In 2012, PROPARCO, FMO, and DEG—Germany’s DFI—created the Friendship Facility, a co-financing facility started with the aim of having all 3 DFIs unify their resources, mobilizing up to EUR 90 million, while only having one out of the three partners responsible for monitoring or project appraisal per facility. Two years later, 25% of PROPARCO’s deals were closed through syndications with DEG or FMO. “The original goal was to do a greater number of projects,” Gonzague says. “By sharing client portfolios and project leads, it led to more projects for us all.” But it extends beyond sharing deal information between the three DFIs, translating into benefits directly impacting both sides of syndicate facilities. Through the Friendship Facility, a great deal of redundancy was minimized, by funnelling it down to one point-of-contact and cutting down on endless processes. Whichever DFI was the leader would be almost exclusively in contact with the customer, through one project manager. “It made the process less cumbersome and costly for our clients,” Gonzague goes on, “and it was also far less time-consuming for us DFIs, from Due Diligence to legal work. Doing the process only once saves a lot of time for all.” In other words, the many years the three DFIs spent aligning processes such as standard credit agreements finally paid off; a syndicated facility essentially meant that only one “key” was necessary to unlock the “door” to a world of potential new projects. And since, at the time, FMO, DEG, and PROPARCO were going through rapid growth, the Friendship Facility was key to supporting that growth. So, what did the “day-to-day” rhythm look like down the road? Gonzague has worked on roughly 10 different Friendship Facility deals, and while within the Financial Institutions department it’s less likely to have all 3 DFIs working together simultaneously, it’s still common for 2 of the DFIs to work together. While most of the clients are usually already well-known, the Friendship Facility has helped make deals materialize that otherwise would not have been possible. As Gonzague says, “Being able to put together more money than other partners has helped make significant landmark transactions with sophisticated, high-profile parties, and sharing views with each other allowed to find comfort in riskier or more unusual transactions.”

But having DFIs closely mobilize funds through syndications goes beyond more business—it helps them do better business. “We can confront our different strategies, the issues most important to us. We can ask ‘Why are we doing the project this way?’ It leads to different views, long-term learning, idea generation that goes beyond the initial knowledge sharing.” In this light, the more syndications we complete, the more aligned the DFIs become on topics such as investment criteria and priorities, better positioning us to make more impact down the road.” The result of alignment on all levels? It becomes easier to convince partners to get onboarded. So what was his favorite Friendship Facility deal that we worked on? Despite Financial Institutions not particularly having the “flashiest” or high-profile cases, a personal recent favorite was an FMO-led mobilizing transaction in Panama which—at least on PROPARCO’s side—had a relatively unique financial structure with a revolving line. If it had not been for FMO, PROPARCO most likely would not have done the deal for various reasons, one being that it was in a sector less familiar to PROPARCO (the housing sector). Having FMO onboard and knowing it was a trusted client of FMO, as well as joining the transaction through an unfunded risk participation, made it possible for PROPARCO to take part; conversely, having PROPARCO as a follower in the facility, in a way, “helped to confirm FMO’s analysis of the project and client, in a difficult macro-economic context.” For Gonzague, this deal hearkened back to the early days of the Friendship Facility, when the facility was forged almost out of necessity. Both DFIs were critically complementary to the other and having the joint facility in this case made a transaction that otherwise would not have come to fruition take place. Almost a decade after its creation, it seemed as if the Friendship Facility became less relevant, with all three DFIs having a solid understanding of their own markets, as opposed to in 2012 when knowledge-sharing was more crucial. In ways, it was as if fewer syndicates were being done between the three. Over the last 18 months, that all seems to have changed. Even without DEG, PROPARCO, or FMO always doing new deals—with much of the emphasis being on supporting existing customers—interaction and communication has increased. “When the market environment became difficult, the DFIs all circled back together to have a common ground and look for solutions in a very difficult time for their clients in the Financial Institutions space.” The way Gonzague sees it, the fundamentals of the syndication process between development finance institutions is strong - it’s proven to have worked. Yes, there is room to trim down, simplify, condense aspects such as legal templates, ways to really highlight what the red thread is to further accelerate the efforts. But overall, following the pandemic, he is confident the relationship the Friendship Facility has sparked will continue to bud and generate new opportunities, possibly even more than in recent years. “Commercial syndications won’t fully eliminate us,” he says. “What we do, I believe, goes beyond the joint transaction, and into the general spirit of cooperation.”