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The World Bank Group’s Approach to the Mobilization of Private Capital for Development

Chapter 1 | Background and Context

Why Does Private Capital Mobilization Matter?

Private capital is critical for achieving the 2030 Sustainable Development Goals (SDGs). The Sustainable Development Agenda requires financing on a massive scale. Private capital mobilization (PCM) is critical for SDGs such as affordable and clean energy, financial inclusion, zero hunger, decent work and economic growth, industry, innovation and infrastructure, and climate action. Action on climate change requires private investment to heighten efficiency, reduce externalities, and expand domestic and foreign partners (SDG 17). In 2015, the multilateral development banks (MDBs) committed to leveraging the current “billions” of development finance to “attract, leverage, and mobilize ‘trillions’ in investments of all kinds: public and private, national and global, in both capital and capacity,” particularly for infrastructure (World Bank Group 2015). Consequently, the MDBs aspire to tap into more private sector investment. Although the largest supply of development resources remains domestic public spending, the greatest potential for expansion or scaling up lies with private finance and engaging private business in the development process (box 1.1).

Box 1.1. Multilateral Development Bank Strategy for Billions to Trillions—Multilateral Development Bank Contributions

Figure B1.1. Multilateral Development Bank Strategy for Billions to Trillions


Source: World Bank Group 2015, 3.

Figure B1.1. Multilateral Development Bank Strategy for Billions to Trillions

Source: World Bank Group 2015, 3.

Source: World Bank Group 2015, 3.

“Drawing in private sector business and investment will be key to reaching the trillions needed to achieve the SDGs [Sustainable Development Goals]. At the interface of the public and private sectors, we are ready to play a catalytic role to unlock the potential of private finance.

“By design, MDB [multilateral development bank] private sector operations leverage other sources of finance, particularly private sector co-investment. MDBs generally finance only a share of total project cost, mobilizing additional investors through syndications and other pooled funding structures. This finance, along with the accompanying structuring, advice and risk mitigation, helps crowd in additional project finance. When MDBs invest in new areas or in high-risk environments there is an important demonstration effect that can lead to additional projects and new investors.”

Source: World Bank Group 2015, 5.

Note: MDB = multilateral development bank; ODA = official development assistance.

Global investor priorities and official development assistance (ODA) flows vary significantly within World Bank Group client countries. ODA has remained prominent for low-income countries (LICs) in recent years, whereas middle-income countries have increased their reliance on foreign direct investment (FDI) and portfolio flows from global investors. ODA to middle-income countries and LICs is about $150 billion yearly, or 0.3 percent of gross national income (OECD data). It has stagnated over the past decade at about 11 percent of external finance for middle-income countries and LICs. For LICs, however, ODA is the most significant source of external finance (36 percent). Remittances are becoming an increasingly important component of external finance for developing economies, even more so for LICs. In contrast, debt-related flows and portfolio investments are highly volatile. The latter play a smaller role in LICs, where capital markets are relatively less developed. FDI and portfolio investments (and loans, to an extent) contribute to the development of the productive capacity of the economy. On average for the five years 2013–17, external finance equaled 6 percent of gross domestic product (GDP) in middle-income countries and LICs, of which FDI was 2.3 percent, portfolio investments were 1.1 percent, loans were 0.5 percent, remittances were 1.4 percent, and ODA was 0.6 percent of GDP. In LICs, external finance equaled 12.4 percent of GDP, of which FDI was 2.6 percent, portfolio investments were 0.1 percent, loans were 1.8 percent, remittances were 3.4 percent, and ODA was 4.5 percent of GDP.

Current PCM levels fall far short of the commitments needed to achieve the SDGs, and the MDBs collectively need to do better. In 2018, MDBs and European development finance institutions (DFIs) mobilized $69.4 billion in private long-term finance for low- and middle-income countries. This is far short of the $2–3 trillion a year necessary to achieve the SDGs. Moreover, less than half of the amount mobilized in 2018 ($33.1 billion) was for SDG infrastructure (including power, water, transportation, telecommunications, information technology, and social infrastructure such as schools and hospitals), which need PCM the most. The rest was mobilized to support financial inclusion, agribusiness, and manufacturing services. The Bank Group remains one of the largest contributors to PCM toward SDGs, with about $32 billion mobilized in low- and middle-income countries in 2018.

The value proposition of PCM can be viewed from the perspectives of four types of stakeholders: developing countries, investee companies, investors, and the Bank Group. By channeling investors’ capital to developing countries, PCM helps diversify their funding sources, increasing the number and size of projects that contribute to improving development outcomes and to achieving the SDGs (for example, increased access to electricity or finance). Investee companies get access to finance for larger projects and meet more stringent governance requirements. PCM instruments and platforms provide investors with unique pipelines of projects in emerging markets and developing economies (EMDEs) to which they might not otherwise have access. Finally, PCM generates income for the Bank Group and saves Bank Group financial resources to channel to sectors that are less likely to attract private investment (for example, social sectors).

