Mobilizing private capital is critical to achieving several Sustainable Development Goals (SDGs). According to the United Nations Conference on Trade and Development’s World Investment Report 2016, achieving the SDGs will require $2–3 trillion a year through 2030. Mobilizing that much capital necessitates broadening the sources of financing and increasing private capital mobilization (PCM) in addition to domestic revenues. 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: Strengthen the means of implementation and revitalize the global partnership for sustainable development).
The World Bank Group and its development partners have adopted an official definition of PCM and jointly report on PCM progress every year to their shareholders and the Group of Twenty (G-20). Multilateral development banks (MDBs) and European development finance institutions (DFIs) have agreed to a common definition for PCM, which consists of private direct mobilization and private indirect mobilization. Since 2016, the MDBs and European DFIs have jointly reported on PCM progress to the G-20 and its shareholders. In 2018, the MDBs and European DFIs reported more than $69 billion in private capital mobilized in low- and middle-income countries. In addition to private direct and private indirect mobilization, the International Finance Corporation (IFC) reports its PCM achievements through the core mobilization indicator, which counts capital mobilized on commercial terms from private and public sources (for example, other MDBs, DFIs, and sovereign wealth funds).
The Bank Group mobilizes private capital by combining two complementary approaches. One involves deploying a mix of financing and guarantee instruments, setting up investment platforms, using short-term financing initiatives, and providing public-private partnership (PPP) transaction advisory. The other involves working with clients (governments and private corporations), investors (for example, project sponsors and institutional investors), financing partners (such as commercial banks), and development partners. The World Bank mobilizes private capital primarily, though not exclusively, through guarantee instruments. Although the World Bank does leverage its balance sheet to mobilize private capital, its principal contribution to increasing private capital flows toward Maximizing Finance for Development is via the catalyzation of private capital (see Key Concepts). IFC has a suite of instruments to mobilize private capital, including debt and equity financing platforms that pool capital from institutional investors, insurance firms, and sovereign agencies. All activities of the Multilateral Investment Guarantee Agency (MIGA)—including its political risk insurance and nonhonoring guarantee instruments—facilitate PCM.
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 the future. 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.
Key Findings on PCM Targets
The Bank Group has committed to mobilizing private capital to help meet the 2030 SDGs. In responding to global challenges, the Bank Group has adopted both G-20 commitments and corporate targets for PCM. The two institutions maintain different sets of definitions internally per their business model and operational needs. The World Bank counts PCM activities at Board of Executive Directors approval rather than financing commitments from third-party capital providers. This tends to overcount World Bank PCM volumes in the case of project cancellations after approval. IFC counts public sources of capital in its core mobilization ratio but at the project commitment stage. The G-20 target for the International Bank for Reconstruction and Development (IBRD) is to increase PCM volume to $6.3 billion by 2020. The G-20 target for IFC is to increase PCM volume to $10.1 billion by 2020 (table O.1). The corporate target for IBRD is a PCM mobilization ratio of 25 percent by 2020, sustained until 2030. The corporate target for IFC is a core mobilization ratio of 80 percent by 2020, sustained until 2030.
Volume ($, billions)
Mobilization Ratio (%)a
2020 G-20 target
2020–30 corporate target ratio
25 (for IBRD)
Source: Multilateral development bank report to the G-20, Bank Group Capital Increase Package Proposal.
Note: G-20 = Group of Twenty; IBRD = International Bank for Reconstruction and Development; IFC = International Finance Corporation. G-20 private capital mobilization targets are at the Bank Group level.a. Measured as private capital mobilization for IBRD and core mobilization (private and public capital mobilization) for IFC. (See Key Concepts, page x).
IBRD progress on PCM targets has slowed since 2017, but scaling up is feasible. IBRD met its $5.9 billion G-20 target in 2017 through partial risk guarantee issuances to critical energy and infrastructure projects. Since 2017, IBRD’s PCM volumes have dropped to $3.7 billion in 2018 and to $2.6 billion in 2019. Although it may be difficult for IBRD to meet its G-20 2020 target of $6.3 billion, it can realistically meet its corporate target of a 25 percent mobilization ratio on average over the next 10 years.
