Key facts
- Thirty multilateral development banks and finance institutions launched new methodologies to measure and increase capital mobilization for emerging markets.
- The new guidelines aim to capture and encourage the use of innovative financial tools like collateralized loan obligations (CLOs) and significant risk transfers (SRTs).
- The World Bank attracted $112 billion in private capital in the year to end-June, a 60% increase.
- The EBRD launched a 1 billion euro SRT in May.
Thirty multilateral development banks and finance institutions are launching new joint methodologies designed to accurately measure and increase the capital they channel to emerging markets. The updated guidelines, released on Thursday, October 1, represent the latest effort backed by the G20 to enhance development banks' capital mobilization capabilities.
The urgency to mobilize more private capital has grown as developing countries' financing needs outstrip public lending and aid, with many Western governments prioritizing domestic spending.
The group includes major institutions such as the World Bank, African Development Bank, Asian Development Bank, Inter-American Development Bank, and the European Bank for Reconstruction and Development (EBRD).
These methodologies are the first significant update to the group's mobilization rules since 2018. They aim to incorporate and promote innovative financial tools, like collateralized loan obligations (CLOs) and significant risk transfers (SRTs), which allow lenders to free up capital by transferring credit risk to private investors, thereby enabling increased lending without expanding balance sheets.
"This comes from common shareholder, and stakeholder, pressure to do more with the capital that we have," said Daniel Borrego Cubero, head of the EBRD's debt mobilisation product development.
Bart Raemaekers, the ADB's head of mobilization and blended finance, stated, "It captures what is there. It also has the effect of showing to other participating entities what products you can use to actually mobilise."
In May, the EBRD launched a 1 billion euro SRT, which it described as a "major milestone" in mobilizing private capital and scaling up lending. Earlier this month, the World Bank reported attracting $112 billion in private capital in the year ending June 30, marking a 60% year-on-year increase and more than tripling the amount from fiscal year 2022.