Karandaaz, DFID initiate credit enhancement facility for infrastructure projects

Islamabad | Sep 12, 2018

Karandaaz Pakistan and UK’s Department for International Development (DFID) on Tuesday introduced Pakistan Credit Enhancement Facility (PCEF) to public and private sector stakeholders at a conference.

The local currency credit enhancement facility was being set up to address and overcome existing constraints in the supply of local financing to infrastructure projects and help the development of the local financial market, a statement said.

Patricia Seex, head of economic growth, DFID Pakistan, said

The DFID would support the development of this innovative and important facility to help infrastructure developers access the finance they needed, at a price they could afford. This facility will contribute to addressing both Pakistan’s infrastructure gaps, particularly for smaller projects and social infrastructure, and to the development of the financial sector which was under-serving all but largest businesses.

DFID is supporting PCEF through GuarantCo, part of the Private Infrastructure Development Group (PIDG).

Lasitha Perera, CEO of GuarantCo, said

PCEF would enhance Pakistan’s capacity to attract and unlock latent pools of capital from pensions and insurance for infrastructure investment into key sectors of the country’s economy. GuarantCo has been active in Pakistan since 2013 as an international credit enhancement provider and was delighted to be part of this constructive partnership to establish a Pakistan-based credit enhancement facility “as we have successfully done in Nigeria. In Pakistan, this facility will provide local currency guarantees for infrastructure projects, making them bankable for commercial lending. PCEF is expected to support smaller scale power projects (including renewables); logistics including storage, warehouses, industrial parks, pipelines, smaller port developments, etc; secondary roads with some demand risk; hospitals; education; housing; waste water and water including desalination; local transportation; and inputs to infrastructure projects.

GuarantCo was established to mobilise local currency investment for infrastructure projects and support the development of financial markets in low income countries. It is supported by the governments of the UK, Switzerland, Sweden, the Netherlands and Australia and is rated AA- by Fitch and A1 by Moody’s. Cardano Development is acting as an advisor for the establishment of PCEF.

Cardano Development is committed to helping frontier economies develop and prosper. Their goal is to address financial and risk-based challenges faced in frontier markets.

Ali Sarfraz, CEO of Karandaaz Pakistan said

the credit enhancement facility would help mobilise private investment in infrastructure to increase service provision for the poor, boost economic growth and alleviate poverty. Similar facilities have been established in some of the world’s poorest countries. This first-of-its-kind facility in Pakistan will invigorate the debt market to fuel infrastructure development in the country in the long-term, while working through local commercial banks and NBFIs. There is an existing strong need for credit enhanced debt instruments and given the eligibility criteria of the types of transactions that can benefit from this, there is a strong identifiable deal flow in Pakistan. 

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