BRICS development bank to expand lending to private sector

The New Development Bank (NDB), set up by the BRICS group of major emerging economies, wants loans to the private sector to eventually take up a 30 percent share of its project portfolio, a senior executive at the bank said on Tuesday.

Zhu Xian, the NDB’s chief operating officer, told Reuters that the bank was targeting an overall 70-30 split between sovereign and non-sovereign loans in its project portfolio, and was seeing strong demand for private sector loans especially in Brazil, South Africa and Russia.

The Shanghai-based bank on Monday approved six new projects which brought its loan portfolio up to over $5.1 billion across 21 projects. Two of these were non-sovereign loans, which are issued to companies without a government guarantee.

“In India and China, there’s very strong demand for sovereign…But on the other hand, some other countries for different reasons they probably prefer more non-sovereign lending,” he said.

“Some countries they still have some sort of fiscal difficulties. Secondly, the debt sustainability is a concern. They don’t want to borrow too much in sovereign terms. So they prefer you do more market transactions.”

The bank’s first non-sovereign project was a $200 million loan to Brazil’s Petrobras for an environmental protection scheme and the second a $200 million loan to South Africa’s Transnet to reconstruct a port in Durban.

Zhu said that there was a gap in the market for them to fill as they were willing to make long-term loans with tenures of at least 10 years.

The NDB is seen as the first major achievement of the BRICS – Brazil, Russia, India, China and South Africa – since they joined forces in 2009 to press for a bigger say in the global financial order created by Western powers after World War Two.