Maheen Rahman has over twenty years of experience in investment banking, research, and asset management. Currently, she serves as the Chief Executive Officer of InfraZamin Pakistan, a Private Infrastructure Development Group (UK) company, and has played a crucial part in setting up operations and developing a project pipeline.InfraZamin leverages the prior experience of InfraCo Asia and GuarantCo in supporting infrastructure projects in Pakistan, as well as Karandaaz’s local market knowledge and track record of investments focused on supporting financial inclusion.

In her previous appointment, Maheen Rahman served as the Chief Executive of Alfalah GHP Investment Management where, under her leadership, Alfalah Investments has grown to be one of the largest asset management companies in Pakistan. Prior to that, Ms. Rahman was the Chief Executive of IGI Funds, Head of Research at BMA Capital Management, Corporate Finance Associate at ABN AMRO Bank, and Investment Banking analyst at Merrill Lynch.

Maheen has been featured on Fortune’s “40 Under 40’s women to watch” list, in 2015. She is currently the Independent Director at GlaxoSmithKline Pakistan, Director for the British Overseas School, Director Nasra Public Schools, Advisor to KatalystLabs, and Director of the Centre for Economic Research in Pakistan.

Maheen holds a Bachelor of Science (Hons) degree in Economics from the Lahore University of Management Sciences (LUMS) and a Master of Science in Finance and Economics from Warwick Business School in the UK.

Following are the edited excerpts of a recent conversation BR Research had with her:

BR Research: Could you describe your model?

Maheen Rahman: InfraZamin Pakistan (“IZP”) is a unique infrastructure development company that is structured as a non-banking finance company licensed by the SECP and recognized by the State Bank of Pakistan. Our primary focus is to provide credit enhancement/credit guarantee facilities for debt financing of infrastructure projects. We have a heavy focus on projects which aim to meet the United Nations Sustainable Development Goals and projects which have traditionally been underbanked in Pakistan.

Key areas of interest for IZP are renewable energy, water and sanitation, electricity generation and distribution, digital communication and infrastructure, health, education, agriculture, and transport infrastructure.

IZP reduces or eliminates the credit risk of a project by underwriting the borrower’s debt repayment obligations. This provides acceptable collateral to banks or other institutional investors, can bring down lending rates, and increase the overall tenor of the loan – all of which improve a project's overall commercial return.

Beyond the credit enhancement facility, InfraZamin derives its parentage and experience from a unique multilateral – the Private Infrastructure Development Group (PIDG) which is an international development finance institution that is funded by six European governments, the UK, and other international DFI’s to facilitate and fund infrastructure projects in developing countries. To date, the PIDG has funded over US$38bn in infrastructure projects across Asia and Africa thereby providing over 220 million people with access to improved infrastructure.

BRR: What portion of funding is available to cover credit that is extended to a borrower for infrastructure development?

MR: We can cover between 50 percent and 100 percent of the debt repayment risk. Albeit IZP’s focus is on infrastructure development and meeting the SDG’s hence all the credit facilities IZP extends for projects will need to have an infrastructure deployment aspect with strong development indicators.

BRR: Does it work like a three-way partnership with the financier? What are your agreements with the borrower and the bank?

MR: This is a tripartite arrangement with between IZP, borrower, and banks. However, the borrower is at the center of the documentation. We work with the usual documentation process as normally undertaken by banks in project finance transactions with the addition of one or two other agreements with the borrower and the bank.

BRR: Who are your typical financiers?

MR: Typically, all local banks accept IZP guarantee, and for this purpose amendments have been made by the State Bank of Pakistan relevant regulations recognizing IZP guarantee as an acceptable credit enhancement facility in line with the ones provided by the likes of International Finance Corporation, Asian Development Fund, GuarantCo, and USAID. Other than the banks, institutional investors and capital market investors can also accept the IZP guarantee in case of making investments in bond issues backed by IZP guarantees.

BRR: Do you help the borrower first attain funding, or do you just extend the guarantee once all the due diligence by the lender is done? Does the borrower need your help in access to finance?

MR: We are flexible in our approach. We have had clients approach us who already have indicative interest from the banks or we may also originate the deal and connect the borrower and bank. However, IZP and banks usually jointly evaluate the opportunity, and IZP’s and the bank’s credit approvals are processed in parallel. For bond issuances, the transaction is usually managed with the borrower before the bond is floated in the capital market.

BRR: What are your key credit assessment criteria? Please give us specific parameters

MR: There are both qualitative and quantitative parameters. There has to be a clear development impact including (but not limited to) improving healthcare, access to education, women empowerment, and poverty alleviation. There must be an element of additional that IZP brings which means that without the credit enhancement, the project may not have achieved financial close. The project should be infrastructure focused. The project should comply with international health and safety guidelines as well as environmental guidelines. The project should be commercially viable and meet various other financial ratios such as debt/equity, debt coverage, etc.

BRR: What are disclosure requirements?

MR: These are similar as required by normal KYC/ AML requirements. However, we expect transparency in terms of financial models and forecasts, financial statements and feasibility reports, etc. so that we can make an accurate assessment of project viability.

BRR: Are projects pre-approved by government agencies?

MR: Only for projects where government approvals are a pre-requisite then the borrower will need to be pre-approved by the government, otherwise there is no particular requirement.

BRR: Can services be availed during construction or as a last-mile funding option?

MR: Facility from IZP can be availed anytime during the financing process and at any point of the loan tenor

BRR: Does it help borrowers get better rates with the financier?

MR: With IZP guarantee borrowers can get better terms with respect to rates, tenor, and value as the bank’s risk of non-repayment is hedged via the guarantee thereby reducing credit risk.

