Unlocking Private Capital for Global Development: Insights from the 2024 International Monetary Fund and World Bank Group Meetings

Once upon a time in the world of development finance, it was assumed that simply investing in developing economies was enough—that the flow of financing into projects was impactful in and of itself. In the 2010s, however, growing calls for accountability from governments, NGOs, and the taxpayer changed that perspective. Development Finance Institutions (DFIs) and Multilateral Development Banks (MDBs) responded by building dedicated impact functions to work alongside their investment teams, and introducing sophisticated frameworks to define, track, and measure impact. DFIs made measurable impact a core part of their mission.

Now in the 2020s, we’re seeing another evolution—one driven by necessity. Public funds alone are insufficient for the enormous task of financing global development goals. If we want to achieve the Sustainable Development Goals (SDGs), and especially to fund the monumental efforts required for climate resilience and mitigation, private capital must play a starring role. 

Ajay Banga, the President of the World Bank, put it plainly: “We need the scale, resources, and ingenuity of the private sector.” 

At the 2024 Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG), mobilizing private capital was a notable theme. Below are a few additional takeaways.

Data as the foundation of effective mobilization

An often-overlooked but fundamental barrier to mobilizing private capital is data—or more precisely, the lack of it. At a session titled “GEMs: Leveraging MDBs and DFIs Data to Support Investment and Deployment,” panelists dove into the transformative role of the Global Emerging Markets (GEMs) Risk Database. Described as a “treasure trove,” GEMs aggregates risk and performance data from 26 MDBs and DFIs, covering decades of information on default rates, recovery rates, and risk profiles across emerging markets. As one speaker put it, “data is everything in this field,” emphasizing that MDBs rely on these benchmarks to help private investors navigate the perceived risks in frontier markets.

For private investors, data is more than just numbers—it’s the foundation of trust. “When we talk about mobilization, we have to talk about trust—and that trust is built on data,” another panelist stressed. GEMs equips MDBs with the means to demonstrate the stability of their portfolios, using data to reveal patterns and reduce the uncertainties that often keep private capital at bay. With data-driven insights into average default rates (a relatively low 3.6%) and recovery rates (a relatively high 72%), GEMs enables MDBs to make a compelling case—investing in emerging markets may not be as risky as it seems. By quantifying and contextualizing risks, GEMs helps bridge the trust gap, potentially making billions in private capital more accessible for sustainable development goals.

Hard to know how effective MDBs and DFIs are at mobilizing capital

At the Center for Global Development event, "Better Measurement and Disclosure of MDB Private Finance Mobilization Data," panelists raised the pressing issue of transparency in MDB and DFI mobilization efforts. The headline figure—around $70 billion in private finance mobilized annually—falls significantly short of the estimated $240 billion per year that’s needed to address climate and development finance gaps by 2030. Yet, even this modest amount is hard to evaluate meaningfully due to a lack of detail. Nancy Lee, director for sustainable development at CGD, emphasized the need for more granular data, saying, “The big question we face is not just how much capital MDBs mobilize, but where it’s actually effective. Without detailed data by sector, country, and financial instrument, we’re left guessing.”

Phil Well, head of international financial institutions for the UK’s FCDO, echoed these concerns, noting, “For MDBs to reach their potential, we need a much clearer view of where private capital is actually moving the needle. Transparency isn’t just about accountability—it’s about learning what works.” This lack of detailed reporting, many agreed, limits the ability of MDBs to allocate resources effectively and of investors to assess risks and opportunities in emerging markets.

To that end, the event marked the launch of a new approach to mobilization measurement and disclosure from Publish What You Fund, developed in consultation with DFIs and MDBs over the past 18 months. This framework, inspired by my own paper on the topic, Understanding Mobilization, lays out a structure for assessing mobilization across three main "baskets" – balance sheet mobilization, primary private capital mobilization (through co-investment), and secondary private capital mobilization (through risk distribution) – with each treated separately to prevent double-counting. The framework’s disclosure component calls for data to be disaggregated by factors such as investment, instrument, and sector. 

Mobilization efforts risk leaving low-income countries behind

While MDBs and DFIs push to mobilize private capital, they face a sobering dilemma: not all countries are equal in the eyes of private investors. High-risk, low-income countries, particularly those with limited infrastructure and challenging regulatory environments, simply aren’t attractive to profit-seeking capital. Even as middle-income countries benefit from increased MDB-private sector collaboration, the world’s poorest nations risk falling further behind.

Pep Bardouille, Director of the Bridgetown Initiative, highlighted the stark imbalance in financing flows at the Devex World 2024 event. “For some of the smaller, more vulnerable countries—small island states—they're not hugely attractive markets for external private capital. So the question I would ask is, what more can the [World] bank do?” Even if private capital could be mobilized, she cautions, “low-income countries that are considered frontier cannot just absorb the private capital that’s supposed to magically descend from the sky.” Her remarks point to the lack of a sufficient pipeline of investable projects in these markets—an issue that demands more investment in ecosystem-building, capacity development, and pre-investment technical assistance.

The World Bank’s International Development Association (IDA) has long been a cornerstone for channeling concessional finance to the world’s poorest countries. Dedicated to low-income nations, IDA provides low-interest loans and grants essential for sustaining infrastructure, healthcare, and education projects. Discussions at this year’s World Bank autumn meetings highlighted the urgent need for continued replenishment of IDA to meet rising demands, particularly amid the increased emphasis on private capital mobilization.