Private capital mobilisation for developing countries is essential to achieve global and local development objectives. Public budgets alone cannot meet the scale of investment required. This chapter examines how development banks and development finance institutions (DFIs) can use their institutional levers to scale up private capital mobilisation. It first shows that these institutions already mobilise most private finance but that mobilisation remains marginal, often treated as an add-on rather than a core function. It then explores how legal and strategic frameworks, financial frameworks and management, and organisational features and culture shape the ability of development banks and DFIs to mobilise private finance at scale. Finally, the chapter highlights that coherent reform across these three dimensions – supported by shareholders and international initiatives – is essential to embed mobilisation as a core institutional function and unlock private investment for growth, resilience and prosperity.
Mobilising Private Capital for Growth, Resilience and Prosperity
Abstract
Private capital mobilisation is central to delivering on development goals. By 2030, developing countries excluding the People’s Republic of China will need around USD 3.1-3.5 trillion annually to meet investment needs– including USD 450-550 billion of external private finance and USD 550-630 billion of domestic private finance (Bhattacharya et al., 2024[1]). Public budgets alone, constrained by fiscal pressure and rising debt (IMF, 2025[2]), cannot meet this scale of need (Bhattacharya et al., 2024[1]). To date, only a fraction of global financial assets is held in developing countries (FSB, 2023[3]); (Volz, Lo and Mishra, 2024[4]). Despite growing investor interest, the bulk of private capital is not deployed for developing countries’ economic transition (Kreibiehl, 2022[5]); (FSB, 2024[6]); (CPI, 2025[7]). Addressing the unprecedented mobilisation of resources to bridge the investment gap will only be feasible with substantially increased private capital mobilisation.
Development banks and development finance institutions (DFIs) are central to efforts to scale up private capital mobilisation in developing countries. Their financing operations, including risk management tools and approaches that enhance investment viability, can directly mobilise private finance into sustainable investment. They do so with their own balance sheet instruments and by managing concessional resources provided by donors, which can be deployed to de-risk transactions and crowd-in private investment.
The central role of these institutions is reflected in that they mobilise most private finance among development finance providers (Figure 2.1). Over 2016-2023, development banks and DFIs accounted for more than 90% of private finance mobilised through official development finance interventions. Multilateral development banks (MDBs) represent 75% of private finance mobilised on overage over the period, and the share of private finance mobilised through bilateral DFIs decreased from 25% in 2019 to 17% in 2023; in absolute terms it remained nearly flat (see also Figure 4.3 below). Development banks mobilised lower volumes of private capital from 2016 to 2023, representing a decline of 80% over the entire period. Across all providers, private finance mobilised is lowest for Least developed countries (LDCs) and Small Island Developing States (SIDS), where development needs dominate and financing gaps are particularly acute.
However, in practice, private capital mobilisation remains an add-on rather than a core function of development banking. Development banks and DFIs increased their use of blended finance and other mobilisation approaches, structures and instruments over the last decade, but these efforts are often small in scale, disconnected from corporate strategies and, consequently, a niche part of development bank and DFI operations. This is emblematic of bilateral development finance: in 2023, only 18% of development finance providers’ portfolios prioritised mobilisation, and just 5.7% of the official development finance1 (ODF) of members of the OECD Development Assistance Committee (DAC) supported mobilisation activities (OECD, 2023[8]); (OECD, 2025[9]); (OECD, 2025[10]).
Private finance mobilised through official development finance interventions by type of development finance provider, 2016-2023, in constant USD billion
Note: The figure shows amounts mobilised from the private sector by official development finance interventions. Mobilisation captures the private finance that can be causally linked to an official intervention, measured at the point where private investment is committed.
Source: Based on OECD (2025), CRS - Private: Mobilised private finance for development, http://data-explorer.oecd.org/s/22r.
The scale of private capital mobilised by development finance remains well below what is needed to meet this opportunity. While private capital mobilisation gained traction (OECD, 2025[9]), it continues to fall short of needs and expectations (World Bank, 2015[11]); (OECD, 2025[12]). In 2023, ODF activities directly mobilised USD 70 billion in private finance for developing countries (OECD, 2025[9]).
As financial institutions, development banks and DFIs are predisposed to play a central role in mobilising private capital. They operate on the basis of a financial business model: they raise and on-lend capital, assess and manage credit risk, and structure portfolios to balance financial soundness with development impact. They vary substantially in terms of financing volumes, institutional capacities and the orientation of their financing. But the basic model of a financial institution applies to all of them and distinguishes them from development agencies and multilateral funds (Box 2.1). As a result, development banks and DFIs can operate at significantly larger scale than development agencies and multilateral funds. In addition, their core functions, including credit risk assessment and portfolio management further position them to mobilise private capital. Their experience intermediating between public policy objectives and private sector participation makes them indispensable in the effort to scale up private capital mobilisation.
