Nonsovereign-backed Financing

Over time, AIIB will access the markets via a range of financing solutions, currencies, and maturities, to fund AIIB’s general financing operations. AIIB currently offers non-sovereign-backed financings (NSBF) to or for the benefit of a private enterprise or a sub-sovereign entity (such as a political or administrative sub-division of a Member or a public sector entity). NSBF includes any financing that is not backed by a guarantee or counter-guarantee and indemnity provided by the Member.

Flexible Financing Solutions

NSBF provides a range of financing solutions to support sustainable and inclusive infrastructure across Asia and beyond.

Loan

Senior, subordinated and syndicated loans tailored to client needs.

Bond

Local and international currency bonds to access diverse capital markets.

Equity

Equity investments to strengthen financial sustainability and catalyze private capital.

Guarantee

Credit enhancement solutions to mobilize capital and mitigate risk.

Local Currency Financing

AIIB can offer financings in a broad range of hard and local currencies, supported by its ability to source funding and structure transactions across global markets. Available currencies include hard currencies such as USD, EUR, RMB, and other Group of Ten currencies or those included in the Special Drawing Rights basket, as well as various local currencies such as THB, PHP, KZT, BRL, and INR. The range of currencies available for financing is expected to expand over time in line with the development of AIIB's financing pipeline and funding capabilities.

Various Currency Solutions Across Markets

AlIB provides a range of currency solutions to meet client needs-delivered directly in liquid markets or synthetically where direct delivery is not feasible.

Hard Currency Financing

Financing in widely traded hard currencies such as USD, EUR, RMB and others with direct delivery and settlement.

USD, EUR, RMB, other G10 currencies or those included in the SDR Basket.

Local Currency Financing (Deliverable)

Direct financing in local currency through onshore funding marketswhere available. Settlement in local currency.

THB, KZT, INR, BRL, PHP... (Non-exaustive)

Synthetic Local Currency Solutions (Non-deliverable)

Solutions that replicate local currency exposure synthetically when direct delivery is restricted or inefficient.

Utilizing instruments such as NDFs, CCS, and FX swaps.

Nonsovereign Partial Debt Guarantees

Guarantees represent contingent liabilities to make payments in the event that a borrower cannot meet its obligations to other financial creditors. A partial debt guarantee (PDG) represents a promise of full and timely debt service payment up to a predetermined guaranteed amount. The unfunded instrument can attract significant commercial financing covering the risk of nonpayment of loans and bonds.

The objective of AIIB's PDG is to enable private-sector clients to unlock access to financial resources by ensuring that the needs of both the borrower and creditors are met. In general, AIIB's PDG coverage does not extend beyond the minimum guaranteed amount necessary to facilitate a successful transaction.

Enhance the Credit Quality of the Project / Borrower

Enable Bankability Through Strong Risk Mitigation

Reduce the Cost of Financing for the Project / Borrower

Support the Long-term Financial Stability of the Project / Borrower

Tenor Extension

Reduce Probability of Default and/or Losses for Lender

Frequently Asked Questions

Why would clients prefer to borrow in local currencies?

Local currency financing has several benefits for clients: Reduction in earnings volatility due to FX movements; Decrease of debt burden in case of local currency depreciation; Reduced possibility of financial distress; and Possibility of borrowing local currency in longer tenor.

Why is local currency financing of interest to AIIB?

Local currency financing has several benefits for AIIB: Stronger credit of the loan portfolio; Access to loan markets that only operate in the local currency; and Expansion of the product range.

How does AIIB source local currencies for on-lending to clients?

AIIB uses the following approaches for its local currency funding: AIIB can access back-to-back funding through swaps to finance a specific project; and For selected hard currencies, AIIB can also rely on pool funding, whereby it maintains a pool of liquidity through swaps, bond issuances, and credit lines in a given local currency to finance multiple projects.

How does AIIB manage currency risks associated with local currency financings?

At the time of disbursement of a local currency loan, or the conversion of a USD disbursement or an outstanding USD loan balance into local currency, AIIB will execute a funding or hedging transaction to raise the local currency in the market. The profile of such funding/hedging operation will be structured to match the maturity, interest rate type, repayments, and other terms of AIIB's loan to the client so that AIIB is hedged from any currency exposure.

Are all the currencies available on a permanent basis?

The availability of local currency financing is subject to AIIB's access to the specific local currency market and the liquidity of said market. AIIB will determine the feasibility of accessing the market on a case-by-case basis, as well as the maturity and costs of the transaction.

Who can apply for local currency loans?

Local currency financing is available to private-sector clients and certain public-sector entities.

Does the borrower have flexibility in choosing the disbursement currency?

Disbursements can be made in the local currency or in USD (or other currencies), subject to the loan documentation. If it is not possible to source the local currency in a size, tenor, and rate required by the client at the time of the disbursement request, the client may request disbursement in USD (or another agreed currency) instead.

How are local currency loans priced?

The pricing components of local currency loans for nonsovereign-backed clients have the following components: AIIB's cost of funds in local currency; Client or project spread (negotiated separately for each loan); Front-end fee; and Commitment fee.

Can local currency loans be prepaid or cancelled?

Borrowers may cancel all or part of the undisbursed balance, subject to the terms and conditions of the applicable loan agreement. Prepayment or cancellation charges may apply where AIIB incurs costs as a result of a loan prepayment or cancellation by the borrower.

Does AIIB offer standalone hedging solutions, such as swaps, in connection with loans provided by third parties?

No, AIIB does not offer standalone hedging products to its clients at the present time.

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