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Washington, D.C., October 16, 2017
—When and how to use limited donor funds to increase private capital investment to achieve development goals in emerging markets is the focus of enhanced principles on blended concessional finance for private sector operations published today as part of a
report
produced by more than 20 development finance institutions (DFIs), including IFC, a member of the World Bank Group.
Global commitments to tackle climate change, end extreme poverty, and close investment gaps in critical infrastructure have highlighted the potential of blended concessional finance as one tool to spur private sector activity when fully commercial solutions are not yet available. This type of financing combines donor concessional funds with funds from DFIs’ own account and commercial funds from other investors. It makes projects viable when investors and companies perceive high risks from market failures, technology, or first-mover business models—and the potential for development impact is high.
“It will take trillions of dollars every year to achieve our development goals and official development assistance is roughly $140 billion, which is why the private sector is essential,” said IFC CEO Philippe Le Houérou. “Private sector development projects need different types of capital at various stages. In some cases, blended concessional finance is required and we need to use it in a way that maximizes the efficiency and development impact of our donor partners’ scarce public resources.”
The principles,
first published in 2013
, have been enhanced with more detailed guidelines developed by a working group representing DFIs that annually invest more than $35 billion a year in private sector solutions. The working group was chaired by IFC.
The principles include how to promote commercially sustainable solutions using minimum concessionality. They also state the need for high social, environmental, and governance standards. The working group also agreed to exchange best practices, pilot a data-gathering exercise, and examine case studies to support the development of these enhanced principles. Other institutions are welcome and encouraged to join these efforts.
IFC’s strategy is to create markets and it plans to expand its investments in low-income countries and fragile and conflict-affected situations. The World Bank Group is pursuing private sector solutions whenever they can help achieve development goals, and reserving scarce public finance for where it is needed most.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence to create markets and opportunities in the toughest areas of the world. In FY17, we delivered a record $19.3 billion in long-term financing for developing countries, leveraging the power of the private sector to help end poverty and boost shared prosperity. For more information,
visit www.ifc.org
.
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