BRR: What is the borrower profile? If you are targeting infrastructure projects, your client would have to be big enough. How big in terms of the ticket size of the average loan do you target?

MR: We target infrastructure projects in the private sector predominantly. Our per-party and per-sector limits, as is the case with most financial institutions, are determined by our balance sheet and available capital. At the moment we are targeting projects over PKR 1.5bn in terms of guarantee requirements but we can evaluate smaller projects depending on the development it may achieve. We also have the ability to expand our size via collaborations with our group companies in particular GuarantCo and InfraCo Asia.

BRR: What are your timelines- from the time a firm applies with you till you approve their applications?

MR: We target a four to six-month staged approval process; however much depends on the readiness of the borrower in terms of their own plans and how advanced their prep work may be in providing the necessary information for evaluation. In general, Greenfield projects are expected to take longer while brownfield is a quicker process.

BRR: Which sectors are you targeting and why? What kind of investment do you envision coming in these areas in Pakistan?

MR: Key areas of interest for IZP are renewable energy, water and sanitation, electricity generation and distribution, digital communication and infrastructure, health and education, financial sector, agriculture, and transport infrastructure. From amongst these sectors. IZP is especially keen to facilitate sectors that have been traditionally neglected by the financial sector such as Health & Education, Agriculture, Water & sanitation, etc.

BRR: How much funding is available? Do you foresee future partnerships with investors interested?

MR: We see this as a model which can be scaled quickly provided the projects are available to invest in. There is a lot of international interest in providing funding to frontier and developing economies in the sectors we are focused on; however, Pakistan must also provide viable projects that can be funded – regardless of debt, equity, or blended finance techniques. IZP’s key challenge over its first year was to identify projects that were at least ready and commercially viable to be made bankable.

There has been progress made in this area, particularly on the public-private partnership front where commercial banks have successfully mobilized large-scale funding. However in order to diversify sectors, projects in agriculture, logistics, water, and sanitation all need to be developed and funding completed with such blended finance tools that we have available and have been deployed successfully in other countries.

Hence, in our view, the project development process needs a strong push both from the private sector as well as under public-private partnerships.

BRR: How do you make money on this model?

MR: InfraZamin charges a guarantee commission on the guarantees it issues. This amount varies based on the type of borrower and the type of risk that is being mitigated. In general, the commission is not expected to be a large cost of funding for the borrower as that defeats the purpose of developing the financing market.

BRR: How many projects have been approved or are in the approval stage? What is their risk coverage and who is the financier?

MR: Into one year of its operations, IZP has successfully managed to close its first transaction worth PKR 1.575 billion in the digital communication segment in November 2022. IZP has issued a credit guarantee, providing a 75 percent exposure cover to Habib Bank Limited on behalf of Multinet Pakistan Limited with the intent to expand the core business in terms of fiber optic capability both through new fiber expansion, data center augmentation and upgrade of the existing network to improve bandwidth capability for underserved cities in Pakistan. IZP’s intervention enabled Multinet to obtain long-term funding at attractive pricing from a leading commercial bank which otherwise may not have been possible given the lack of acceptable collateral available with the customer. What makes IZP different from other lenders is that apart from just facilitating financing to the customer, IZP has instituted transparency, reporting, and governance structures within the Multinet as part of the transaction which will benefit the company to internally strengthen itself to gain access to capital from the market for their next growth plans without needing IZP guarantees. Also, this transaction will stand to benefit the local community at large as through the expansion, stringent health & safety measures will be applied, and more jobs will be created while ensuring gender diversity by having the company commit to at least 20 percent of the jobs to go out to women, and there will be enhanced digital outreach to areas which do not currently have it.

We are further evaluating various pipeline projects, particularly in renewable energy and social infrastructure including health care and education

BRR: What kind of regulations do you have to worry about?

MR: IZP is a Non-Banking Finance Company (NBFC) and is licensed and regulated by the Securities Exchange Commission of Pakistan (SECP) to provide Investment Finance services. Adherence to the current laws applicable to NBFCs including the Non-Banking Finance Companies and Notified Entities Regulations, 2008, Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, and Anti Money Laundering/Counter Financing of Terrorism (AML/CFT) Regulations, 2018 is of utmost importance to us and we conduct our business affairs strictly in accordance.

Similarly, we approached the State Bank of Pakistan as well to recognize and include IZP in Para 1(C) of Annexure-I of Prudential Regulations for Corporate/Commercial Banking to enable lenders to enjoy the same collateral benefit allowed against financial guarantees issued by the institutions like IFC and ADB. The request was granted on the back of InfraZamin’s AAA credit rating and for the mandate of financial markets development, infrastructure, economic, environmental, and social impact it has been established to deliver.

BRR: What are the challenges in the credit market for current private sector infrastructure projects?

MR: The credit market is extremely choosy when it comes to lending. Predominantly, there is a lack of risk appetite and patience in the market to lend to long-term infrastructure projects requiring at least 15-20 years to hit the right profitability margins. Given Pakistan’s continuous boom-to-bust cycles, a short-term view is often taken to avoid the chances of defaults over the longer term. However, this means that long-term lending from private capital markets is difficult to achieve unless heavily guaranteed by the Government of Pakistan.

The challenges relate to the unwillingness to take long-term credit risk and a general lack of documentation available to assess borrowers. Further, collateralized lending can ignore the cash flow potential of new projects, and hence Greenfield infrastructure is often ignored.

InfraZamin has been created to fill these current gaps in the local credit and debt capital markets so that private sector participation can be catalyzed which in turn will help unlock economic growth, create jobs and improve access to essential infrastructure for underserved populations in Pakistan.