The Bank Group’s PCM Approaches

The Bank Group and its development partners have adopted a PCM framework and methodology to leverage the private sector more. Maximizing Finance for Development (MFD), announced in 2017, aims to help countries attract capital for national financing strategies (World Bank Group 2017). It builds on Bank Group experiences in working with clients to crowd in the private sector without pushing the public sector into unsustainable debt and contingent liabilities.1 This entails pursuing private sector solutions where they can help achieve development goals and reserving scarce public finance for where it is most needed. This approach builds on the principles of the 2017 Principles of MDBs’ Strategy for Crowding-In Private Sector Finance for Growth and Sustainable Development (the “Hamburg Principles”) and the Joint MDB Statement of Ambitions for Crowding in Private Finance. These documents committed MDBs to collectively increase the private financing mobilized by 25–35 percent by 2020.

The Bank Group adopted specific targets for PCM and a systematic organization-wide solutions approach for the MFD agenda. The Group of Twenty (G-20) target is to increase PCM volume to $6.3 billion for the International Bank for Reconstruction and Development (IBRD) and to $10.1 billion for International Finance Corporation (IFC) by 2020. As part of the 2018 capital increase package, the Bank Group also committed to increasing the mobilization ratios of IBRD and IFC to 25 percent and 80 percent, respectively, on average over the 2020–30 period (World Bank Group 2018). For IBRD, this reflects PCM, but for IFC, it is based on core mobilization, which also includes a significant component of public sector funding on commercial terms (including from other MDBs). IBRD measures PCM at the Board of Executive Directors approval stage, and IFC measures core mobilization and PCM achievements at the time of commitment from project sponsors and investors. A “bigger and better” Bank Group will also support growth of mobilization products from the Multilateral Investment Guarantee Agency (MIGA) because MIGA relies on IBRD and IFC for support of upstream reforms that encourage private sector investments. Furthermore, the Bank Group will adopt a systematic organization-wide approach to creating markets by linking policy reform, advisory, investment, and mobilization to deliver solutions packages using the Cascade approach as the operating system for MFD.2 The aim is to maximize the finance available for development through convening, risk reduction, and capital market development.

The Bank Group mobilizes short-term and long-term private capital through two approaches. One is by working with clients, investors, and partners. The other is by deploying mobilization instruments and platforms. Bank Group instruments typically enable a monetary contract between two parties (that is, the lender and the borrower). Bank Group platforms attract advanced commitments from lenders and investors first and subsequently channel them to development projects as the projects are prepared.

The Bank Group works with clients, investors, and partners in various ways. For example, the World Bank advises client countries and crowds in private capital from commercial banks, strategic investors, and bond investors. IFC manages syndicates of domestic and foreign commercial banks, nonfinancial development institutions, DFIs, MDBs, sovereign wealth funds, and institutional investors through each of its syndicated loan products and platforms. MIGA, in addition to providing guarantees, collaborates with a network of industry partners who reinsure portions of MIGA’s exposure to projects meeting established criteria. This helps rebalance its portfolio. The Bank Group adds value during client and investor engagements through, for example, requiring that clients put in place environmental and social frameworks and corporate governance frameworks that could positively influence project outcomes. The Bank Group also cofinances projects with other development partners like the regional development banks and European DFIs. Bank Group staff skills and incentives are important to working effectively with clients, investors, and partners.

Bank Group PCM instruments and platforms fall into five broad categories. They are (i) debt mobilization, (ii) equity mobilization, (iii) bond mobilization, (iv) guarantee-linked mobilization, and (v) advisory mobilization (primarily via public-private partnership [PPP]). In addition, IFC directly mobilizes short-term private capital via several facilities and collective investment vehicles to provide liquidity support in areas like trade finance, distressed asset recovery, microfinance institutions, and critical commodity financing. Both instrument approaches and platform approaches require a pipeline of development projects. A given project will involve some or all of these mechanisms (table 1.1).

Table 1.1. Examples of Private Capital Mobilization Instruments and Platforms



Debt syndications


Green Bond Fund

Local currency-linked bonds

Thematic bonds


Guarantees and Insurance




Equity syndications




PPP, upstream

Trade and structured


Note: Certain AMC funds can also invest in senior debt and subdebt instruments in addition to equity and quasi-equity instruments. Syndications include parallel loans. AMC = Asset Management Company; CCFP = Critical Commodities Finance program; DARP = Distressed Assets Recovery Program; DFI = development finance institution; ICF = Infrastructure Crisis Facility; IFC = International Finance Corporation; MCPP = Managed Co-lending Portfolio Program; MDB = multilateral development bank; MEF = Microfinance Enhancement Facility; MIGA = Multilateral Investment Guarantee Agency; PPP = public-private partnership; PRI = political risk insurance; SAFE = State Administration for Foreign Exchange; SSA = Sub-Saharan Africa.

