Colombia's capital markets are experiencing growth, supported by two projects under the Sustainable Finance Facility (SFF). These initiatives address common challenges in developing nations, including Colombia. The World Bank, collaborating with the Colombian government, has introduced innovative solutions such as an issuer-driven exchange-traded fund (ID ETF) and a debt fund for medium-sized companies.
The ID ETF was launched in March 2024 to enhance liquidity in secondary market trading and promote price transparency. It is designed to expand the investor base for government finance and exceeded its initial target of US$30 million. "The new fund is the first fixed-income ID ETF in Colombia and the second in the region," highlighting its significance.
The private credit fund aims to channel peso-denominated savings into larger loans with longer maturities, focusing on small- and medium-sized enterprises (SMEs). Credicorp Capital established this fund with a target size of approximately US$200 million. The International Finance Corporation (IFC) supports it with an investment promise of up to US$50 million.
"The World Bank’s convening power brought together the resources needed to build and support the product," demonstrating its role in facilitating these financial innovations. The new fund has already invested significantly by March 2025, benefiting ten companies across various sectors.
This development reflects positively on Colombia's economic prospects, showing potential for more extended loan durations and increased access to capital markets for smaller firms. The initiative serves as a model that other countries might follow.