With a lucrative career spanning over 20 years, Maheen Rahman has made it to top positions in investment banking, research, and asset management. Currently, she serves as the Chief Executive Officer of InfraZamin, a commercial credit enhancement facility that helps de-risk infrastructure investments by crowding in funding from local markets for sustainable and socially responsible infrastructure development in sectors that have traditionally been neglected by lending institutions and capital markets.

“We are a unique infrastructure development company in the sense that we are registered and licensed as a local non-banking finance company by the SECP [Securities and Exchange Commission of Pakistan] and are recognised by the SBP [State Bank of Pakistan] as an acceptable credit enhancement facility.

“However, our lineage is global. So, our primary sponsor is the Private Infrastructure Development Group [PIDG], a finance institution that mobilises private investment in infrastructure in Africa, South Asia, and Southeast Asia to promote economic development and combat poverty. PIDG holds a 60 per cent stake in InfraZamin, and the rest is owned by Karandaaz Pakistan.

“Our mandate is to encourage local financial market players — banks, capital market investors, etc — to invest in infrastructure development projects. As a country, we are always seeking foreign direct investment or looking towards China, Saudi Arabia and so on. We never think of meeting our [infrastructure financing] requirements from local sources,” Ms Rahman lamented.

‘We will need to create an ecosystem where banks and capital markets are willing to finance riskier projects’

“We issue guarantees for private sector-financed infrastructure projects considered risky by banks and other lenders. When banks refuse to finance you because they don’t know you and consider the scheme risky, you come to us. Our goal is to support a couple of projects in a particular sector to demonstrate that they can work and the banks can take the risk and eventually open doors to enable them to run on their own.”

The key areas of interest for InfraZamin are renewable energy, water and sanitation, climate change, digital communication infrastructure, health, education, agriculture, and transport.

“We drastically reduce the credit risk of a project by underwriting the borrower’s debt repayment obligations. This provides acceptable collateral to banks and other institutional investors, bringing down interest rates for the borrowers,” Ms Rahman elaborated, emphasising how infrastructure spending can increase manifold by using local currency financing for infrastructure development.

Furthermore, InfraZamin also has access to grant funding for technical assistance and capacity building so the institute effectively works to strengthen a project on the development side as well, “We have provided grants worth Rs25-30m and plan to spend additional Rs12m for social impact development,” she shares.

Since its foundation, InfraZamin has developed and executed a number of transactions; for instance, it helped the Kashaf Foundation issue Asia’s first gender bond of Rs2.5bn by taking a full credit risk guarantee covering 100pc of the principal amount under social infrastructure. “The bond proceeds will support the Foundation in providing micro-loans to women in the rural and peri-urban cities of Pakistan for rebuilding flood-affected houses, upgradation of school buildings, and renovation of the physical infrastructure of female-led businesses.

Before that, it completed its first transaction with Multinet, a Karachi-based fibre optic connectivity provider. The Multinet loan facility of Rs2.1bn was provided by Habib Bank Limited to support the company in its plans to extend fibre optic access into Tier-2 and Tier-3 cities and grow its customer base to cover even more SMEs. “Currently, we are evaluating proposals, including a Sindh government water desalination scheme for Karachi in the public-private partnership (PPP) mode, worth $100m,” she concluded.

According to Ms Rahman, infrastructure development is essential for economic growth due to its linkage with different sectors of the economy. Infrastructure investment is crucial to increase competitiveness, improve productivity, facilitate economic development, and enhance the social well-being of the people.

However, Pakistan’s annual infrastructure spending of 2pc of its GDP is one of the lowest in the region, and well below the national GPD level requirement of 10pc. “So the backlog is piling. We need trillions of rupees to close this gap. There’s only so much we can get from the rest of the world. The rest will have to be financed from our own sources. We will need to create an ecosystem where banks and capital markets are willing to finance these projects.

“We must be able to use our local banks and local capital markets and develop our bond markets so that this financing can happen in the home currency as opposed to a foreign currency to pull off social and economic development objectives. Addressing market failures in financing viable infrastructure projects via credit enhancement of local currency debt instruments is what we are aiming to achieve at InfraZamin,” she said.

All big projects are carried out either by the federal or provincial governments; the private sector is brought in on a very selective basis in the PPP mode. “You can’t build infrastructure with just tax money. You need the banks to be able to finance these schemes, and you need the private sector to be involved in them. Without that, your baseline infrastructure development would not have happened,” Ms Rahman insisted.

Published in Dawn, The Business and Finance Weekly, October 14th, 2024