Many development banks and DFIs remain insufficiently geared towards mobilising private capital at the scale required to meet developing countries’ investment needs. Traditionally, development banks and DFIs have been set up as sole financiers and they continue to primarily focus on directly covering financing needs. Development banks specifically evolved to be structurally oriented towards providing conventional public sector financing and support. This sovereign focus characterises development banks with public-only mandates, whereas some MDBs combine sovereign and private-sector arms or windows (e.g. the International Finance Corporation, IFC). A small group of DFIs, such as British International Investment, the Dutch FMO or Germany’s DEG, operate exclusively with private clients.
Each model faces distinct challenges to scale up private capital mobilisation: public-only lenders often lack the structuring skills needed for complex mobilisation; mixed-mandate MDBs must balance sovereign and private pipelines; and private-sector-only DFIs tend to concentrate on senior debt rather than higher-risk catalytic instruments. In practice, MDBs that operate across both public and private sectors may have insufficient private sector expertise, while DFIs dedicated solely to private clients may have limited risk appetite and structuring capacity for more complex mobilisation. Changing the trajectory of private capital mobilisation requires a more systematic focus by development banks and DFIs on mobilisation. There is also an important distinction in functional focus: MDBs often engage in upstream policy dialogue and capital market development, whereas DFIs are typically more concentrated on direct investment operations.
The analysis in this report distinguishes between:
development banks and DFIs, which operate on a financial business model. This includes MDBs, bilateral development banks and DFIs from DAC countries as well as regional and national development banks from developing countries. Some MDBs include public and private sector arms, such as the World Bank Group with IFC and MIGA and the IDB Group with IDB Invest. DFIs are private-sector focused institutions.
development agencies, which mainly operate on budgetary resources that are typically disbursed or implemented in the form of grants
other multilateral institutions (including vertical funds), with a narrower mandate than development banks and agencies, requiring regular replenishment and often having limited implementation capacity
Annex A provides an overview distinguishing between multilateral, bilateral, regional and national development banks and DFIs.
Scaling up private capital mobilisation requires the development banks and DFIs to align their institutional framework with the mobilisation objective. A step change in mobilisation is not just a matter of expanding the finance at these institutions’ disposal. It implies calibrating institutional approaches and incentives, shaping operations and ensuring mobilisation becomes an integral part of development banking through their influence on institutional culture, practices, incentives and capacities (OECD, 2025[13]); (OECD, 2025[14]). In the absence of a systematic approach to rethinking development banking that focuses on shaping institutional factors for private capital mobilisation, the effectiveness and efficiency of development banks’ and DFIs’ mobilisation efforts will likely remain suboptimal.
Three institutional levers affect the focus of development banks and DFIs on scaling up private capital mobilisation:
1. Legal and strategic frameworks – Legal mandates, such as articles of agreement and shareholder resolutions, together with corporate strategies and institutional KPIs define the formal purpose, scope and boundaries of development banks and DFIs. They provide the authorising environment within which development banks and DFIs set priorities and allocate resources. Where mobilisation is absent from mandates or only broadly referenced in strategies, development banks and DFIs lack clear direction and authority to act. Even when private capital mobilisation is acknowledged in corporate strategies, it is often framed as a secondary or complementary activity rather than a core function, limiting strategic focus, weakening accountability mechanisms and reducing operational follow-through on mobilisation goals.
2. Financial frameworks and management – Financing is the core function of development banks and DFIs, but rules governing capital use, funding arrangements and risk management affect how this function contributes to private capital mobilisation. Capital adequacy requirements, pricing policies and risk frameworks shape which instruments can be deployed and how risks can be shared with or transferred to private investors. These rules serve to safeguard financial robustness, which is central to development banks’ and DFIs’ ability to raise capital and pass on financing at competitive rates. At the same time, how these frameworks are interpreted strongly influences whether development banks and DFIs rely on senior debt and originate-to-hold models, or whether they make more systematic use of mobilisation instruments such as guarantees, equity, mezzanine finance or securitisation. Financial sustainability and creditworthiness are essential for development banks and DFIs, but adaptive and evidence-based approaches to capital and risk management are critical to supporting mobilisation at the scale required to achieve global and local development objectives.
