The Asian Development Bank is ramping up private sector lending as it aims to scale up its operations by 50% over the next decade and leverage its capital base to improve its development impact across Asia-Pacific.
"ADB is looking at growing its private sector portfolio significantly by about four times to US$13bn annually by 2030. We also want to be more innovative in terms of the type of products that we are providing," Asif Cheema, ADB's director of private sector financial institutions, told IFR.
"We want to grow in new sub-sectors like insurance where the private sector hasn't done a lot of work in the past but is very critical to build resilience in markets. Local currency capital markets is also a really core priority for us."
A combined country-specific capital markets development programme sees the bank's private sector operations department working with issuers to build a pipeline of deals and provide financing and the sovereign team which provides policy-based loans and market infrastructure, while the ADB's treasury team makes equity investments to set up institutions and issues local currency bonds to support operations.
In February, the ADB launched a capital utilisation plan that envisions a 50% increase in annual financing commitments, rising from US$24bn in 2024 to more than US$36bn by 2034, including a significant expansion of non-sovereign operations.
The CUP builds on capital management reforms that were announced in 2023 to unlock US$100bn in new funding capacity and on last year's corporate strategy update. The ADB has also strengthened concessional lending and bolstered the Asian Development Fund, which provides grants to its poorest and most vulnerable member countries.
To meet its 2030 corporate targets, ADB intends to leverage its net income to help developing member countries unlock sustainable finance and develop bankable projects, and aims to mobilise significant additional capacity for every dollar of ADB investment.
“In addition to ADB's financing, we also have a very clear target of private sector mobilisation so the growth in volumes will encompass both our own balance sheet and the direct mobilisation from our partners,” Cheema said.
In 2024, non-sovereign co-financing jumped 26% to US$8.7bn, which boosted the 2024 co-financing ratio to US$2.62 for every dollar deployed.
ADB's lending commitments are expected to see a sharp increase in the next two to three years as a result of the CUP and non-sovereign operations are expected to rise to 27% of commitments from 20%.
A big push is underway to attract commercial banks with blended finance facilities that derisk some of ADB's products and investments. The bank can use its large funding pool from donors to design blended financing on a project-by-project basis, providing guarantees and performance-based incentives and technical assistance.
Net income is also expected to grow steadily in the next decade and the ADB will invest part of this income to help member countries to develop projects and mobilise sustainable finance through capital markets with labelled issuance.
"We are helping financial institutions to build green finance frameworks. For example, our sovereign teams are working to help develop some of the central banks' green taxonomies and we are exploring instruments such as debt-for-nature swaps," Cheema said.
"On the private sector side, whether it’s social or sustainability-linked bonds or any other thematic bonds, we've been very actively supporting financial institutions both by providing financing but also through capacity building, in terms of putting together the right frameworks. Overall, sustainability remains a very important theme."
ADB provided a US$12.5m anchor investment in a three-year green bond issued by Mongolian private sector bank Khan Bank in October alongside the European Bank for Reconstruction and Development, which invested the same amount.
It also made a US$25m investment in the first certified climate bond for a mid-tier non-banking financial company in India in September in a four-year, rupee-denominated senior secured debt facility for fintech Vivriti Capital for renewable energy and EV infrastructure.
As many multilateral development banks are finding it difficult to raise funding and are coming under increasing political pressure, ADB's expansionary approach sets it apart.
"The ADB is in a very unique position where we have significant headroom to grow right now, based on our existing capital base," Cheema said.