How Proparco invests

Investments driven by their contribution to development in southern countries

For Proparco, a “good project” is a profitable project, in line with its mandate and strategic orientations, led by a sound client, which will have impacts – particularly social and environmental impacts – on local development.
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Proparco’s objective is in line with AFD’s strategic orientations and the priorities of the French cooperation policy: to promote the emergence of a dynamic, innovative and responsible private sector in developing and emerging countries, which contributes to building sustainable economic growth, job creation, the provision of essential goods and services and, more generally, to poverty reduction and the fight against climate change.

Investment conditions and principles

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Targets: Proparco supports the development of companies and financial institutions that are active in key development sectors (infrastructure, agriculture, industry, finance, social services…) – both local actors and French companies established in the South or seeking to develop subsidiaries there. Like its European counterparts, Proparco excludes certain production sectors and activities (Proparco’s exclusion list).

Additionality: Proparco’s operations are complementary to the product ranges of local and international commercial banks and avoid any disturbance on the competitive financial market. Its operations focus on sectors where its assistance is most needed and where it has the highest added value, particularly non-financial assistance (advice and support on the E&S and governance aspects, role in project structuring…).

Knock-on effect: Proparco’s financing aims to demonstrate the economic and financial viability of private sector actors in the South in activities and/or regions that are a priori deemed unattractive by investors. In this sense, Proparco’s operations have a significant knock-on effect by attracting and mobilizing other public and private financing for its clients’ projects.

Reliability of client: All financing decisions are based on an in-depth analysis of the various risk factors (financial, legal and technical) related to its client and its project: reliability of accounts, quality of in-house governance, etc. Proparco also assesses the capacity of the companies it finances to withstand and recover from potential shocks (resilience), which is essential to ensuring that its investments are relevant and viable.

Project profitability: The economic viability of companies and projects is an important selectivity criterion. As a lending institution, the return on investment is essential to ensuring the sustainability of Proparco, which does not benefit from public resources, as well as the sustainability of the companies and financial institutions it supports.

Impacts on development: The contribution that the companies it finances make to local development is central to Proparco’s approach to investment. Depending on the type of client, it assesses, for example, the impacts that the activity/project has on maintaining and creating employment, gender issues, environmental practices (reduction of greenhouse gases, use of renewable energies…), social practices (employment conditions, health and safety of workers…) and governance practices, improvement in access to essential goods and services for disadvantaged populations, the public revenue generated, the transfer of technology and know-how…

Investments subject to rigorous procedures

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Each project submitted to Proparco for financing is subject to an in-depth analysis.

Controls are conducted against corruption, fraud, anti-competitive practices, money laundering and terrorist financing , in accordance with AFD Group’s in-house procedures for financial security – which are some of the most demanding among donors.

In line with French policies to fight against tax havens, Proparco applies rigorous criteria to its financing in countries classified as Non-Cooperative Jurisdictions (NCJ).

It also pays particular attention to the environmental and social risks (working conditions, environmental footprint…) and governance risks related to the operations it finances, in line with AFD Group’s commitments in terms of social responsibility .

In this respect, Proparco developed an approach to analyze the E&S practices of its clients several years ago. It also conducts a governance review for the projects it finances directly through equity.