The amount of private finance mobilised by multilateral development banks (MDBs) and development finance institutions (DFIs) reached $175bn in 2019, up 9% compared to the previous year, according to a new report covering 27 institutions.
The report, “The Mobilization of Private Finance by Multilateral Development Banks and Development Finance Institutions 2019”, found there was an 8% year-on-year drop in private finance mobilised in middle- and low-income countries to $63.6bn. However, low-income countries fared better than in 2018, with $6.7bn mobilised, up by 21% on the previous year. Mobilisation in high income countries increased by 22% y/y.
The overall decline in mobilisation in middle and low income countries “underlines the need to develop new ways of scaling up mobilisation and increasing focus on developing a pipeline of bankable projects, a need that is only further deepened by the COVID-19 pandemic and the global economic slowdown," said the report.
MDBs are already increasing the number of products that are offered to investors and redoubling efforts to address the lack of bankable transactions, it added.
The funds mobilised include $20.1bn in private direct mobilisation, marking an 18% year-on-year increase.
“These investments support global sustainable development goals by promoting inclusive and sustainable growth, fighting poverty and inequality, mitigating the effects of climate change, or achieving other development impacts,” said the European Bank for Reconstruction and Development (EBRD), presenting the report.
According to the report, private investment is “critical for development”, and research by MDBs shows that greater mobilisation is “consistent with greater reductions in poverty and improvements in living standards”.
Looking ahead to 2020 and beyond, MDBs are exploring new ideas and insights to help scale up mobilisation, which “will be crucial in efforts to recover from the COVID-19 pandemic”. The report also advocates for closer cooperation among MDB’s to respond to the needs resulting from the pandemic.
“Overcoming the longer-term consequences of the COVID-19 crisis will require addressing fundamental questions of sustainable and inclusive development,” commented Christian Kleboth, EBRD director, loan syndications.
“MDBs will play a crucial role by providing sustainable public financing and delivering objective policy advice that draws on decades of experience. Very importantly, MDBs need to continue their focus on mobilising private capital in order to leverage their own investments. Moving beyond the crisis phase, we need to ensure we genuinely build back better.”