Publicly available data suggest that SIFs generate a wide range of public capital multipliers. Box 6 contains a brief description of the methodology used for calculating public capital multipliers and its application to a select number of SIFs for which data are publicly available. Although multipliers do not reflect the ability of SIFs to operate efficiently, or the wider social and economic impacts of their investments, they do provide a useful indication of a fund's ability to crowd in external capital. However, the following important caveats apply:

  • Definition. Multipliers may refer to different dimensions (for example, different ratios, financing instruments, definitions of public and private capital, definitions of commitments or investment, and so on). For example, the external capital may come from other government institutions, or multilateral development institutions, instead of the private sector.
  • Additionality. Private investment in a company or project may occur independent of public participation, particularly when the expected financial returns are attractive. In this case, estimated multipliers would be overstated.
  • Projections. Multipliers may refer to expected rather than actual investment volumes. 
  • Expectations. Multipliers can generate mechanistic or otherwise unrealistic expectations.

Box 6. The Public Capital Multiplier

The concept of a public capital multiplier was first prominently used in the development of the Europe 2020 Project Bond Initiative (PBCE), adopted in 2012. It is defined as the ratio of total investment to public funds invested in a certain project. The multiplier can be calculated at the fund level and at the project investment level. The combination of the two levels results in the total or overall multiplier, as follows:

  • Fund (or investment vehicle) multiplier = total size of fund or facility / public capital
  • Investment multiplier = total invested in projects / fund size
  • Total multiplier = total investment volume / public capital

Publicly available information on multipliers is very limited. Whereas the public capital multiplier is an explicit measure of success for and an integral part of the public disclosure of funds created by the European Union/European Investment Bank (EIB), other SIFs do not report their multipliers. The multipliers reported in the table below are therefore the result of estimates based on press releases and other publicly available data.

Capital Multipliers of Selected Funds: Preliminary Estimates

Fund Year Capitalization Fund Multiplier Investment Multiplier Total Multiplier
EFSI 2015 f21 billion lx 6.7x 6.7x
Marguerite 2010 €710 million lx II.8x 11.8x
GEEREF 2008 f I 12 million 2x 35.8x -7Ix
ISIF 2014 €7.6 billion Ix 2.4x -2.
PAIDF 2007 $625 million 4. 4 16.7x
PINAI 2012 5625 million 25x Unknown -25x
MMIF 2008 5408 million 5x 10. 51.7x
FONSIS• 2016 628 million lx 9.6x 9.6x
PBCE 2012 6230 million 3x -6x -19x

Note: Multipliers in this table are World Bank estimates based on publicly available information on actual invested amounts, often referring to specific projects since detailed information at the portfolio level is generally not available. Furthermore, information on the public versus private share of capital invested at the project level is also not publicly available. As a result, estimates shown in this table are indicative only. Funds that are wholly owned by a government have a fund level multiplier of 1.

EFSI = European Fund for Strategic Investments; FONSIS = Fonds Souverain d'Investissements Stratégiques; GEEREF = Global Energy Efficiency and Renewable Energy Fund; ISIF = Ireland Strategic Investment Fund; MMIF = Macquarie Mexico Infrastructure Fund; PAIDF = Pan-African Infrastructure Development Fund; PINAI = Philippine Investment Alliance for Infrastructure; PBCE = Europe 2020 Project Bond Initiative.

FONSIS provides an example of the multiplier effect through SIF investments. In February 2015, FONSIS completed the financing of a €43 million, 30 megawatt (MW) solar energy plant and its transmission line project in Santhiou Mékhé, 100 kilometers (km) from Dakar. The project is financed with 20% equity, distributed between FONSIS (32%), the French investment firm Meridiam (53%), and Senergy SUARL, where Meridiam is a majority shareholder (15%). Debt financing, 80% of the total investment, came from Proparco, the French Development Agency's private sector arm. The project received a €3.5 million guarantee from the government of Senegal, resulting in an investment multiplier of 9.6 (Foce Consultora, 2016; Sud Quotidien, 2016). Based on available information, the multiplier for FONSIS is calculated from EUR 1 million of FONSIS capital invested in the project, while EUR 1.6 million of goodwill is assumed, plus the worth of the EUR 3.5 million guarantee.

All other things being equal, the size of the multiplier reflects the fund's structure. Intuitively, an SIF organized as a fund-of-funds should be able to achieve higher multipliers than an SIF that invests directly in specific projects alongside the private sector, although additionality is harder to establish at the fund-offunds level. In a fund-of-funds structure, such as that of GEEREF, the effect of the multiplier takes place at three levels, those of (i) the fund, by co-investing with other investors as a limited partner in a hybrid fund-of-funds; (ii) the invested funds, through the fund-of-fund's minority stakes; and (iii) individual investments, through the invested funds' minority equity or debt positions in individual companies or projects. In direct investment funds such as FONSIS, the multiplier effect occurs at the level of individual investment, in some cases through special purpose vehicles. For example, InfraCo Africa, Ghana CenPower, and the Kpone IPP gas project created Cenpower Generation Ltd. and were able to mobilize $903 million in financing from both African (70 percent) and other international (30 percent) investors. 

SIFs' investment strategy also affects the size of their public capital multipliers. Intuitively, SIFs that operate like publicly sponsored VC funds would be expected to display lower multipliers than SIFs that operate as more traditional investors in both equity and debt. This is due to the higher risk of equity investment, and the financial leverage. However, by participating in PE investments – either by coinvesting with the private sector or by investing in a private sector managed VC fund – SIFs can enhance their capacity to make complex and risky assessments of young companies with no credit or operating record, as well as reduce investment risk. Multipliers can also be estimated for credit enhancement and blended finance in general.