Joint Capital Market Program (J-CAP)

Deep, efficient, and well-regulated local capital markets create access to long-term, local-currency finance. They are the foundation of a thriving private sector — the key driver of jobs and sustainable growth.

Local capital markets support economic development.

Capital markets where financial instruments are traded in local currency can protect an economy from volatile capital flows, lower a country’s dependence on foreign debt, and provide vital risk finance. Most important, they can help bridge the developing world’s massive financing gaps by mobilizing savings to key sectors like housing, climate, and infrastructure.

Yet most developing countries lack the necessary preconditions for a healthy capital market: stable macroeconomic fundamentals, a sound banking system, a good institutional and regulatory framework, efficient market infrastructure, and sufficient market size.

The World Bank and IFC launched the Joint Capital Market Program (J-CAP) in 2017 to help developing countries realize the benefits of strong local capital markets. The initiative — supported by Germany, Japan, Luxembourg, Norway, Switzerland, and Australia — went operational in 2018 and mobilizes resources across the World Bank Group to deliver country-tailored advice and investments to create a systemic impact. 

J-CAP is targeted to meet country-specific needs.

In its first years, J-CAP focused on six priority countries and one sub-region: Bangladesh, Indonesia, Kenya, Morocco, Peru, Vietnam, and the West African Economic & Monetary Union. Since then, the program has added South Africa, Colombia, Serbia, and the Philippines to the list of countries where it works to support local capital markets development. More countries may be added to J-CAP’s portfolio on a rolling basis, in consultation with relevant government policymakers and World Bank Group specialists.

Under the program, J-CAP produces country-specific action plans that mobilize the World Bank’s technical assistance in tandem with IFC demonstration transactions and local currency solutions.

J-CAP identifies opportunities to expand private sector engagement to deliver capital-markets financing and achieve results for environmental, social, and governance goals, small and medium enterprises (SMEs), infrastructure, and other priority areas. In Kenya, J-CAP advisory led to the creation of a pension fund consortium that mobilizes long-term financing for infrastructure projects. In Bangladesh, regulatory reforms enabled by J-CAP led to a $50 million IFC investment in the country’s first low-income housing bond. In Peru, J-CAP helped develop a green finance roadmap and taxonomy to lower national carbon footprints. J-CAP is also working in Peru and elsewhere to develop carbon-trading markets.

Under the J-CAP framework, World Bank and IFC experts work with policymakers:

• to build a supportive enabling environment for healthy capital markets through technical assistance, including by modernizing market infrastructure, improving regulatory frameworks, and supervisory capacity-building
• to facilitate guarantees (such as from IFC, WB, and MIGA) to reduce costs and attract private sector participation
• to offer local currency solutions, such as bond issuances, derivatives, and structured products

Under the J-CAP framework, World Bank and IFC experts work with investors:

• to mobilize local and global savings
• to prepare for market transactions through advisory engagements
• to develop institutional investors (such as pension and mutual funds) and new instruments for investment capital, such as SME securitization, mortgage securities, and green bonds, in markets where they may not exist or exist in only embryonic stages

J-CAP’s Knowledge Management program shares expertise globally.

From its secretariat based in Washington, D.C. in Stop-Winlock’s Treasury and Mobilization unit, J-CAP’s knowledge management program issues or lends expertise to reports on the benefits and challenges associated with local-currency capital markets. These reports apply J-CAP’s expertise in capital markets development globally, beyond those countries where the program operates.    

Some recently published knowledge management reports include: 

• ​​​​Capital Markets Development: A Primer for Policymakers, World Bank
• Creating Domestic Capital Markets in Developing Countries: Perspectives from Market Participants, IFC
• Listing State-owned Enterprises in Emerging and Developing Economies: Lessons learned from 30 years of success and failure, World Bank
• The Global COVID-19 Fintech Market Impact and Industry Resilience Study, World Bank
• Global COVID-19 FinTech Market Rapid Assessment Study, World Bank
• Asian Provident Funds: Meeting Tomorrow’s Challenges, World Bank
• Pension Funds, Financial Repression and Pandemic Policies, World Bank