3. Organisational features and culture – Incentives, skills and organisational design influence how strategies and financial rules translate into practice. In many development banks and DFIs, operational systems remain geared toward traditional operations such as sovereign lending or direct finance, making mobilisation efforts more ad hoc. Mobilising private capital requires distinct capabilities, including upstream engagement with governments and firms, pipeline development, transaction structuring, support for local capital market development and co-creation of projects with private actors. Where internal incentives remain tied to disbursement volumes and mobilisation skills are siloed or underdeveloped, private capital mobilisation efforts are unlikely to become a systematic function of development banks and DFIs. Aligning incentives, broadening staff and skills, and embedding mobilisation responsibilities across departments are essential to foster an institutional culture that supports catalytic approaches and sustained engagement with private investors.
These institutional levers are interlinked and mutually reinforcing (Figure 2.2). Legal and strategic frameworks that do not prioritise private capital mobilisation constrain the development of incentive systems, reducing staff motivation and weakening accountability to shareholders. A narrow interpretation of financial frameworks and management, shaped by static approaches to capital adequacy and risk management, discourages the use of catalytic instruments and reduces demand for specialised structuring expertise. This lack of capacity reinforces a cautious approach, as institutions are less equipped to assess and manage the risks associated with more innovative transactions. In turn, organisational features and culture that are geared toward disbursement and traditional lending further entrench conservatism, as staff are neither incentivised nor trained to originate and execute transactions that crowd-in private investors. The result is a cycle in which mandates, financial rules and operational systems mutually reinforce one another, keeping mobilisation peripheral rather than embedding it as a core element of development banking. Breaking this cycle requires coherent rethinking of this institutional framework, so that legal frameworks provide clear authorisation; financial rules enable mobilisation approaches at scale; and operational systems reinforce the incentives and skills needed to deliver.
Source: Authors’ elaboration.
The mobilisation agenda addresses a core challenge to delivering growth, resilience and prosperity. The scarcity of financial resources and the constraints on accessing and mobilising finance from capital markets, for both public and private actors, constitutes a defining limitation and reality for developing countries – and the original rationale for development finance. Significant progress has been made through ongoing MDB balance sheet optimisation and capital adequacy reform, which help expand lending headroom, enhance risk-transfer mechanisms and strengthen capital adequacy approaches. These reforms mark an important step toward improving the efficiency of existing resources. However, balance sheet optimisation and capital adequacy reform alone will not suffice. The broader challenge is to align legal and strategic frameworks, financial frameworks and management, and organisational features and culture to make mobilisation a systematic, core function of development banks and DFIs, complementing their efforts to expand financing capacity.
This report supports the MDB reform agenda, which highlights private capital mobilisation as a shared strategic priority across MDBs. Significant progress has been made since MDBs jointly reaffirmed their commitment to private capital mobilisation in 2023 (AfDB, 2023[15]); (IFC, 2023[16]). The analysis in this report builds on the G20-endorsed Comprehensive Roadmap for MDB Reform, which identified clearer targets and strengthened incentives as key to a stronger focus of MDBs on private capital mobilisation (G20 Brazil Finance Track, 2024[17]). It also builds on insights into institutional barriers and emerging good practices for risk mitigation generated by the World Bank Private Sector Investment Lab, a high-level forum of private finance and development leaders identifying concrete ways to scale up private capital (World Bank, 2023[18]). This report outlines that these initiatives supported MDBs in significantly advancing their increasing alignment with the mobilisation imperative.
Overcoming developing countries’ constraints in meeting their large-scale investment needs also requires action beyond efforts at direct mobilisation. The growing understanding of constraints on expanding and mobilising private capital finance in developing countries includes (Bhattacharya et al., 2024[1]):
Shortage of project pipelines – A persistent lack of projects that meet bankability standards due to limited early-stage equity and project preparation finance, especially in LDCs and SIDS, as well as challenges to aggregate smaller projects into investable portfolios in Upper Middle-Income Countries (UMICs).
Shallow domestic capital markets – Underdeveloped local markets limit the availability of long-term finance and local currency solutions, while weak regulatory frameworks deter institutional investors.
Insufficient enabling environments – Inconsistent policies, lack of integrated planning, weak public-sector capacity, gaps in capital market infrastructure, high transaction costs and limited insurance penetration undermine investor confidence.
Elevated financing costs – Macroeconomic volatility, debt sustainability challenges, political and policy risks, and mispriced premia result in financing costs two to three times higher than in advanced economies, rendering many investments commercially unviable.
