Efforts to mobilise private finance for sustainable development often focus on blended finance - using public resources to increase private investment. To be sure, such instruments are critical for de-risking development initiatives at the project level, for example by using a public guarantee to protect private lenders. But they alone cannot fill the USD 4 trillion annual financing gap for the Sustainable Development Goals.
Mobilising private capital at scale requires stable, investable climates – including sound macroeconomic policies, effective regulations, and strong institutional capacity. Without them, emerging markets and developing economies will continue to face persistent barriers to attracting private finance. Catalytic technical assistance (TA) can play a critical role in supporting the establishment of such enabling environments.
What is catalytic technical assistance?
In the context of private finance mobilisation, technical assistance most often refers to direct, project-specific interventions, e.g. helping private companies access external financing; private-public partnership transaction advisory services; or project feasibility studies, reviews and analyses. But TA also encompasses more systemic activities that aim to shift the conditions under which investment occurs. Such activities, focusing on market-enabling policy reforms and institutional capacity-building, are called macro-level catalytic TA.
What does this look like in practice? It can be activities undertaken by donors, DFIs and MDBs to help recipient countries build legal frameworks, strengthen financial regulations, improve local government capacity, and support reforms that benefit entire sectors. While these efforts will not yield results overnight, they are vital because they lay the foundations upon which sustainable, large-scale investment becomes possible.
Yet, catalytic TA remains under-recognised and misreported across official development assistance statistics. There are many reasons for this. In some cases, when multiple development actors are involved in the same project, there can be attribution challenges and double counting concerns; technical assistance providers may also have difficulty quantifying catalytic activities; or they can fail to recognise the role of developing country governments in building robust enabling environments. As these activities are not reported at their real value, development actors tend to deprioritise or ignore them in their project planning.
To meet the scale of today’s development challenge, donors, MDBs and DFIs must rethink how they deploy and account for catalytic TA. Here are three policy considerations that can help guide this shift.
1. Help donors and development finance institutions (DFIs) work together, not against each other
Too often, catalytic TA and blended finance investment initiatives are operated in silos. Donor governments typically focus on policy reform and capacity-building initiatives, while DFIs prioritise bankable projects and credit enhancements. Even when aimed at the same market barriers - like insufficient project pipelines, high transaction costs or market illiquidity - efforts are rarely considered in sequence, or co-designed. What would it look like for donors and DFIs to work together, and take an integrated approach to sustainable development? Donors could fund catalytic TA, for instance, to improve a recipient country's renewable energy regulatory regime, opening the way for DFI-backed investments in independent power producers, taking advantage of the newly established legal framework. This kind of co-operation would help ensure that reforms support project pipelines and help bridge the gap between donors’ risk appetite and DFIs’ commercial focus. Co-ordinated approaches that pair catalytic TA with blended finance tools can help de-risk markets, crowd in investment, and strengthen long-term private sector development.
2. Target catalytic TA where it unlocks markets, not just improves systems
TA is considered most “catalytic” when it removes institutional constraints and delivers system-wide benefits. This kind of assistance includes regulatory and institutional capacity reform that unlocks whole asset classes and sector-wide improvements. Examples include helping establish digital collateral systems for agri-finance; developing legal, transparency and disclosure frameworks for Green, Social, Sustainability, and Sustainability-Linked (GSSS bond issuances; and building stock exchanges to increase market liquidity and investor confidence. Crucially, this requires donors, MDBs and DFIs to more closely engage with recipient country authorities, to ensure that reforms are politically feasible, locally owned, and appropriately coordinated.
3. Better capture the role of catalytic TA through evidence and measurement
The value of catalytic TA also remains under-evidenced. Traditional mobilisation reporting measures direct causal links to private finance flows, while catalytic TA enables downstream, indirect private finance flows over time. This accounting system leaves donors with few incentives to invest in upstream reform, even when it is critical to downstream mobilisation.
To correct this, a different kind of evidence base is required, with case studies exploring the mobilisation and catalysation effects of TA, and theory-of-change models that can help identify effective catalytic TA strategies. This evidence base should be built through peer learning sessions and transparent data sharing.
In addition to better evidence, development actors need standardised metrics for quantifying catalysation and measuring the impacts of catalytic TA. Across the development finance system, inconsistent definitions and fragmented frameworks compound the undervaluation of catalytic TA initiatives.
As the development community increasingly looks to the private sector to bridge financing gaps, it must allow for the scaling up of the catalytic TA interventions that make its participation possible. Only then can private finance flow, not just to a handful of projects, but across entire markets, delivering scale and sustainability. Together, stronger evidence and harmonised measurements would help improve resource allocation toward high-impact TA initiatives, while ensuring such efforts in frontier markets and early-stage market-building are recognised.
The ideas presented in this blog reflect ongoing work by OECD analysts.
