Private capital mobilisation is central to meeting the investment needs of developing countries, yet development banks and development finance institutions (DFIs) are not yet fully geared to deliver at the scale required. Mobilisation remains an add-on rather than a core function of development banking. This chapter provides an overview of how three interlinked institutional levers – legal and strategic frameworks, financial frameworks and management, and organizational features and culture – shape the ability of development banks and DFIs to scale up private capital mobilisation. It summarises evidence on how mandates, financial instruments, risk frameworks and staff incentives in many institutions constrain mobilisation, and highlights where emerging reforms are beginning to shift institutional practice. The chapter concludes that a system-wide transformation is needed, underpinned by clear shareholder direction, to embed mobilisation as a core institutional function across multilateral, bilateral, regional and national development banks and FDIs – making efficient use of scarce public finance to unlock private investment for growth, resilience and prosperity.
Mobilising Private Capital for Growth, Resilience and Prosperity
Abstract
Delivering on global growth and development goals requires an unprecedented mobilisation of finance. 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, already constrained by rising debt and fiscal pressure, cannot meet this scale of need (IMF, 2025[2]). Therefore, private finance has to play a central role. Currently, only a fraction of global financial assets is deployed in developing countries and global capital overall is not aligned with long-term growth, resilience and prosperity (FSB, 2023[3]); (Volz, Lo and Mishra, 2024[4]); (Kreibiehl, 2022[5]).
The transitions of developing countries towards growth, resilience and prosperity 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 necessary to close financing gaps and critical to support structural transformation and long-term growth and efficient use of scarce development finance1. In essence, mobilisation should increase the availability of relevant resources to areas where private finance is unlikely to flow, such as the poorest countries or fragile settings.
Development banks and development finance institutions (DFIs) are central to scaling up private capital mobilisation for resilient economic growth pathways in developing countries. As financial institutions, they are predisposed to play a central role in mobilising private capital. They already mobilise most private finance among development finance providers (Figure 1.1). Over 2016-2023, development banks and DFIs accounted for more than 90% of private finance mobilisation through development finance. Multilateral development banks (MDBs) mobilised on average 75% of total private finance over the period; the share of private finance mobilised through bilateral DFIs decreased from 25% in 2019 to 17% in 2023.
Yet, the scale of this mobilisation is well below what is needed. Private capital mobilisation remains an add-on rather than a core function of development banking. While mobilisation has gained traction (OECD, 2025[6]), it continues to fall short of needs and expectations (World Bank, 2015[7]); (OECD, 2025[8]). In 2023, official development finance2 (ODF) activities directly mobilised USD 70 billion in private finance for developing countries (OECD, 2025[6]). For the most part, 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 were set up as sole financiers and they continue to focus on directly covering financing needs. Changing the trajectory of private capital mobilisation requires them to focus more systematically on mobilisation.
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.
Action needs to happen within a holistic approach to mobilisation and associated reform efforts. Significant progress has been achieved particularly since multilateral development banks (MDBs) jointly reaffirmed their commitment to private capital mobilisation in 2023 (AfDB, 2023[9]); (IFC, 2023[10]). There is an increasingly shared understanding of the constraints of expanding and mobilising private capital finance in developing countries (Bhattacharya et al., 2024[1]). These include insufficient enabling environments, shallow domestic capital markets and associated high financing cost, unavailable project pipelines, elevated financing costs, underutilised risk-sharing instruments, and persistent data gaps. Unlocking and catalysing private capital at the scale required depends upon progress across all these fronts. Moreover, changing the trajectory of private capital mobilisation requires extending the MDB reform agenda across the broader landscape of development banks and DFIs to ensure that similar reforms are adopted as appropriate and applicable across bilateral, regional and national development banks and DFIs.
Scaling up private capital mobilisation requires development banks and DFIs to align their institutional frameworks with the objective of mobilisation. Three interlinked and mutually reinforcing levers are central in this regard:
1. Legal and strategic frameworks – Legal mandates, such as articles of agreement and shareholder resolutions, together with corporate strategies and institutional key performance indicators (KPIs) define the formal purpose, scope and boundaries of development banks and DFIs. If articulated adequately, these can help focus on mobilisation, alongside sovereign and direct lending where appropriate.
2. Financial frameworks and management – Financing is the core function of development banks and DFIs, and financing models and associated rules safeguard financial robustness. Incorporating versatile yet prudent risk management can guide financing instruments and portfolio management approaches to effectively support mobilisation, while keeping a focus on financial sustainability and creditworthiness.
3. Organisational features and culture – Incentives, skills and organisational design influence how strategies and financial rules translate into practice. Specific capabilities are required for mobilising private capital and can complement existing skills focused on sovereign lending or direct finance. Internal incentives that go beyond commitment volumes, can help make private capital mobilisation efforts become a systematic function of development banks and DFIs.
