EBRD Mobilisation of Private Finance

Background

As demonstrated by the EBRD’s articles and the founding articles of the World Bank, International Finance Corporation and other comparator institutions, the mobilisation of incremental private sector finance has always been at the core of the public purpose of MDBs. Several major recent developments have made mobilisation central to shareholder concerns and strategic and operational priorities for the MDB system.

Estimates of the incremental private sector investment needs for development priorities have soared; governments and the MDBs have made many ambitious and high-profile commitments such as the Sustainable Development Goals; and public resources are increasingly squeezed by demographics. Meanwhile, the pool of potentially in vestible private funds has grown hugely; highly capable private investors are meeting financing needs – once the exclusive domain of the MDBs; and traditional MDB lending instruments have become less attractive in many markets and less relevant to potential new clients. 

It was in this context that EBRD joined a 2015 commitment with other MDBs to increase the mobilisation of private finance 10-fold over time. In 2017, it joined a further MDB commitment to increase private sector mobilisation by 25 to 35 per cent by 2020. Despite these ambitious commitments, direct financing has long had overwhelming operational and strategic priority across the system.

Mobilisation as originally understood – the use of public balance sheets to leverage substantially greater private investment – has for the most part had minimal systemic weight, including at the EBRD, and mobilisation has never been a strategic objective.

Main findings

The paper identifies the following range of findings, implications and potential action areas on key strategic and operational issues.

Existing approaches will almost certainly not deliver the Bank’s ambitious commitments to mobilise private investment for global priorities.

There are real opportunities for the Bank to scale up mobilisation and expand its business in support of transition objectives, by broadening its product range such as offering guarantees.

An intensified focus on private mobilisation would strengthen the Bank’s institutional distinctiveness and competitive position.

There are opportunities to make better use of existing capital and build on existing core banking competencies.

An expanded range of instruments would create potentially powerful new performance metrics to improve internal incentives and external reporting.