A new 1.6 billion rand ($98 million) financing arrangement has been introduced by the World Bank Group and Citigroup to widen access to local currency funding for businesses in South Africa, aiming to lower exposure to foreign exchange fluctuations.
Structured through the International Finance Corporation (IFC), the World Bank’s private-sector investment arm, the facility will enable more lending in South African rand instead of foreign currencies such as the US dollar.
Such financing is especially important in developing economies, where firms often generate income in domestic currency but are required to borrow in dollars, leaving them vulnerable to exchange rate volatility.
Part of the funding has already supported IFC participation in a water-focused outcome-based bond issued by FirstRand Bank, which is the first instrument of its kind issued by a commercial bank globally.
World Bank Group Vice President and Treasurer Jorge Familiar highlighted that local currency financing is becoming increasingly vital amid ongoing global economic uncertainty.
He stated that “local currency financing and capital markets development in emerging and developing markets are critical priorities for the World Bank Group.” He further explained that the initiative demonstrates how partnerships with the private sector can support innovative financial tools such as outcome bonds and local currency solutions that promote long-term investment and job creation.
Familiar also noted that borrowing in foreign currencies can expose companies to significant risks when their earnings are in local money, making domestic currency funding essential for financial stability.
The initiative builds on a similar programme introduced in Kenya in 2024, which both institutions regard as a successful pilot project.
The South African arrangement is now being considered a model that could be replicated in other emerging and developing economies.
Stephanie von Friedeburg, Citi’s Global Head of Public Sector Banking, said the structure strengthens the tools available to development finance institutions working to deepen local capital markets.
The initiative comes at a time when currency instability continues to affect several African economies, including Nigeria and South Africa, where exchange rate volatility has increased borrowing costs and complicated business planning.
By increasing lending in local currencies, organisations such as the IFC aim to reduce financial risks while encouraging private sector expansion.
Over the past ten years, the IFC has provided more than $33 billion in local currency financing across 71 currencies, reflecting a broader shift among development finance institutions toward reducing reliance on hard currency debt.
The World Bank added that the new facility forms part of a broader strategy to deepen domestic financial markets, expand access to long-term capital, and support employment growth in developing economies.