IFC has increased its mobilization ratio since 2017 and exceeded its core mobilization targets in 2018 and 2019. This is partly because of increases in mobilization from public sources (for example, MBDs, DFIs, and sovereign wealth funds). IFC’s core mobilization volume grew from $7.5 billion (63 percent mobilization ratio) in 2017 to $11.6 billion (100 percent mobilization ratio) in 2018. In 2019, IFC mobilized $10.2 billion (114 percent mobilization ratio).
MIGA has no explicit PCM targets because all of its interventions count as PCM. MIGA’s interventions through political risk insurance, nonhonoring guarantees, and credit enhancement products count toward PCM commitments. MIGA’s reinsurance activities, through treaty and facultative reinsurance, further increase its capacity for PCM. Thus, MIGA has been growing its PCM portfolio in line with its overall business targets and priorities.
Climate-linked mobilization commitments are growing in the Bank Group portfolio. The Bank Group climate-linked mobilization volume was 45 percent of total PCM in 2018 compared with 28 percent in 2016. This ratio is similar to the overall ratio achieved by MDBs, which is an average of 46 percent of their project portfolios.
Key Findings on Relevance
Bank Group PCM approaches are relevant to both country and corporate clients. Over the evaluation period (2007–18), the Bank Group has pioneered and deployed PCM instruments that are relevant for country and corporate clients. (The PCM harmonized definition and reporting on which the evaluation is based came into effect in 2016–17. This report refers to the harmonized definition of PCM, but it evaluates the performance of each instrument and platform based on its specific objectives at the time when it was approved.) PCM instruments have crowded in commercial banks, institutional investors, sovereign wealth funds, asset managers, and pension funds; supported client countries’ policy reforms (for example, through World Bank policy-based guarantees); and helped projects fill the financing gap (for example, World Bank guarantee projects in Albania and Montenegro). In addition to PCM instruments, corporate clients in Sub-Saharan Africa and Latin America and the Caribbean, for example, have used IFC’s mobilization platforms—the IFC Asset Management Company (AMC) and the Managed Co-lending Portfolio Program (MCPP)—to diversify funding sources and get longer-term financing than is available locally (for example, energy and transport infrastructure projects in Ghana, Honduras, Nigeria, and Paraguay).
PCM approaches partially meet investors’ priorities and expectations. Bank Group engagement with institutional investors, commercial banks, and project sponsors used a wide range of PCM modalities. Institutional investors’ expectations have been partially met in equity mobilization platforms because of lower-than-expected financial returns and lack of investable projects in the pipeline. Commercial banks and investors found debt platforms relevant because they helped diversify their portfolio exposure in private firms based in emerging markets and developing economies.
Key Findings on Effectiveness
Bank Group approaches are mostly effective in mobilizing private capital. World Bank guarantees had positive outcomes by de-risking and improving projects’ bankability at the commitment stage and increasing access to infrastructure services for beneficiaries at the project maturity stage. However, guarantee projects did not lead to subsequent PCM engagements in other sectors within the country. IFC syndicated loans increased client firms’ access to finance. IFC debt and bond mobilization platforms—the Green Cornerstone Bond Program and the MCPP—were effective in meeting client and investor expectations. Equity platforms such as AMC showed mixed results in meeting IFC’s development objectives: at maturity, funds managed by AMC partially met IFC’s development objectives, according to a 2018 Independent Evaluation Group meso evaluation. PPP advisory projects have created a large role for domestic and South-South investors from emerging markets. MIGA has positioned itself well among MDBs in addressing PCM thanks to its new products and the share of its exposure that gets reinsured (for example, power generation projects in Sub-Saharan Africa and capital optimization projects in Latin America and the Caribbean).