Underutilised risk-sharing instruments – Blended finance and other risk-sharing instruments, approaches and structures remain unrealised. Available tools are often complex, fragmented or untested in developing countries, while institutional inertia and mandates that focus on lending volumes or profitability discourage mobilisation-oriented innovation.
Persistent data gaps – Lack of accessible and reliable financial, project-level risk data constrains accurate risk assessment and valuation of resilience or nature-based solutions. Proprietary risk data and limited country/sector-level information put developing countries at a disadvantage, deterring investment and inflating perceived risks.
The focus on institutional levers that development banks and DFIs dispose of needs to be situated within this broader context as part of a systemic approach. Unlocking private capital at the scale required depends on progress across all these fronts. A sole focus on maximising direct mobilisation volumes would miss the point that, to be effective, mobilisation should be part of and geared toward a strategic and systematic effort to catalyse and unlock sources of finance currently not available to developing countries and contribute to market creation. Mobilisation can take different forms, including for example direct mobilisation at the transaction level and indirect mobilisation – or catalysation – which covers indirect and downstream private investments enabled by public interventions with the intent to create an enabling environment2. Further, there are indispensable complements to direct mobilisation efforts, i.e. development banks’ and DFIs’ activities to support governments in reforming broader investment policies, developing investment pipelines, removing specific barriers to investment, enhancing capacity and stimulating the creation of markets .
Changing the trajectory of private capital mobilisation requires extending the MDB reform agenda across the broader landscape of development banks and DFIs (Finance in Common, 2025[19]) (Annex A). Bilateral development banks and DFIs, and national and regional development banks in developing countries are indispensable to this effort. Collectively, these institutions hold assets larger than those of MDBs. Additionally, the local embeddedness, access to domestic capital markets and close ties with public and private actors particularly of national development banks from developing countries enable them to identify and finance investment opportunities aligned with national priorities.
The reform agenda should continue to focus on enhancing the holistic ability of developing countries to meet their financing and investment needs. Achieving this entails a delicate balance, especially of concessional resources. While concessionality is key to mobilisation, minimising and exiting from it where possible is fundamental to market creation, avoiding crowding-out and ensuring additionality. Concessional finance is also the basis for all other dimensions of support to developing countries, including concessional lending to the poorest countries and those most in need, such as LDCs and SIDS. At the same time, using up scarce ODF and the financing space of developing countries has a direct opportunity cost when it would be possible to generate these resources commercially in a sustainable way. Mobilisation should increase resource availability where private finance is unlikely to flow, such as in the poorest countries or in fragile settings.
The economic transitions of developing countries are increasingly recognised as a compelling investment proposition for private actors. Rapid urbanisation and expanding markets create opportunities in reliable energy and resilient infrastructure. Mobilising private capital is therefore necessary for closing financing gaps and critical to supporting structural transformation and long-term, inclusive growth, as well as the efficient use of scarce development finance.
This report contributes to the broader agenda of realising the investment potential of private capital for growth, resilience and prosperity. It provides data, information and evidence on the state of play of institutional levers and identifies how development banks and DFIs can be better equipped to mobilise private capital at the necessary scale and speed, highlighting drivers of institutional change across legal and strategic frameworks; financial frameworks and management; and organisational features and culture. Chapter 2 examines legal and strategic frameworks, including mandates, corporate strategies and KPIs, and how they influence the prioritisation of mobilisation. Chapter 3 explores financial and risk frameworks, focusing on capital structures, instruments and risk approaches that determine development banks’ and DFIs’ ability to crowd-in private capital. Chapter 4 assesses organisational features and culture, analysing how incentives, skills and organisational design shape mobilisation outcomes. The concluding Chapter 5 outlines policy options for shareholders, development banks and DFIs to scale up private capital mobilisation in support of developing countries’ priorities.
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← 1. Overall development finance is defined as the sum of bilateral official development assistance (ODA) flows, bilateral other official flows (OOF) except OOF grants and loans for commercial purposes, and all grants and loans by multilateral development institutions, irrespective of the grant element of the loans. Other official flows are defined as transactions by the official sector with ODA-eligible countries which do not meet the conditions for eligibility as ODA, either because they are not primarily aimed at development, or because they have an insufficient grant element (OECD, n.d.[20]).
← 2. The OECD is currently collaborating with MDBs and DFIs through the MDB–OECD DAC Working Group on Mobilisation to document and clarify approaches to capturing these effects, drawing on existing institutional initiatives and feedback from members of the DAC Working Party on Development Finance Statistics. Tools like securitisation, warehouse facilities, and blended finance platforms are increasingly central to these efforts to complement direct mobilisation with scalable market creation.