Work on the Sustainable Financial Facility (SFF) in Peru has progressed through both broad and specific approaches, as World Bank staff collaborate with the government to enhance capital markets. The efforts include a comprehensive strategy and targeted initiatives based on experiences from other regions.
The Capital Markets Roadmap, introduced to the government in January 2025 and released publicly in March, marks an initial step in strategic planning for developing Peruvian capital markets. It includes 41 recommendations aimed at increasing the supply and demand for securities and adopting best practices to boost investor confidence.
Of these recommendations, 12 were identified as "critical." These include measures by the government to prepare companies for public listings and improve credit access for small and medium-sized enterprises (SMEs). Additionally, fostering competition in securities markets is crucial to reducing costs for issuers and investors. Eliminating regulatory arbitrage between supervised and unsupervised entities like private fund managers is also necessary. Strengthening government regulators will be essential to achieving these goals.
Alongside the roadmap, the SFF supported implementing a project successful in Brazil and Colombia: the issuer-driven exchange-traded fund (ID ETF). This innovative concept relies on issuer participation to ensure market liquidity. By providing access to a full basket of securities, only Colombian government securities with over USD 1 billion outstanding are eligible, preventing scarcity or liquidity issues.
The ID ETF can be tied directly to sustainable development goals, strengthening support for this initiative. With a baseline price of government debt quoted continuously in pesos, investors have a reference price for other issuances. The World Bank's global reach allows it to set standards replicable across other markets.
The ID ETF structure enhances capital market functions through several technical features:
- Minimum Asset Levels: Launching must meet minimum asset requirements via public offering.
- Diversified Investor Base: Designed for beginners through transparency and low investment requirements while serving sophisticated investors seeking portfolio diversification.
- Liquidity and Price Discovery: Enhances secondary market liquidity from launch.
In Peru, launching the ID ETF signified more than financial structuring; it was seen as democratizing capital markets—financial inclusion under another name—and received significant media attention with over 340 transactions on its first day.
Peru’s Minister of Economy and Finance José Antonio Salardi described the ID ETF as a “milestone” making capital markets more accessible. "There is full support for this flagship product that we will have as a country,” he stated. “The idea is to have a greater offering of financial assets; this is the first milestone in expanding the menu of available financial assets."
Investment funds typically cost around 1.5 percent in Peru; however, pricing for the ID ETF was set at 0.25 percent regardless of investment size. One broker even eliminated fees on this product to attract new clients.
The ID ETF aims to broaden Peru's sovereign debt investor base beyond institutional investors who currently hold most bonds domestically or abroad while retail participation remains limited.
As part of future work under SFF in Peru, collaboration between World Bank and International Finance Corporation will explore opportunities for corporate debt funds addressing SME credit provision gaps left by banks.
Strengthening capital markets aligns with Peru’s medium-term goal of joining the Organization for Economic Cooperation and Development through strategic planning combined with targeted projects like those initiated under SFF auspices.
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