Projects with domestic investor participation, MDB involvement, and World Bank–IFC–MIGA collaboration have better PCM project outcomes. Projects with domestic investor participation had greater success (80 percent) than those with overseas investors only (60 percent), and they had success rates similar to projects with both domestic and overseas investors. Domestic investor participation improved project outcomes because domestic investors engaged actively in project design and implementation, bringing knowledge of the local market and regulations. The presence of a bilateral DFI was not associated with significantly improved project performance. However, the presence and involvement of other MDBs was associated with high success rates (90 percent versus an average of 70 percent for PCM projects without MDB participation). The difference was partly due to greater resource availability from MDBs; similarities in due diligence; environmental, social, and governance compliance requirements; and monitoring from multiple parties after financial close to ensure greater quality of outputs and outcomes. Evidence from energy sector projects indicates that concomitant World Bank, IFC, and MIGA interventions have a positive effect on PCM outcomes. These joint interventions involve either working sequentially as a project’s de-risking needs evolve to financing needs or working concurrently as One Bank Group on upstream issues.
IFC’s PCM approaches have led to demonstration effects with corporate clients. IFC PCM projects attracted repeat client business, particularly in East Asia and Pacific and in Latin America and the Caribbean. Europe and Central Asia attracted the most repeat client business for MIGA. (Repeat engagements could mean that IFC or MIGA support the expansion of an ongoing project or an existing client in a new project. Investors’ engagement in repeated business indicates that they trust the Bank Group’s PCM approaches and believe that projects developed through the Bank Group will be sustainable.) Nonfinancial additionality, however, was limited. Only 21 percent of IFC projects had evidence of nonfinancial additionality (18.8 percent with both types of additionality), manifested in addressing environmental, social, and governance issues throughout the life cycle of the project.
PCM project performance is not systematically related to the amount of private capital that countries subsequently attract. Countries with successful PCM projects do not necessarily receive increased private capital flows or have spillover effects. It takes time and sustained investment in a sector for the Bank Group to mobilize an amount of private capital sufficient to trigger a demonstrable increase in countries’ overall private capital flows. It is also essential for governments and the Bank Group to continue to support business environment reforms post-PCM and to address constraints that may persist and need to be addressed to facilitate private investments in the long term.
Enabling environment reforms are often necessary for PCM and should be sustained, but an opportunistic approach to reforms may also lead to PCM. In the context of the World Bank’s enabling environment work, projects achieved financial close and mobilized private capital in two scenarios: (i) when the Bank Group–supported reforms addressed sector and macroeconomic constraints in a comprehensive way (for example, energy sector regulations and business regulation reforms), and (ii) when the Bank Group responded flexibly to opportunistic situations in a particular subsector (for example, PPP advisory in the transport sector) or in lightly regulated environments in the absence of upstream reform.
Constraints on PCM
The World Bank and IFC country strategy cycles are not fully aligned with PCM ambitions. During the evaluation period, countries’ track records and potential did not drive the targeting of the World Bank and IFC’s PCM approaches in attracting private capital. Country Partnership Frameworks and Country Private Sector Diagnostics are essential for formulating PCM strategies. However, interventions based on a single three-year country strategy cycle may not be sufficient, especially for attracting institutional investors with much longer investment horizons. Insurance investors, for example, pursue bankable assets (such as infrastructure) that can generate steady returns over a 20- or 30-year period.
IBRD PCM targets have not cascaded to Regional units and Global Practices (GPs), while IFC has mobilization targets in its scorecard. World Bank memorandums of understanding between Regional vice presidencies and GPs—and related scorecards—do not include PCM targets, yet there is a need to better align staff incentives to reward achievement of PCM targets. World Bank GP staff are not benefiting from the comparative advantage available within the Infrastructure, Public-Private Partnerships, and Guarantees unit of the World Bank or within the World Bank Treasury, the staff of which often have greater expertise with financial instruments and a longer track record in financial structuring of complex projects than the task team leaders and sector specialists do. IFC does have mobilization targets in its Corporate Scorecard, including targets on IFC’s own account long-term finance and total long-term finance targets.
IFC PCM approaches are not consistently aligned with investors’ risk appetites. Institutional investors have limited risk appetite to cofinance the unlisted infrastructure and financial sector projects that IFC typically supports. Domestic investors in emerging markets and developing economies are underserved by the Bank Group’s umbrella support (for example, IFC syndications) and lack local currency funding instruments. In some cases, adequate risk return analysis for IFC exposure and industry regulatory requirements are not fully aligned with the approaches (for example, MCPP). Furthermore, tapping a new investor base, such as the insurance industry, requires additional resources, new skills, and better risk monitoring and auditing.
