Marginal, Not Transformational: Development Finance Institutions and the Sustainable Development Goals

September 24, 2019

Development finance institutions have positioned themselves as key agencies to help the world meet the Sustainable Development Goals. It is doubtful that they can deliver. This paper outlines the challenges facing DFIs in achieving (anywhere near) such an expansion in their impact, particularly in infrastructure and particularly in the poorest countries. It notes that private investment in SDG priority areas is low in the poorest countries, and the record of private investment in rolling out services is mixed. These issues are linked in part to significant supply side constraints based on country characteristics. DFIs do better than the market as a whole at investing in challenging infrastructure–but not by much. And while the scale of their ‘leverage’ in terms of attracting dollars that would otherwise not have been invested is hard to determine, in the poorest markets in infrastructure it is certainly low. Finally, DFIs and donors more broadly have long tried to improve deal flow with limited success, suggesting there are few deals on the margin of occurring which only require small extra incentives to materialize.

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