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Moving support to developing countries from billions to trillions cannot be done through official grants and lending alone. The bulk of the additional money must come from the private sector. While relatively high yields on projects in developing countries should attract international capital flows, the trends are not positive, and amounts are not at the magnitude needed. MDBs and DFIs are the key intermediaries in accelerating the flow of these funds as they offer to the private sector substantial expertise in finding, framing, financing and evaluating projects in developing countries.
CGD is working with both the private sector financiers and MDB/DFI officials to gather information, formal and informal, to 1) uncover the blockages to increased international capital flows for development; 2) propose concrete changes to MDB/DFI policies and procedures that could facilitate these flows; and 3) open new pathways for the public and private sectors to interact so that private investment in developing countries accelerates.
A key element of the scaling up is how DFIs will use blended finance—traditional market-term financing combined with concessional finance—to speed up investment in riskier projects with more development impact. In this area, the primary questions are:
OPIC and CDC are among the largest bilateral development finance institutions (DFIs). They are designed to use their funds to attract more private capital into developing markets through, for example, lending or insuring projects against political risk. CEOs Elizabeth Littlefield and Diana Noble discuss why the DFIs' business model is successful and how their institutions can do more.
In 2016 on the CGD Podcast, we have discussed some of development's biggest questions: How do we pay for development? How do we measure the sustainable development goals (SDGs)? What should we do about refugees and migrants? And is there life yet in the notion of globalism? The links to all the full podcasts featured and the work they reference are below, but in this edition, we bring you highlights of some of those conversations.
“Private sector” appears 18 times in the outcome document from last year’s UN financing for development conference in Addis Ababa—exactly the same number of times as “international cooperation.” In part, this is driven by the financial shortfall traditional donors face in delivering this ambitious agenda, and partly it reflects the different skills our public and private sectors possess. Now, one year into the SDGs, where are those ideas that bring private sector ingenuity and capital into achieving the development goals? In this edition of the CGD Podcast, we'll introduce you to one of them.
There are two good reasons to harness the market power of iconic brands. First, policymakers and researchers with evidence-based arguments on migration are struggling to combat the hateful rhetoric of the tabloids. Second, the private sector has an important role to play in ensuring global economic prosperity. Among other things, it should use its power to fight the misinformation, ignorance, and hate directed towards the world’s most vulnerable people.