The Asian Infrastructure Investment Bank has set itself an ambitious target of growing by 20% per year and scaling up its lending to the private sector to as much as 45% within the next five years, its vice-president and chief investment officer told GlobalMarkets in an exclusive interview.
The Beijing-based multilateral development bank, which has grown from 57 founding members three years ago to 100 members today, has approved 50 projects worth $9.64bn in 18 countries since its inception. But it wants to do a lot more.
“We are planning to scale up our operation and plan to grow at least 20% per year,” DJ Pandian said. “It is a little ambitious, but the demand is quite high, and the infrastructure gap is increasing day by day. And most of the demand for infrastructure is in Asian countries. And unless we step up, we may not be able to contribute significantly.”
The bank is not limiting itself to just guaranteeing and funding its member countries. It is also hoping to boost lending to the private sector from around 30% to 40%-45% in the next five years, and have an equal split between sovereign and non-sovereign lending in the next 10 years, said Pandian.
When the AIIB was set up in January 2016, it led to some fear that the Asia-led group would pose a serious threat to the functioning of other multilaterals such as the World Bank. But Pandian dismissed that as a “perception without having much knowledge”, pointing out that the bank has a robust governance system in place, with even the biggest shareholder having just one seat on the board.
Willingness to adapt
The AIIB, whose objective is to invest in sustainable infrastructure, raised $2.5bn from a global bond in May, placing itself among the very top supranational names in the capital markets.
Although the dollar is its currency of operation, Pandian said demand from its client countries had led it to provide local currency loans in five currencies — the Indonesian rupiah, Indian rupee, Thai baht, China’s renminbi and the Russian rouble.
“We can adopt either a swap or a hedging mechanism, and if the demand goes up, then perhaps part of our borrowing may be in the local currency, which we can then lend,” he added.
What it will not do is take capital increase for granted — the way its Western peers have done. Jin Liqun, president of AIIB, said he did not want the bank to be dependent on concessional funding, but instead be able to achieve reasonable profit.
“We should be willing to change and willing to adapt,” he added. “We have worked out our approach purely based on experience of the MDBs over the last several decades or half a century and many private companies.”