, which is its largest client nation globally at $1.7 billion as of June, a 51% rise over the past 12 months, the largest developmental lender into third world, said on Tuesday.

“Our total commitment to India, which is our largest client country globally, at the end of June stood at $1.7 billion representing an increase of over 51 per cent from last year,” IFC vice-president for Asia and the Pacific region Alfonso Garcia Mora said in a statement. This is nearly half of its investment in the whole of South Asia since the pandemic, which touched $3.8 billion as of June 2021, it said.

Its efforts included supporting medical facilities, vaccines supplies, and to also hard-hit micro, small, and medium enterprises while also spurring investments in renewable energy, affordable housing, and distressed assets resolution in the region.

Financial sector and small businesses took a drubbing

The pandemic has drastically impacted the private sector in the region, severely affecting the most vulnerable people in the region, Mora said and noted that the viral infection has laid bare the region’s existing vulnerabilities in the financial sector, disrupting businesses, particularly small businesses, and leaving so many people exposed.

Since the onset of the pandemic that has created massive social and economic disruptions, IFC has committed over  $3.8 billion, including mobilisation and short-term finance, in South Asia as of June 2021, resulting in a record investment volume of over $14.9 billion in the last five years in the region, towards a green, inclusive, and resilient recovery, Mora added.

Out of the total investment of $3.8 billion, $590 million are committed towards Covid response deals in South Asia, and additional deals worth over $100 million are in the pipeline.

Focus on climate finance

The impact of the pandemic coupled with the region’s vulnerability to climate change, has highlighted the need for a collaborative, resilient and climate friendly recovery that can withstand future shocks, said its new regional director for South Asia, Hector Gomez Ang.

While South Asia is one of the fastest growing regions in the world, estimates suggest that climate impacts could reduce its annual GDP by an average of 1.8%  by 2050, rising to 8.8% by 2100 if the region failed to take adequate corrective measures. The region is also estimated to have an untapped climate investment potential of $3.4 trillion by 2030, Ang said.

In line with this, IFC has committed $353 million in climate finance and $490 million in international development association or fragile and conflict-affected situations countries in the region.

It can also be recalled that under the World Bank Group’s climate change action plan (2021-25), the IFC is committed to aligning all new real sector operations with the objectives of the Paris Agreement by July 1, 2025 and has set a target of reaching 35% financing for climate on average over the next five years.