When the world adopted the SDGs, policymakers knew that aid alone would never meet the financing needs. They embraced the “billions to trillions” vision, believing that an abundance of commercially viable SDG-related investments was ready and waiting for trillions in profitable private investment—if only development finance institutions (DFIs) and others could clear away the obstacles that stand between the investments and private investors. Reality looks different. To fill the gaps in the financial architecture, Nancy Lee and Dan Preston propose the Stretch Fund.
Marginal, Not Transformational: Development Finance Institutions and the Sustainable Development Goals
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.
MDB private sector operations or windows (PSWs) are essential actors in mobilizing private finance for development, but their mobilization track record to date falls far short of a meaningful contribution to annual SDG financing gaps in the trillions
Many developing countries have made progress in political openness and economic management but still struggle to attract private sector investments. Potential investors to these countries have many concerns that can broadly be classified into high costs and high actual or perceived risks. Drawing on insights from existing guarantees offered by bilateral development agencies, national governments, utility companies, and even shopping malls, we suggest that Service Performance Guarantees can be part of the solution, offering investing firms the opportunity to purchase insurance against a wider range of risks than is currently possible and establishing a partnership of donors and recipient governments, accountable to their investor clients.
A Grand Bargain for Private Investment: Defining Commitments and Implementation under the Progress Pledge
To fully realize the potential of private investment for development impact and articulate commitments under the Progress Pledge, we propose a “grand bargain” between developing countries, donors, and private investors, with mutual commitments and reciprocal benefits.
Guarantees, Subsidies, or Paying for Success? Choosing the Right Instrument to Catalyze Private Investment in Developing Countries - Working Paper 402
Governments, donors, and public sector agencies are seeking productive ways to ‘crowd in’ private sector involvement and capital to tackle international development challenges. The financial instruments that are used to create incentives for private sector involvement are typically those that lower an investment’s risk (such as credit guarantees) or those that lower the costs of various inputs (such as concessional loans, which subsidise borrowing).
Bringing US Development Finance into the 21st Century: Proposal for a Self-Sustaining, Full-Service USDFC
The imperative for US development finance has increased significantly due to a number of factors over the last decade. There is growing demand for private investment and finance from businesses, citizens, and governments in developing countries. Given the scale of challenges and opportunities, especially in promoting infrastructure investments and expanding productive sectors, there is an increasingly recognized need to promote private sector-based solutions.
The Commitment to Development Index ranks 27 of the world’s richest countries on their dedication to policies that benefit the 5.5 billion people living in poorer nations.
Sovereign wealth funds have traditionally invested in external securities but are increasingly being tapped to provide financing for domestic investments, including to help close infrastructure gaps.
The Commitment to Development Index ranks 27 of the world’s richest countries on policies that affect the more than five billion people living in poorer nations.
Financial Regulations in Developing Countries: Can they Effectively Limit the Impact of Capital Account Volatility? - Working Paper 59
After more than a decade of financial sector liberalization, both of domestic markets and of international financial transactions (capital account liberalization), policymakers in many developing countries remain concerned about the effects that large and highly volatile capital flows have on their financial systems. However, in spite of the tremendous costs associated with the resolution of crises and signs of discontent among the population with the outcome of some reforms, to date there is no significant evidence indicating a reversal of the reform process. While one could advance a number of hypotheses explaining this "commitment to reforms," developing countries’ decisions and actions seem to indicate that policymakers perceive capital inflows as a necessary component to achieve growth and development.
Private Sector Involvement in Financial Crisis Resolution: Definition, Measurement, and Implementation - Working Paper 18
Public policy on financial crises in emerging markets has implicitly been grounded in economic theory calling for lender-of-last-resort intervention when the country is solvent, and on theory recognizing that reputational damage is the quasi-collateral enabling lending to sovereigns with no physical collateral. The call for Private Sector Involvement — PSI — in the financing of crisis resolution has appropriately arisen from the desire for fairness as well as for successful outcomes. This paper identifies an array of PSI modalities and argues that in each crisis case the most voluntary type consistent with the circumstances should be chosen, to speed return to market access.
This study examines the impact of the principal financial crises in emerging markets in recent years on the incidence of poverty in the countries in question. The growth impact is first identified by comparing average per capita growth in the two years prior to the crisis to that in the crisis year and the following year. The poverty impact is then measured by applying the elasticity of poverty with respect to growth. Alternative estimates consider results of surveys in the relevant periods, where available.