WASHINGTON, USA – Singapore and New Zealand announced on Wednesday they will contribute to two innovative financial instruments that can further expand the World Bank’s lending capacity to address global challenges.
Singapore pledged $20 million to the bank’s hybrid capital instrument and announced plans to be the first shareholder to redirect the interest payments from this instrument to the Bank’s net income. When leveraged, Singapore’s contribution will provide up to $200 million in additional lending capacity over ten years.
Singapore joins eleven other countries that have collectively pledged around $1.2 billion to hybrid capital. Hybrid capital gives shareholders and partners an opportunity to invest in financial instruments with special leveraging potential. This total amount, when leveraged, can expand the bank’s lending capacity by around $9 billion over ten years. Germany, Latvia, the Netherlands, Denmark, Sweden, Iceland, Canada, the United Kingdom, Norway, Italy, and Australia are also contributors to hybrid capital.
New Zealand is the first shareholder to subscribe to an innovative financial instrument called Enhanced Callable Capital (ECC) — subscribing $50 million. ECC functions like equity and can be activated to safeguard the International Bank for Reconstruction and Development’s credit rating in the rare event of imminent threat. Each $1 of ECC unlocks $6 in lending capacity over ten years, amplifying development impact. The World Bank Group is the first multilateral development bank to use its callable capital in this way.
“Singapore and New Zealand are leading the way by contributing to these innovative financial tools. With strong leveraging potential, these instruments allow us to invest even more in projects that create jobs and help people to reach their full potential,” World Bank Group president Ajay Banga said.
Singapore’s minister in the prime minister’s office and second minister for finance and national development Indranee Rajah, said:
“Singapore strongly welcomes the innovative financial instruments introduced by the World Bank Group which will strengthen the bank’s lending capacity in furtherance of its mission to end extreme poverty and boost shared prosperity. As part of our long-standing partnership with the World Bank Group, Singapore will contribute $20m to its Hybrid Capital instrument. This will enable the Bank to leverage eight to ten times the amount to address global challenges such as energy access, water security and sustainable growth.”
New Zealand’s minister of finance, Nicola Willis, said:
“I am pleased to announce that New Zealand will convert a portion of our existing callable capital at the IBRD into enhanced callable capital. I know the World Bank has real expertise and strong relations in the Pacific, and I look forward to its Pacific work continuing. I’m also pleased that the IBRD’s financial innovations mean that we can efficiently support increasing its lending capacity.”
Overall, the World Bank has expanded its lending capacity by around $100 billion over the next ten years, enabling investments that will transform hundreds of millions of lives. It has done this through the introduction of new financial instruments and balance sheet optimisation measures, including lowering the minimum equity-to-loans ratio which could add $70 billion in new lending over a decade.
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