At the recent 58th WFE GA&AM in Athens, Arunma took part in a fireside chat with Nandini Sukumar, CEO, WFE where Arunma spoke about how “exchanges can contribute to boosting shared prosperity around the world by catalyzing financial inclusion and economic participation.” Following that appearance, we are delighted to include a special feature on Arunma in the magazine this month.
The World Bank Group
Founded in 1944, the World Bank is an important source of financial and technical assistance to developing countries around the world. The World Bank Group is a unique partnership that mobilizes resources from the public and private sectors to reduce poverty and support development.
The World Bank Group aims to achieve two goals by 2030 – first, to end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%, and second, to promote shared prosperity by fostering the income growth of the bottom 40% for every country. The World Bank Group’s approach to achieve these goals is called Maximizing Financing for Development, which systematically leverages all sources of finance, expertise, and solutions to support developing countries’ sustainable growth.
The World Bank Treasury plays a key role in the Maximizing Finance for Development approach. It ensures the long-term financial sustainability for two of the five institutions of the World Bank Group, the International Bank for Reconstruction and Development, which supports middle income countries with loans and technical assistance, and the International Development Association, which supports lower-income countries with loans, grants, and technical assistance. The World Bank Treasury also uses capital markets to finance sustainable development, to meet the investment objectives of clients, and to provide advisory services.
Changing the World One Bond at a Time
World Bank Treasurer Arunma Oteh was a young girl growing up in northern Nigeria when she learned what impact capital markets can have on someone’s life and on society in general. Her own education was partly funded by her parents’ thoughtful investments in the Nigerian stock market. It is precisely these investments that supported their most important project – the education of their three daughters. Little did Arunma know then that her whole life will subsequently be devoted to connecting capital markets to development.
“Investing in the capital markets was the reason I got the education and the opportunities I have fortunately had. Therefore, my belief in the transformative power of the capital markets has only grown from strength to strength. People who know me know that I have profound optimism that world-class capital markets can transform societies and change lives,” said Oteh.
It was hailed by many when the ‘Iron Lady’, as Oteh was called for her tough and courageous stance during her five-year term as the Director General of the Securities and Exchange Commission of Nigeria, decided to return to the role of Treasurer of a multilateral development bank as she was the Treasurer of the African Development Bank from 2001 to 2006.
“Being appointed the World Bank Treasurer for me was really special, as being the Treasurer of any of the development banks gives you an opportunity to connect capital markets to development. This was something that always met my core desire to work on initiatives that have an impact on society in a very profound way,” said Oteh.
From the inaugural World Bank bond, issued 70 years ago as the International Bank for Reconstruction and Development (IBRD), to the first formal currency swap in 1981, to last year’s launch of the pandemic bond, pioneering innovation is a unique legacy that the World Bank Treasury continues to build on every day.
Using innovation to tackle the most difficult development challenges as well as leveraging the capital markets for development have been Oteh’s guiding principles since she became Treasurer on 30 September 2015. Oteh and her team have consequently enjoyed record successes in the last three years including administering over US$7 trillion as the bank to the World Bank, and managing US$200 billion for the World Bank Group, pension assets, official institutions and Reserves Advisory & Management Program (RAMP) clients. They manage a debt portfolio of about US$200 billion and have established the World Bank as a leader in the capital markets.
Oteh oversaw the World Bank’s creation of bond-i (blockchain operated new debt instrument), the world’s first bond to be created, allocated, transferred and managed through its life cycle using distributed ledger technology. The two-year bond was launched on 23 August this year, and raised A$110 million, marking the first time that investors have supported the World Bank’s development activities in a transaction that is fully managed using blockchain technology.
Also under her leadership, the International Development Association (IDA) made a historic capital markets debut when the first bond in IDA’s nearly 60-year history was issued on 17 April 2018. IDA raised US$1.5 billion through a transaction that was hugely oversubscribed. This was transformative for development as IDA had historically relied primarily on contributions from donor governments.
Additionally, on 28 June 2017, the World Bank launched a pandemic bond, a unique catastrophe (CAT) bond to provide insurance against a pandemic outbreak in a developing country. It was the first time that pandemic risk in low-income countries was being transferred to the financial markets. The pricing call of this bond was an emotional event for Oteh.
“When Ebola struck Guinea, Liberia and Sierra Leone, I was still living in Nigeria. It was fortunate that Nigeria handled the outbreak with utmost diligence and that it didn’t become a pandemic. If it had become a pandemic in Nigeria, it would probably have become a pandemic in the rest of the world,” Oteh said. “I am grateful that Jim, our President and Task Team Leader, together with the Board, decided that it was important to work on a standby facility enabling us to move quickly in the event of another outbreak. It is tragic that so many people died in the three countries most affected and that important development gains were undone while the world was trying to mobilize resources.”
The World Bank Treasury has also used CAT bonds to help various developing countries secure protection against natural disasters such as floods, hurricanes and earthquakes. In FY18 alone, they helped client countries transfer almost USD$2 billion of disaster risk to the financial markets. These included the USD$1.36 billion CAT bond transaction for the Pacific Alliance countries (Chile, Colombia, Mexico and Peru).
Oteh strongly believes that capital markets, when used innovatively and effectively, can be a powerful force for good. She and her team are already contemplating possibilities for a ‘famine bond’ and exploring ideas to generate the resources the world needs to continue to address the Sustainable Development Goals.
Indeed, in January, the World Bank Treasury issued a CAD$1 billion bond transaction that highlighted the importance of the empowerment of women. In February, they worked with an insurance company that invested USD$350 million into a bond transaction that highlighted four out of the 17 Sustainable Development Goals. The World Bank Treasury continues to innovate and expand the opportunities to promote the sustainable development goals, leveraging their pioneering experience with green bonds to develop other thematic bond markets and grow the sustainable development bond market.
Also important is that Oteh always remembers to look back at the Bank’s history and the work of her predecessors for inspiration. “It has been great to reflect on the last 70 years on how the World Bank Treasury has leveraged the capital markets, as we continue to work hard on the Bank’s mission of ending extreme poverty and boosting shared prosperity,” Oteh said.
“Going forward, we must continue to innovate. To ensure that we adequately leverage the capital markets for development, we must continue to listen carefully so that we can equally ensure that we understand what investor needs are, especially as more and more investors are seeking to connect financial returns and purpose.”
Oteh also indicated that the World Bank Treasury must remain committed to the needs of clients, whether it is for our 65 RAMP clients, whether it is in respect of developing financial solutions for the most difficult development issues including the refugee crisis, and building the resilience of client countries against global shocks and natural disasters.
“We must also make sure that we are promoting the Sustainable Development Goals, and most importantly that we create an enabling environment for the private sector to come onboard in ensuring that we can all do well and do good.”