World Bank lifts emerging-market loan bond push

The World Bank Group has raised $509 million through a second loan-backed bond deal, taking its emerging-market securitisation programme past $1 billion as it seeks to draw more private capital into businesses that can expand employment across developing economies.

The transaction, closed through the International Finance Corporation, packages 62 IFC-originated loans from different sectors into a collateralised loan obligation, or CLO. It follows a $510 million debut deal in September 2025 and shows the lender wants securitisation to become a regular development-finance tool, not a one-off market test.

The new issue is part of the Emerging Markets Securitization Program, a platform designed to convert parts of IFC’s loan book into rated securities that pension funds, asset managers, insurers and banks can buy. By selling exposure to loans already originated by IFC, the institution can recycle capital into fresh lending while giving investors access to private-sector credit in markets many still view as hard to enter directly.

The capital stack includes $320 million and $50 million senior tranches sold to private investors and rated Aaa and Aa1 by Moody’s, respectively. An $80 million mezzanine tranche is insured by a consortium of credit insurers, while a $59 million equity tranche is held jointly by IFC and the UK Foreign, Commonwealth & Development Office through MOBILIST, its public-markets investment programme. The senior notes are being listed on the London Stock Exchange.

PIMCO acted as anchor investor. Other participants include L&G, Shizuoka Bank, Sona Asset Management and additional institutional investors. AXA XL, AXIS Capital, Everest, HDI Global, Liberty Specialty Markets and MSIG USA form the credit-insurance consortium. Goldman Sachs arranged the deal, Clifford Chance advised IFC and Bank of New York Mellon is trustee and paying bank.

The World Bank Group is presenting the deal as part of an originate-to-distribute model, under which development loans are pooled, structured and distributed to market investors rather than held entirely on the balance sheet until maturity. The approach is intended to increase lending capacity when public budgets, donor finance and concessional resources are under strain.

“Capital that reaches the private sector in emerging markets is capital that creates jobs,” John Gandolfo, IFC vice-president and chief financial officer, said in announcing the transaction. He said the second deal showed that institutional money could be channelled into sectors that expand employment and opportunity.

The jobs argument has become central to the World Bank Group’s strategy. More than 1 billion young people in developing countries are expected to reach working age over the next 10 to 15 years, while current economic trajectories are unlikely to generate enough formal employment. Private-sector expansion, especially through smaller firms, infrastructure, manufacturing, agribusiness and services, is treated as essential to narrowing that gap.

The timing also reflects a tougher macroeconomic setting. Global growth is projected to slow in 2026, with emerging-market and developing economies facing weaker per-capita income growth, higher borrowing costs and elevated uncertainty from energy prices, trade disruption and geopolitical tensions. Those pressures have intensified the search for mechanisms that can move long-term institutional capital into productive investment without relying solely on sovereign borrowing.

For investors, the appeal lies in a familiar CLO structure, credit ratings on senior tranches and diversification across IFC-originated loans. For IFC, the benefit is the ability to transfer portions of risk, create cash capacity and demonstrate that development assets can be packaged in forms that meet mainstream capital-market standards. The addition of an Aa1 tranche broadens the risk-return menu.

The model is not without questions. Securitisation can be complex, and development-finance specialists warn that emerging-market debt structures need clear disclosure, strong servicing standards and careful alignment between investors, insurers and multilateral lenders. The programme’s credibility will depend on loan performance, transparency, repeat issuance and whether capital freed through the transactions is visibly redirected into new private-sector projects.