Governments need to address constraints on PCM, including the enabling environment, client capacity, working with other MDBs, and competition from government lenders. Several business environment constraints limit PCM, including poor governance and regulatory barriers to private capital flows. Client countries have limited understanding of PCM instruments and platforms and limited capacity to identify a pipeline of bankable projects and value them correctly. The Bank Group’s addressable market has been shrinking in recent years. The reduction is due to bilateral initiatives (for example, export credit agencies) and sovereign initiatives (for example, government-to-government initiatives, sovereign wealth funds, and state-owned banks) that can channel public capital without the participation of MDBs, including the Bank Group. This is particularly evident in middle-income countries. Governments are primarily responsible for addressing those constraints, in some cases with Bank Group support through policy lending or technical assistance.
Opportunities to Scale Up PCM and Recommendations
All Bank Group client countries—including low-income countries (LICs) and lower-middle-income countries (LMICs)—have PCM potential. Private capital flows to Bank Group client countries are below potential, suggesting an opportunity to mobilize more, especially among LICs and LMICs. Independent Evaluation Group models suggest that, given investment climate and income levels, the capacity of client countries to absorb private capital flows—including foreign direct investment, portfolio, and private sector borrowing—is at 50–80 percent of its potential. The Bank Group can develop a PCM project pipeline in the LICs and LMICs. When a country’s governance, capital markets, and business environment meet a certain threshold (which is more likely in upper-middle-income countries), private sector flows are likely to happen without MDB or Bank Group involvement. At that point, the additionality of the Bank Group’s PCM activities and the mobilization potential of the Bank Group are likely to decline.
The coronavirus pandemic (COVID-19) response requires mobilizing both public sources and institutional investor capital sources in the short to medium term. The pandemic will likely limit the expansion of traditional PCM instruments such as B loans. Platform approaches such as AMC or MCPP, by contrast, tend to have longer investment horizons (for example, 5–12 years). Furthermore, according to a BlackRock Investor Pulse Survey in March 2020, investors’ interest in private equity has remained steady or increased as the valuations of underlying project assets have declined because of COVID-19. Both traditional Bank Group PCM solutions (for example, World Bank and MIGA guarantees, trade finance, and short-term liquidity facilities) and countercyclical approaches (for example, the Distressed Assets Recovery Program) can continue to play important roles in mobilizing private capital in light of the ongoing pandemic.
Three near-term actions can enhance the ability of the Bank Group to mobilize private capital and thus improve the probability of meeting corporate targets and improving PCM outcomes:
- Prioritize client countries for PCM approaches, with corresponding targets cascading to the Regional units and GPs (IBRD), to meet the 2030 PCM targets. Country strategies can be used to discuss PCM opportunities and priorities, including in LMICs and LICs, at the same time as engaging in longer-term strategic discussions about attracting institutional investors who have much longer investment horizons. IBRD needs to cascade PCM objectives to the Regional units and GPs, with clear incentives for operational units to meet them.
- Expand PCM platforms, guarantees, and disaster risk management products commensurate with project pipeline development (Bank Group). There is room for guarantees—particularly policy-based guarantees—to grow to support new project financing or refinancing efforts. World Bank disaster risk management products and programmatic PPP solutions are experiencing a renewed demand. They could be scaled up with support from the World Bank Treasury and Infrastructure, Public-Private Partnerships, and Guarantees units, especially in view of client governments’ responses to pandemics.
- Develop new PCM products and improve product alignment with the needs of new investor groups and partners (IFC and MIGA). Simpler products comparable to investors’ existing portfolios and with exposure to emerging markets and developing economies are relevant to most investors. Global and regional clients also seek innovative instruments. Pooled currency facilities and short-term liquidity facilities will be even more relevant in view of the pandemic. There is market demand for political risk guarantee solutions that offer comprehensive coverage or support collective investment vehicles targeting LMICs and LICs. Pilot approaches on innovative instruments and better investor alignment can scale up PCM and improve development outcomes.