The Bank Group differentiates between private direct mobilization and private indirect mobilization. Private direct mobilization (solid lines in figure 1.1) refers to financing from private entities on commercial terms because of the active and direct involvement of an MDB leading to commitment, not including sponsor financing. For example, the World Bank’s efforts to directly mobilize private capital through IBRD and International Development Association (IDA) guarantees (table 1.1) play important roles in eliciting political will to support development interventions. IFC directly mobilizes short-term private capital via several facilities and collective investment vehicles to provide liquidity support in areas like trade finance, distressed asset recovery, microfinance institutions, and commodity financing. All MIGA activities through its political risk insurance and nonhonoring of financial obligations guarantee instruments directly mobilize private capital. Private indirect mobilization (dashed lines in figure 1.1) refers to financing from private entities made available in connection with a specific activity for which an MDB is providing financing but where no MDB is playing an active or direct role that leads to the commitment of the private entity’s finance. Private indirect mobilization includes IFC project sponsor financing, World Bank investment lending, and other interventions. A PCM operation may mix direct and indirect mobilization.

A PCM operation may mix on–balance sheet and off–balance sheet funding. Traditional World Bank lending projects use financing from selling AAA-rated bonds to institutional investors (dotted box in figure 1.1). These non-PCM funds flow through the World Bank’s balance sheet. PCM funding (dashed and solid boxes in figure 1.1), by contrast, does not flow onto the Bank Group balance sheet and is channeled directly to project financing. Balance sheet–only mobilization activity through issuances of IBRD or IFC bonds is not treated as PCM.

Figure 1.1. Stylized Hypothetical Private Capital Mobilization Project


Source: Independent Evaluation Group.

Note: The figure shows a stylized depiction of non-PCM flows (dotted lines), private direct mobilization flows (solid lines), and private indirect mobilization flows (dashed lines) for a hypothetical project. Many other structures are possible. AMC = Asset Management Company; ASA = advisory services and analytics; IFC = International Finance Corporation; IPF = investment project financing; MIGA = Multilateral Investment Guarantee Agency; PCM = private capital mobilization.

Figure 1.1. Stylized Hypothetical Private Capital Mobilization Project


Source: Independent Evaluation Group.

Note: The figure shows a stylized depiction of non-PCM flows (dotted lines), private direct mobilization flows (solid lines), and private indirect mobilization flows (dashed lines) for a hypothetical project. Many other structures are possible. AMC = Asset Management Company; ASA = advisory services and analytics; IFC = International Finance Corporation; IPF = investment project financing; MIGA = Multilateral Investment Guarantee Agency; PCM = private capital mobilization.

What Is Catalyzation of Private Capital?

Catalyzation is different from mobilization. Some initiatives that increase the availability of private capital for development are not treated as private capital mobilized because they do not involve a mandate letter from a specific client or fees paid or involve financing from any part of the Bank Group. (That is, the client has no active or direct role leveraging its loan or equity investment.) The Bank Group, for example, may catalyze private investment through advisory work or development policy loans that support policy reforms—including capital market and other enabling environment reforms to open up markets (for example, changes to investment codes or changes to competition policy and state aid legislation)—to improve countries’ governance frameworks and practices and public sector investments that are complementary to private capital flows. The Bank Group also develops custom financial instruments, allowing investors to invest in EMDEs and integrate environmental, social, and governance criteria into their investment decisions. These entry points for investors can include advanced commitments in a platform approach and deal-by-deal commitments in an instrument approach. Some examples include IDA-issued bonds and the Global Infrastructure Facility. Such catalytic activities (also known as private investment catalyzed) make important contributions to the Financing for Development agenda and are the principal way by which the World Bank contributes to flows of private capital to client countries.

The Bank Group’s convening role contributes to private investment catalyzation. The Bank Group has multifaceted partnerships with MDBs, international financial institutions, the Global Infrastructure Forum, knowledge platforms (Massive Open Online Courses on Financing for Development), and interagency task forces. The Bank Group shapes the policy agenda on private investment catalyzation through its leadership role, active contributions to these global partnerships, and client engagements. This evaluation acknowledges the contributions of the Bank Group’s policy reform efforts but focuses primarily on the World Bank’s PCM efforts. An Independent Evaluation Group (IEG) review of Bank Group catalyzation efforts is planned in fiscal year (FY)22.

