The Inter-American Development Bank (IDB) Scaling4Impact (S4I) is a landmark USD 1 billion synthetic risk transfer (SRT) transaction launched in 2024 by IDB Invest, the private sector arm of the IDB, in collaboration with Newmarket Capital. It marks the first-ever SRT between a private investor and an Americas-based multilateral development bank.
The Inter‑American Development Bank’s Scaling4Impact synthetic risk transfer
Abstract
Balance sheet constraints faced by multilateral development banks (MDBs) limit their ability to scale lending. At the same time there is insufficient access to diversified and investible MDB assets for institutional investors. Moreover, the high perceived risk in emerging markets and developing economies (EMDEs) deters private investors. This challenge is further exacerbated by the underdeveloped securitisation markets for MDBs and the need for robust risk-sharing mechanisms. By addressing these obstacles, the Inter-American Development Bank (IDB) Scaling4Impact (S4I) transaction seeks to mobilise private capital at scale, enhance lending capacity, and establish a replicable model for financial innovation in development finance.
S4I is a landmark USD 1 billion synthetic risk transfer (SRT) transaction launched in 2024 by IDB Invest, the private sector arm of the IDB, in collaboration with Newmarket Capital. The S4I transaction marks the first-ever SRT between a private investor and an Americas-based MDB. The S4I financial structure allows private investors to access exposure to MDB assets from Latin America and the Caribbean. The S4I transaction structure consists of the following:
senior tranche: 13.0 – 100.0%
senior mezzanine tranche: 10.0 – 13,0%, unfunded insurance provided by AXA XL and AXIS
junior mezzanine trance: 2.8 - 10,0%, funded cash collateral by Newmarket Capital
junior tranche: 0.0 - 2.8%, retained by IDB Invest
The transaction involved a USD 1 billion reference portfolio, spanning 20 countries and 10 subsectors across Latin America and the Caribbean, with loans to large corporates, infrastructure projects, and financial institutions. The S4I transaction unlocked up to USD 500 million in new lending capacity to be directed toward high-impact, socially- and environmentally critical investments in an historically underfunded region.
The S4I introduced several financial innovations that build on the accomplishments of predecessor MDB SRTs. This transaction successfully integrated private sector insurers – AXA XL and AXIS Capital - on the senior mezzanine tranche, marking a first in the MDB securitisation space. Their participation enhances risk-sharing mechanisms and signals private investors’ growing confidence in MDB-backed transactions. Furthermore, Newmarket and IDB Invest benefited from a more defined protocol from Fitch, Moody’s, and S&P rating methodologies tailored for MDB risk transfer transactions. Global MDBs had collaborated with rating agencies prior to the transaction to establish a clarified protocol for MDB risk transfer, which simplified execution and enhanced efficiency for S4I and future transactions.
S4I operates on the core principles of blended finance and the structure aligns with the OECD-DAC Blended Finance Principles by demonstrating mobilisation, crowding in private sector investment and ensuring a tailored approach to local contexts.
The significance of S4I extends beyond its immediate financial impact. It serves as a model for future MDB-private sector partnerships, reinforcing the role of synthetic risk transfers (SRTs) in scaling development finance. The S4I transaction supports the crowding in of private sector capital by laying the groundwork for future participation of private finance investors in MDB securitisation for both SRT investors and insurers. Additionally, even when an MDB SRT is completed bilaterally, it provides an opportunity for the asset manager to educate their limited partner base on the strengths of MDB balance sheets. The tool also provides an avenue for private sector investors to access exposure to EMDEs through the expertise and long-standing relationships built by MBDs/DFIs.
By optimising balance sheets and freeing up capital for critical infrastructure and social projects, S4I directly supports the SDGs and the G20’s call for MDBs to enhance capital efficiency. In a financial landscape where traditional concessional funding remains constrained, such innovative structures offer a replicable pathway to mobilising substantial private investment for development.
Moreover, S4I highlights the increasing involvement of seasoned investors in the development finance space, working closely alongside DFIs and MDBs to refine risk transfer mechanisms and structure deals that attract commercial capital. Partnerships like S4I demonstrate how expertise in structured finance, risk management and capital markets can be harnessed to create meaningful economic and social impact. The collaboration between MDBs and private investors is evolving, with more institutional capital being directed toward high-impact transactions that bridge the gap between profitability and development outcomes.
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