IFC exec on providing financing for developing countries: ‘We are casting our net very wide’

IFC Managing Director and Executive Vice President Makhtar Diop joins Yahoo Finance Live to discuss private sector investment, banking and financial infrastructure in developing countries, and the outlook for globalism.

Video Transcript

JULIE HYMAN: And we go back to Davos now and the World Economic Forum holding its meeting there for this year. Springtime, a little bit different.

And IMF officials saying this morning more forecast downgrades are possible to growth but still does not anticipate a global recession. Those comments coming as developing countries seek to ramp up investments and financial infrastructure.

For more, our editor in chief Andrew Serwer is back with us with a guest. Andy.

ANDY SERWER: Thanks, Julie. I'm here with Makhtar Diop, who is the managing director of the International Finance Corporation, which is the part of the World Bank that encourages private-sector investment in developing countries. Makhtar, nice to see you.

MAKHTAR DIOP: Nice to see you, Andy. Thank you so much.

ANDY SERWER: So tell us a little bit about what you do, the work you do, and what the trends are that you're seeing in developing countries given the economic headwinds that we're seeing right now.

MAKHTAR DIOP: IFC is an institution which is lending $32 billion a year, roughly 1/3 of it going to climate-change activities, which is a premier institution for emerging economies and developing countries. What we're trying to do-- what we're doing is we are bringing private sector to look at opportunities in developing countries. We derisk that investment. It means that we bring them guarantee. We bring them additional resources to make these investments much more attractive.

And at the end of the day, we are an institution which is interested in development. So all this investment from the private sector is to improve people's life and to make sure that a country are going in a sustainable but also inclusive way.

ANDY SERWER: Now when you're talking about the private sector, are you talking about US banks, hedge funds, private equity, or international banks? What specifically do you mean by private investment?

MAKHTAR DIOP: All of this. We are issuing bonds We are helping companies in-- for instance, I just came back from Thailand where we are giving a-- financing a blue bond for Indorama, which is a company, an Indian company. But what we are doing is trying to really help them blue the production and ensure that the marine debris that we are seeing are disappearing from some of the water.

But we are doing other things. We are also financing women. We know that women have less access to financing in developing countries than men. So all the companies which are led by women receive our financing.

We are financing also the digital economy. We ensure that the digital gap that exists between developing countries and less developed country is narrowing. For instance, last year we lend close to $1 billion in the digital space, mainly in Africa. So this is the kind of thing that we are doing, and we are developing a methodology which ensures that we can measure the impact that we are having on people's life.

ANDY SERWER: And these investments provide a real ROI for these private-sector investors?

MAKHTAR DIOP: Absolutely. Our value proposition is to show that you can invest in poor country, and country will look fragile. With the right instrument and the right support, you can make a lot of money.

And we-- for all investors, we are following a process which is very similar to the process followed by an investment bank. We look at ROR. We look at the return of investment. But we ensure that also we do it in countries where naturally a bank, a traditional bank would have looked at and in sector where it's more difficult and riskier-- adaptation, energy transition. All these kind of activities are essential for us.

ANDY SERWER: Are there any ways for retail investors to participate in these types of investments?

MAKHTAR DIOP: Absolutely. We are throwing our net-- casting our net very wide. We are bringing companies. We are bringing private investors. We are institutional investors. We are bringing banks. We are bringing all people.

And what the thing that is a characteristic of IFC is for each dollar that we put, we are mobilizing a dollar, which means that we are attracting $1 of the capital market and investors.

ANDY SERWER: You have this great global view, Makhtar, of the global economy. What are you seeing right now? Are you seeing any signs of recession or slowdown? Are there sort of stronger areas, weaker areas? What's your outlook?

MAKHTAR DIOP: Yeah, we have seen growth moving from 6.1% to 3.6%, and we have seen a situation which is very uncertain. The level of uncertainty that we are seeing today is quite large due to shocks, which are large, big shocks but also multiple shocks. There is the pandemic. There is a food crisis. You have oil crises. You have the geopolitics of the war. All these at the same time is something that we haven't seen recently in the world.

So what the private sector needs is really to derisk, to make sure that we're bringing them solutions to guarantee the investment to help them with their losses, and this is the kind of things that we are doing to be able to continue.

But the good news is that while all this is happening, the appetite of investors to those countries, even if it are slowing down, is rebounding now. It's rebounding because we are bringing some new instruments which gives them the comfort that they can have, the ROR that they want in spite of the risks that we are seeing.

ANDY SERWER: And final question, Makhtar. We've seen a trend towards nationalism and antiglobalism, and I wonder if you have any perspective on that. Or in other words, is globalism dead, or is it taking a pause, or is it ready to come back?

MAKHTAR DIOP: We are facing challenging times, but our institution believe and our president have seen it recently in an op-ed that there is no solution out of global trade. Trade has brought so much good-- made so much-- helped so many people moving out of poverty that we need to continue trading.

That's why, for us, we have an opportunity now with the food crisis to push countries to trade more, to remove all the barriers that we are starting seeing coming from countries which were exporters, but also to increase the production of food in countries which are not traditionally food exporters and to help them with their logistics so that they can be part of the trade-- the world trade.

So this is something that we believe is important and that will be the solution for us to move from this very uncertain time.

ANDY SERWER: Makhtar Diop, economist, managing director of the IFC of the World Bank, thanks so much for joining us.

MAKHTAR DIOP: Thank you so very much. Thank you.

ANDY SERWER: Back to you guys in New York.

JARED BLIKRE: All right. Looking great down there, Andy.