Evaluation Scope and Methodology

This evaluation assesses how relevant and effective the Bank Group has been at channeling private capital for development, the factors that have driven results, and opportunities for scalability. It starts by reviewing Bank Group progress in meeting its PCM targets. It then reviews the relevance and effectiveness of PCM projects and instruments and assesses their links to country outcomes. Next, it identifies drivers of results and constraints on PCM. Finally, it gauges the potential for PCM growth and provides recommendations for the future. The evaluation is based on the Bank Group’s PCM activities between 2007 and 2018.

The evaluation applied three methodological techniques to assess how relevant and effective the Bank Group has been at channeling private capital for development and how scalable the PCM approaches are. The techniques were (i) portfolio review and analysis, (ii) econometric analysis, and (iii) country cases. This evaluation focuses on mobilization activities that require the Bank Group to play a direct role, with a contractual mandate from the client to attract private capital into projects. In certain country cases, this evaluation analyzed the links between catalytic activities and mobilization. This evaluation used a multilevel framework and benchmarking techniques for review and analysis of PCM approaches. The evaluation covered three main levels of data collection and analysis: (i) the global level (including the total portfolio of selected mobilization approaches: 129 World Bank projects, 939 IFC projects, and 314 MIGA projects), (ii) the level of selected countries (12) using country cases and efficient frontier analysis, and (iii) selected mobilization approaches in client countries. The evaluation analyzed the PCM instrument level or platform level using industry benchmarking methods.

The Bank Group conducted 1,391 PCM operations during the evaluation period. Of these, the evaluation reviewed 345 projects in depth (table 1.2). The sample was selected with the aim of building the evidence base across the five types of PCM approaches. The World Bank PCM portfolio included investment project financing, guarantees, Program-for-Results, and Treasury operations (currently not accounted for by the World Bank in its PCM calculations; table 1.3). Appendix A provides detailed methodological information.

Table 1.2. Portfolio Review and Analysis Details, Evaluated and Validated by the Independent Evaluation Group (number of projects)


PCM Portfolioa

PCM Projects

Non-PCM Projectsb

Coded and Validated for PRAc





















Source: Independent Evaluation Group Datamart (for IBRD/IDA projects), Project Completion Report Self and Independent Evaluation Group Rating (for IFC AS projects), and Expanded Project Supervision Report database (for IFC IS projects).

Note: AS = advisory services; IBRD = International Bank for Reconstruction and Development; IDA = International Development Association; IFC = International Finance Corporation; IS = investment services; MIGA = Multilateral Investment Guarantee Agency; PCM = private capital mobilization; PRA = portfolio review and analysis.a. All IFC AS public-private partnership projects and MIGA projects are included in the PCM portfolio. No direct financial commitment is expected from IFC AS.b. Projects reviewed through the Independent Evaluation Group’s microevaluation program.c. Projects reviewed in depth for the purposes of this evaluation.

This evaluation is part of a thematic IEG evaluation series that examines MFD, focusing on PCM approaches and Bank Group contributions to the SDG financing agenda. Accountability for learning from PCM approaches is critical for the Bank Group in achieving its MFD goals and capital increase targets. This evaluation complements and builds on previous IEG reviews, most notably reviews on Bank Group policy-based guarantee (PBG) instruments, the IFC Asset Management Company (AMC), joint Bank Group projects, capital markets, PPPs, and MIGA nonhonoring guarantees.

Table 1.3. World Bank Private Capital Mobilization Projects, Distribution by Type, FY07–18





Investment project financing






IFFI bond



Natural catastrophe bond



Natural catastrophe risk pool



Pandemic global risk pool






Weather derivative product



Source: Independent Evaluation Group portfolio review and analysis of World Bank approved projects, 2007–18.

Note: FY = fiscal year; IFFI = International Finance Facility for Immunisation Company.

  1. The term “clients” in this report refers in most cases to governments or client countries. However, in some cases, it refers to private entities that are clients of International Finance Corporation (IFC) or the Multilateral Investment Guarantee Agency (MIGA). If a particular section or paragraph is specific to the World Bank, “clients” refers only to country clients; the capital providers are referred to as “investors.” For IFC, the clients are private sector borrowers and sponsors. For MIGA, the clients are the guarantee holders.
  2. Cascade framework: The Cascade recommends that reforms be tried first, followed by subsidies and then public investments in the following sequence: “When a project is presented, ask: ‘Is there a sustainable private sector solution that limits public debt and contingent liabilities?’ If the answer is ‘Yes’—promote such private solutions. If the answer is ‘No’—ask whether it is because of: (i) policy or regulatory gaps or weakness? If so, provide Bank Group support for policy and regulatory reforms; (ii) risks? If so, assess the risks and see whether Bank Group instruments can address them. If you conclude that the project requires public funding, pursue that option” (World Bank 2017, 2).