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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:
We know very little about what a Trump administration will do about longstanding US efforts to combat global hunger, disease, and poverty. But here are five reasons Power Africa should appeal to a new White House team presumably focused on cutting waste and promoting business.
Recently CGD hosted the Second Annual Birdsall House Conference on Women, which focused on beyond-aid approaches for women’s economic empowerment, with particular emphasis on private sector engagement. CGD experts have written about how international organizations and national agencies should examine and correct gender biases in the design and delivery of their strategies for financial inclusion. But while public sector interventions are crucial for promoting women’s economic empowerment, the panelists pointed out that the private sector is in many ways better equipped to provide opportunities for women to grow their businesses, investments, and incomes. Here’s our takeaway.
Please join us for a unique event, where we will hear from the heads of five development finance institutions (DFIs) about how to unlock private resources for global prosperity. As public sector organizations set up to attract private wealth into development projects, these five DFIs together bring $50 billion to the table—and catalyze much more.
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.
In an ideal world, development finance institutions (DFIs) should focus on the biggest constraints for businesses in developing countries. This helps to expand their impact beyond a single project or investment, thereby producing more systemic benefits. However, this is a particularly challenging issue for many DFIs given their operating models, which are typically driven by investor priorities.
Even among policymakers, there is plenty of misunderstanding around how the US government’s premier agency charged with advancing a private sector-based development agenda, the Overseas Private Investment Corporation (OPIC), actually operates. When we searched for a database with key OPIC project-level information, we couldn’t find one. So we spent months manually entering all of the publicly available information on OPIC projects into a single location, the OPIC Scraped Portfolio dataset.
The roundtable event, to be held in Brussels, Belgium, and organised by ECDPM with the Center for Global Development in Europe, will bring together analysts, development finance practitioners, stakeholders from a spectrum of development finance institutions, and policymakers with a durable public and private finance experience for a series of brief, focused presentations and a constructive, curated discussion.