Creation of a Special Fund Window will make financing more affordable to less developed members alongside ongoing support for modern infrastructure investment.
The Asian Infrastructure Investment Bank’s (AIIB) Board of Directors has approved the creation of a Special Fund Window (SFW) to make its financing more affordable to its less developed members.
The SFW will serve as a blended financing facility that will provide interest rate buy down to sovereign-backed financing projects that are aligned with AIIB’s Corporate Strategy. Those eligible will be identified according to AIIB’s regular investment process.
AIIB president Jin Liqun explained: “Infrastructure investments and connectivity are crucial for lower-income countries to regain a growth momentum and to achieve long-term sustainable development goals in the post-COVID-19 era, while also dealing with climate change. Through the SFW, AIIB can support its less developed members with affordable pricing while still being consistent with the core elements of our business model to finance i4t. Although modest in scale, we are glad to be able to complement other multilateral development banks by bringing much needed additional financing to lower-income members.”
Developing nations face significant challenges when attempting to raise finance for the scale of infrastructure investment they need, and the perception of risk can see the cost of financing projects rise.
Sir Danny Alexander, AIIB vice president for policy and strategy said: “For the first time, with the support of donors, this new facility will enable AIIB to offer more affordable loan pricing to these members. Combined with our Project Preparation Special Fund which makes grants to support the preparation of high quality projects, we hope this new facility will help meet the needs of our less developed members and global efforts to support sustainable development and tackle climate change.”
The SFW includes unique features in the field of blended finance. It will be funded by voluntary contributions from AIIB’s members. Decision-making authority will reside with AIIB’s existing multilateral governance structure, and the SFW will operate according to the rules and regulations approved by AIIB’s Board of Directors. The SFW implementation will also be fully incorporated into AIIB’s regular investment process.
Projects under the SFW will also contribute to supporting AIIB’s corporate strategy priorities and targets. in particular, they will support the AIIB’s move to make climate finance 50% of all approvals by 2025, and to establish a clear operational focus on green Infrastructure, connectivity, technology-enabled infrastructure and mobilisation of private finance.