InfraCo Asia Investments & Karandaaz establish first-of-its-kind infrastructure credit enhancement facility InfraZamin Pakistan

Karandaaz InfraZamini FCDO

InfraZamin Pakistan is an innovative, for-profit credit enhancement facility funded with equity capital from InfraCo Asia Investments and Karandaaz Pakistan, provided by the United Kingdom’s Foreign, Commonwealth and Development Office (FCDO). InfraCo Asia, via its subsidiary Indus Guarantees Pte Ltd, and Karandaaz held a signing ceremony for the shareholders agreement, setting into motion the operationalisation of the facility.

As an initiative of the Private Infrastructure Development Group (PIDG) InfraZamin aims to fill current gaps in the local credit markets, in order to catalyse greater private sector participation in long-term, local currency financing of infrastructure in Pakistan. InfraZamin will do so by providing guarantees to enhance the credit quality of local currency debt instruments to finance creditworthy infrastructure projects in Pakistan.

The first-of-its-kind in Pakistan, InfraZamin was conceived and designed after extensive market study and engagement with the Securities & Exchange Commission of Pakistan and follows on from GuarantCo’s experience with the successful creation and operationalisation of a similar facility in Nigeria, InfraCredit Nigeria. InfraZamin leverages the prior experience of InfraCo Asia and GuarantCo in supporting infrastructure projects in Pakistan, as well as Karandaaz’s local market knowledge and track record of investments focused on supporting financial inclusion.

Incorporated as a private limited company, InfraZamin will operate on a commercial basis guided by international best practices and local governance standards. Its Board of Directors will include representatives of InfraCo Asia (through Indus Guarantees), Karandaaz, and GuarantCo.

On the potential of InfraZamin Pakistan, Allard Nooy, CEO of InfraCo Asia and prospective Chair of the InfraZamin Board said “As a specialised credit enhancement facility focused on infrastructure in Pakistan, we see significant potential for InfraZamin to ‘crowd-in’ underused pockets of liquidity in Pakistan’s financial markets. PIDG Companies GuarantCo and InfraCo Asia bring with them deep expertise and significant infrastructure and credit enhancement capabilities that will help unlock these opportunities for InfraZamin.’’

Speaking about InfraZamin Pakistan, Ali Sarfraz, CEO Karandaaz said, “Pakistan spends only 2.1% of its GDP on infrastructure as opposed to 8%-10%, leading to widening infrastructure deficit. InfraZamin Pakistan will not only unlock capital thus boosting much needed investments in infrastructure but also add to the sophistication of Pakistan’s financial architecture. The additional investments will support economic growth, create jobs, and ultimately reduce poverty besides invigorating Pakistan’s capital markets through cutting edge financial instruments. We are delighted to partner with InfraCo Asia and GuarantCo in setting up this innovative structure and look forward to its success.”

Lasitha Perera, CEO of GuarantCo said: “GuarantCo is proud to have developed the ground-breaking InfraZamin initiative and to be partnering with two highly experienced investors InfraCo Asia and Karandaaz in its operationalisation. The Islamic financing market has a growing appetite for safe asset

classes which can act as an alternative to investing in sovereign securities. InfraZamin will be a game-changer for the country in the balanced development of Pakistan’s capital markets and the wider economy.”

Speaking about the UK’s assistance for InfraZamin Pakistan, Annabel Gerry, Director of Development at FCDO UK in Pakistan said, “I am very proud that UK is setting up the first market-based credit enhancement facility for infrastructure finance in Pakistan. It is an innovation in the market and will help unlock much needed infrastructure financing opportunities for a wide range of projects in the country. InfraZamin will create jobs, alleviate poverty and boost economic growth in the long run.”

Philippe Valahu, CEO of the Private Infrastructure Development Group said: “PIDG is delighted to see this initiative established in Pakistan. InfraZamin presents a significant opportunity for Pakistan to finance the critical infrastructure needed to fuel economic growth, especially in view of the COVID-19 pandemic and its impacts.”

InfraZamin is expected to start operations in early 2021 based on a fully committed capital structure, with core equity provided by Indus Guarantees as 60% shareholder and Karandaaz as 40% shareholder, and GuarantCo providing a contingent capital facility. PIDG Technical Assistance has also provided a technical assistance grant for pre-operationalisation expenses in relation to InfraZamin.