Private Capital Mobilization? IFC’s Innovation Delivers and Hints at Deals to Come

The International Finance Corporation (IFC) closed its inaugural emerging markets securitization transaction in September 2025. It’s an innovation in private capital mobilization and the third innovative risk transfer by a multilateral development bank (MDB) in the last 12 months. Significant transactions by IDB Invest and CIF Capital Markets Mechanism precede it.

By James Mitchell, CMIA Board Member

As a true sale securitization with senior notes placed with institutional investors, it provides a strong signal that MDBs are initiating a transformation from balance-sheet-limited lenders to capital-mobilizing market intermediaries. While a mature emerging market credit asset class will take time to develop in practice, its emergence will indicate a positive, structural shift in climate and development finance.

There are tens of billions of dollars of emerging market credit sitting on the balance sheets of MDBs that are actively developing approaches to risk transfer today. While the ultimate scale of an emerging market credit asset class and the pace of its maturation would be topics unto their own, the incentives are in place for governments, investors, and insurers to take an interest in its development today.

The timing of IFC’s innovative securitization makes it all the more significant. It provides another model with which to stretch MDB balance sheets as fiscal space tightens and official development assistance wanes.

The deal

The deal itself is a $510 million collateralized loan obligation (CLO), which packages a portfolio of IFC loans to 57 obligors from 28 countries. CLOs are a segment of fixed income markets that offer investors varying levels of risk and return depending on the tranches, or securities, they choose. In this transaction, the portfolio is static and will amortize as the underlying loans do, starting with the senior tranche.

The capital stack includes three tranches. The US$320 million senior tranche was rated by Moody’s as Aaa and was placed at 130 basis points over the Secured Overnight Financing Rate (SOFR). This was successfully placed with private investors. The middle slice is a US$130 million mezzanine tranche. It was priced at 220 basis points over SOFR and was insured by a consortium. It was retained by IFC. A US$60 million residual equity layer sits beneath this. IFC retains most of this tranche.

The deal was listed on the London Stock Exchange and arranged by Goldman Sachs. The UK Government’s MOBILIST made an investment in the deal, but did not disclose the details.

A closer look

This was a true sale securitization, with assets being transferred into an SPV. Implementing a true sale securitization added complexity for IFC, but such efforts were likely made to lay the groundwork for IFC’s future warehousing plans. IDB Invest’s 2024 Scaling4Impact and African Development Bank’s (AfDB) 2018 Room to Run securitizations were synthetic.

IFC remains the lender of record and servicer for all loans, retains 25% own-account risk for each loan, and holds most of the residual equity layer. This combination provides strong up- and down-side incentives to IFC in its role as loan servicer.

IFC retained the mezzanine tranche, but the level of credit enhancement by insurers is undisclosed. This arrangement is similar to the Scaling4Impact and Room to Run transactions.

IFC placed senior notes with investors, which is very significant. It provides validation of IFC’s structure and ability to service the underlying loans. Furthermore, it suggests that when such emerging market exposures are appropriately diversified, rated, and transparent, global institutional capital is willing to invest.

Several trade publications have indicated that senior notes carried 36% credit enhancement. If this is indeed accurate, it is in line with the CLO market, where, according to JP Morgan, 37% of the capital stack tends to sit below the AAA-rated tranche. This is promising for IFC’s broader aims and deeply connected to the ongoing MDB reform efforts.

IFC did not disclose the level of capital relief this deal provided, but it indicated that freeing up its balance sheet to originate more loans was the objective. As World Bank President Ajay Banga put it, “this is step one (…) it also frees up our balance sheet so we can support more countries and more private-sector players.” In practice, IFC has balanced capital relief with loss-of-income, i.e., via the spread that it must pay to investors.

Broader implications

The significance of this transaction is that it provides a tangible example of and pathway for moving MDBs from an “originate-to-hold” model to an “originate-to-distribute” model, considered key to private capital mobilization. Such a shift has potential for mobilizing private capital at a greater scale by ushering in a virtuous cycle of MDBs originating emerging market loans, distributing the loans to global investors via securitization, and using freed balance sheet space to originate more loans.

To realize this vision, IFC indicates that the strategic goal of its Warehouse-Enabled Securitization Program (WESP) is to create a new asset class of global emerging markets securitizations. IFC intends to develop this asset class through regular issuances themselves and, ultimately, supporting issuances by other MDBs. As the WESP program develops, IFC also anticipates warehousing assets to increase the pool available for securitization and developing local currency and sector-specific offerings to target investor demand.

Looking ahead

This transaction follows years of calls for MDBs to optimize balance sheets and focus on private capital mobilization. The need for MDBs to evolve from balance-sheet-limited lenders to capital-mobilizing market intermediaries has been highlighted, for example, by the G20’s Capital Adequacy Framework (CAF) review, the Bridgetown Initiative, and the Paris Summit on a New Global Financing Pact. By executing a rated, market-placed transaction backed by emerging market credit, IFC has effectively operationalized some fundamental MDB reform themes.

While IFC declared that its repackaging of loans into a rated security has created a new asset class, the practical emergence of this asset class may take some time. The $510 million CLO transaction is modest in comparison with IFC’s $42 billion loan book and the $1.2 trillion CLO market.

Nonetheless, IFC’s transaction is the third innovative risk transfer by an MDB in the last twelve months. In addition to Scaling4Impact, discussed above, CIF Capital Markets Mechanism issued its inaugural $500 million bond in January 2025, with proceeds going to the Clean Technology Fund. It is of a similar flavor in that it frontloads future reflows, or, in other words, it allows CIF to borrow against future loan repayments so that it can deploy more loans sooner. It was oversubscribed six times.

As a new emerging market credit asset class emerges, it will indicate a structural shift in climate and development finance. Success may raise new considerations as the market scales and the role of MDBs shifts: how to uphold origination and servicing standards, mandates, and environmental and social safeguards.

This transaction comes at a time when fiscal space is generally limited for governments. Many of the largest official development assistance providers have announced cuts, which are also likely to impact multilateral fund replenishments in the future. Private capital mobilization is no longer a nice-to-have. This reality makes IFC’s emerging markets securitization transaction all the more significant.