- Who we are
- Private Sector Facility
Private Sector Facility
The PSF was established in 1998 in response to growing demand among beneficiary countries for investment in private enterprise, which is increasingly seen as the engine of economic and social growth. The Facility is a market-oriented financing window that responds to the demand for financing in developing countries in support of their private sector development strategies.
The PSF seeks to promote economic development by encouraging the growth of productive private enterprise in developing countries and supporting the development of local capital markets. Successful interventions stimulate economic growth, generating jobs and income and thereby reduce poverty.
The OPEC Fund finances the local private sector and helps to facilitate foreign direct investment. State owned enterprises may also be eligible for financing, as long as they are commercially managed as autonomous enterprises and act as a channel of support for local private enterprises. The OPEC Fund also supports public-private partnership projects that are operated on private enterprise principles.
In principle, the OPEC Fund can support the private sector in all low- and middle-income countries. However, the government of the country concerned must usually conclude an Agreement for the Encouragement and Protection of Investment with the OPEC Fund as a pre-condition.
All economic sectors are eligible for consideration. However, the Facility accords higher priority to micro-, small- and medium-sized enterprises (MSMEs). The Facility also finances larger industrial and agro-industrial projects that provide meaningful economic benefits.
Typically, an eligible project is an expansion, rehabilitation, diversification, capitalization or start-up project that is commercially, technically, ethically, legally and environmentally sound and that is deemed to contribute meaningful economic and social benefits to the host country.
Funding provided through the PSF may be given directly to a private enterprise for development projects sufficiently large for OPEC Fund financing to be viable. To reach MSMEs, the OPEC Fund provides lines of credit to financial institutions for on-lending.
Current products include: loans and credit lines, equity, quasi-equity or “mezzanine” instruments, Islamic financing, and credit guarantees. The PSF usually offers funding in US dollars or euros. Exceptionally, when market conditions allow for appropriate hedging, local currency funding may be structured.
Loan pricing comprises interest and fees. A choice between floating and fixed interest rate is offered. Maturity, including grace period for principal repayment, takes account of the nature of the project and projected cash-flow. A front-end fee is generally payable following signature. A commitment fee is payable on the undisbursed portion of the loan. Pricing and other terms and conditions of quasi-equity products are in line with normal industry practice.
Loans are secured in accordance with normal industry practice, taking into consideration the nature of the project and the local circumstances. Loans to financial institutions are often extended against the strength of the balance sheet and are not collateralized.