Fact Sheet Proparco (France) and private finance for development What is Proparco? Proparco key figures (€ million) Proparco (Company of Promotion and 2012 2011 2010 2009 2008 Participation for the Economic Cooperation) was created in 1977 as a financial Capital base (Total Assets) 420 420 420 420 120 development institution dedicated to private sector financing. Proparco is partly owned Committed investment volumes 740 865 944 893 467 by the French development agency (AFD) Net income 20.8 23.6 18.4 21.6 39.3 and private actors from countries in the 1 global north and south. Its main governing Net interest income 39.2 21.6 18.4 23.5 0.8 body brings together French members of parliament, government officials (foreign Taxes (direct and indirect) paid 17.8 12.6 13.3 8.8 7.8 affairs, development), a representative of the French credit export agency (COFACE) and independent experts with specific relevant qualifications (from civil society, companies Sector focus Proparco in 2012 Use of different instruments etc.). (€ million) 2008 A member of the Association of European €467m Development Finance Institutions (EDFI) 139 since 1992, Proparco is supposed to support 2009 and promote private investment in emerging €893m and developing countries in order to achieve 869 the Millennium Development Goals (MDGs). 2010 Its operations are presented as “financially 1552 €944m and economically viable, socially equitable and environmentally sustainable”. One of 2011 €865m the pillars of Proparco’s mission is to guide companies in order to improve their financial 561 2012 management, marketing, environmental €740m and social risks control, and governance. To manage operations in various regions and 0 200 400 600 800 1000 pool knowledge of local economic reality, Investment funds Financial sector Equityinvestments Proparco loans & guarantees Proparco has a network of 12 regional desks Companies Infrastructures AFD Sub participations Third-party loans Other in four continents. Proparco does not use any public funds but, as explained in its activity reports, “backing capacities of emerging and developing Sectors from the AFD means Proparco benefits from countries. Proparco uses a wide range of instruments as long-term loans in local or Proparco’s portfolio has been mainly the creditor worthiness of a shareholder with concentrated in the financial sector for a an AA+ rating”. Although Proparco does foreign currency (senior, convertible), own funds, stockholders’ equity, current account, couple of years, while infrastructure finance not benefit from any direct government and investments in companies make up a endowment, this privileged access to convertible bonds, mezzanine, guarantees and technical support in order to finance considerable share of Proparco’s activities as financial markets can be considered as an well. Loans target infrastructure investments implicit subsidy. the productive sector (with a focus on the agro-industrial sector, manufacturing considerably more often than equity, while this is more balanced in the case of companies. Proparco’s activities are not reported as industries, building materials), infrastructure Indeed, companies can be funded through the overseas development assistance (ODA) at (developing and improving the effectiveness direct intervention of Proparco or indirectly by the moment but the ongoing negotiations at of infrastructure in transport, energy, equity fund participation and intermediaries the Organisation for Economic Co-operation communication, water sanitation) and that reinvest later. Loans also seem to and Development (OECD) level to widen financial markets (to improve the capacities outweigh equity in targeting the financial what could be counted as ODA, which are of local markets, local banks and financial sector, although this point must be qualified strongly supported by France, could change institutions). In emerging countries, Proparco and tempered insofar as equity funds are the situation. is especially focused on sustainable energy (biomass, biogas, hydropower, geothermal often concentrated in the financial sector. Objectives and practices energy, wind power system, solar energy). To develop its activity, Proparco follows Instruments Proparco concentrates its finances on the the sectoral policies framework of the AFD A large proportion of Proparco’s finance productive sector, infrastructure and financial group. comes in the form of loans (87% of commitments in 2012), which are sometimes development finance institution (DFI), which Proparco also takes into account to what combined with other instruments such as claims its aim is to realise 50% of its new extent a certain investment fits into its guarantees. Proparco also signs on to AFD commitments in Africa. strategic priorities. According to the following sub participations, equity investments, and criteria: i) achievement of the objectives of to a small degree, to third-party loans. The DFIs have often been criticised in the past the shareholders of Proparco; ii) mobilisation use of AFD sub participations decreased about the fact that private capital flows of the other funds for the project; iii) function significantly in 2012. As a result, the current mainly concentrate on higher income of ‘umbrella’ (ex: protective role in times use of loans and guarantees has become countries and emerging markets. As such, of crisis, against corruption, etc.) or ‘fame’ even more dominant. it seems important to stress that Proparco’s looked for by the partner; iv) subsidiarity current commitments in Africa clearly focus principle in the project. Finally, the efficiency Instruments by sector on higher income countries such as South of the project is calculated according to the Africa or Nigeria. cost of the risk and the conditions of the Between 2008 and 2012, the majority of loan. The global project note is presented to loans were concentrated on the financial How does Proparco determine the committee. Officially, there is no required sector. However, since 2010 this trend has development impacts minimum note for the acceptance of a changed slightly. Although 42% of the loans project. were still deployed for the financial sector To measure the effectiveness and the impacts in 2012, an increased share also targeted in terms of development of its projects, The client is responsible for realising the infrastructure (32%) and companies (26%). Proparco is using a tool inspired by the evaluation at the local level. Proparco GPR (Geschäftspolitisches Projectrating©) examines the conclusions and the Loans by sector developed by the German DFI, Deutsche recommendations of the preliminary studies and the follow-up of the findings, proceeds Since 2008, equity commitments increasingly Investitions- und Entwicklungsgesellschaft (DEG). Although it is difficult to obtain to the environmental and social classification targeted the financial sector. In 2012, a of the projects to determine the type of massive 47% of equity commitments information about the French version of the GPR and its practical application by Proparco, initiative to undertake, and oversees the concentrated on the financial sector, while evaluation mission with the client. During the the share of equity investments in investment we know that this tool allows the French DFI to evaluate the development impacts and evaluation, the client can exchange views funds has dropped dramatically throughout with the interested parties affected by the the years, accounting for merely 7% in 2012. also the commercial aspects of the projects. Indeed, this tool estimates, according to a project (local authorities, administrations, Furthermore, infrastructure finance also make communities, local associations). up a considerable share of Proparco’s equity multidimensional approach, the economic commitments in 2012 (26% in 2012 compared viability of the project, its development The most developed approach is one that to 6% in 2011). impacts, the additional role of Proparco concerns the operations in direct financing, compared with that of commercial banks, because it includes, in particular, a risk and the profitability of the operation. Regions assessment ex ante. This is in contrast to It should be mentioned that, in the case of the operations in financial intermediation It seems clear that Proparco is increasingly (the evaluations ex ante are systematically getting involved in the Latin America Proparco, the tool just takes into account positive effects of the projects from an ex realised for all the projects in direct financing and Caribbean region (the share of these within six to 12 months after their realisation). geographic areas for by the global portfolio ante point of view. In more concrete terms, this implies that the evaluation process In the case of the direct intervention, increased from 5.5% to 15% between Proparco is supposed to strictly apply its 2008 and 2012, with a peak of 18% in 2011. of development projects just intends to measure the positive anticipated and framework; in the operation with a financial Proparco’s commitments in the Middle East intermediary, the approach is more indicative: and Mediterranean appear to be running expected impacts, setting aside negative impacts and, more generally, real ex post Proparco is supposed to support the client in out of steam, while sub-Saharan Africa improving its practices. still remains a special target for the French impacts. In addition, Proparco also uses others AFD internal tools. Loans by sector Equity by sector Regional focus (loans and participations)