The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has launched a partnership with the World Bank, the Swedish International Development Agency, and the stock exchange specialist OMX to help develop access to securities markets products in the region.

This partnership, the Efficient Securities Markets Institutional Development, responds to the growing demand for housing, roads, and other infrastructure projects in Africa. Such projects face a shortage of long-term local currency funding to support their construction.

Under the Efficient Securities Markets Institutional Development, known as ESMID Africa, experts will work with government regulators and market participants to design new products that provide this funding and that build or strengthen the marketplaces and institutions (such as stock exchanges, rating agencies, and securities firms) that are the core of the securities industry.

The collaboration will help bring to market new types of securities products that will attract investors and further develop the securities markets.

The goal is to make long-term financing in local currencies more widely available in the emerging markets, starting in Sub-Saharan Africa with ESMID Africa. IFC, the World Bank, the Swedish Development Cooperation Agency, and OMX of Sweden have signed an agreement for Kr40mn (US$5.5mn) to fund the project.

“Poor infrastructure places unnecessary burdens on Africans and hinders development. IFC is committed to helping private investors contribute more to infrastructure projects in Africa by getting at a root of the problem – limited access to long-term, local currency finance,” says Thierry Tanoh, IFC’s director for Sub-Saharan Africa. “This new initiative will allow us to work more effectively with regulators, market participants, and our international partners, to identify the shortcomings in securities markets and develop the best practical solutions.”

Africa as a whole has enjoyed strong economic growth in the past four years, which has spurred demand for improvements in infrastructure and for affordable, good quality homes. Securities market products, especially bonds and securitisation, are key ways for local and regional governments and private sector companies to obtain much-needed long-term financing for major projects of this type.

“Local currency financing is critical for infrastructure development” says Roger Garman, Sida’s senior advisor for financial systems. “But to channel long-term savings, such as pension funds, to build infrastructure requires securities markets that are working efficiently, and with the right products”.

ESMID-Africa will begin its work by doing a diagnostic of securities markets in selected African countries. From there, country programmes will be designed and implemented through IFC’s technical facility in the region, PEP-Africa.

ESMID-Africa will initially be funded by a grant from the Swedish International Development Agency, supplemented by in-kind contributions from IFC and the World Bank.