The mandates of development banks and DFIs often provide broad strategic direction but rarely make private capital mobilisation a priority. They have profoundly shaped their architecture and functions, influencing operational focus, staffing profiles, internal incentives and other elements pertaining to operational systems and organisational culture. As such, institutional mandates are foundational to defining the scope and ambition of private finance mobilisation efforts. Recent international reform initiatives highlight the importance of aligning institutional mandates with contemporary challenges, calling for development banks to operate with greater ambition, capacity and efficiency to respond to the scale of developing country needs (World Bank, n.d.[11])) and associated calls for development banks to improve alignment with global challenges and make private capital mobilisation a core priority (G20 Independent Expert Group, 2023[12]) (G20 Brazil Finance Track, 2024[13]).
Overall, mandates do not yet fully reflect the growing political emphasis on private capital mobilisation. This does not necessarily indicate structural misalignment, but reflects the fact that mandates are typically broad, long-standing and infrequently revised, and that new priorities such as mobilisation might take time to filter into their formulation. The issue is therefore less that mandates prohibit mobilisation and more that they often more explicitly emphasise other functions, which can de-incentivise systematic mobilisation in practice. As a result, even where there are the intention and ambition to scale up mobilisation, the absence of a clear and binding mandate can reduce accountability and weaken follow-through.
An increasing number of development banks and DFIs have a strategic focus on mobilisation, but often without clear follow-through to implementation. Corporate strategies are a critical bridge between mandates and delivery, and shareholders are often pivotal to steering institutions towards strategies with a stronger focus on private capital mobilisation. Despite an increase in mentions of mobilisation, these references are often made in general or aspirational terms, framing mobilisation within broader efforts to engage the private sector. Because mobilisation requires cross-departmental co-ordination, upstream engagement and pipeline development, and risk-sharing approaches, the absence of clear strategic direction can quickly result in fragmented efforts. A small group of institutions explicitly positions private capital mobilisation as a core strategic objective, sometimes identifying it as a standalone priority or institutional function. Yet, most strategies fall short of being actionable because they lack targets, timelines and indicators. The lack of such metrics reduces incentives for staff to prioritise mobilisation relative to commitment volumes; and implementation is often left to individual departments or project teams.
Institutional KPIs require further calibration to align with mobilisation objectives. The importance of clear targets is widely acknowledged as a basis for benchmarking performance and integrating operations, defining appropriate targets requires careful calibration. KPIs at development banks and DFIs continue to focus on traditional indicators like commitments or disbursements. Some institutions are introducing dedicated mobilisation targets and KPIs alongside traditional performance indicators. Although these efforts illustrate how targeted reforms can translate into measurable outcomes, challenges persist around attribution and metric design. Without dedicated KPIs for mobilisation, development banks and DFIs struggle to embed mobilisation into their culture and day-to-day operations. Evolving performance criteria to include mobilisation metrics is essential to reorienting institutional behaviour toward leveraging, not just deploying, capital. Many institutions treat mobilisation as a standalone function rather than embedding it into the design of country or sectoral strategies, investment planning and project pipeline development. This limits the ability to mobilise private capital at scale and reduces the strategic coherence and impact of interventions.
Overall, even when strategic frameworks reference mobilisation, these commitments are often broad, lacking specificity on delivery models, resourcing or performance tracking. This weak strategic alignment triggers a cascade of constraints. Mobilisation efforts might be siloed or under-resourced, accountability to shareholders weakened and opportunities for systemic innovation missed. Without clearer signals from governance bodies and stronger direction, private capital mobilisation risks remaining a rhetorical ambition rather than an operational priority.
Ultimately, strategic frameworks are critical to signalling institutional priorities and aligning strategy with mobilisation objectives is necessary, but not sufficient. While progress is emerging, current initiatives often remain fragmented, lacking full integration into legal and strategic frameworks. They need to be complemented by reforms in financial models, instruments and operating systems for private capital mobilisation to move from the margins to a more standard and mainstream feature of how development banks and DFIs deploy capital.
Scaling private capital mobilisation hinges on how development banks and DFIs use their financial instruments and associated policies. Historically, operations have centred on senior debt – especially sovereign lending – which is low-risk and affordable but has limited mobilising impact unless structured to attract co-investment. As shown in Figure 1.2, instruments vary widely in their mobilisation function: while senior debt can close financing gaps, equity, mezzanine finance and guarantees play a more catalytic role by absorbing risk, signalling confidence or aggregating smaller investments. Mobilisation can occur along the entire risk spectrum, from pari passu syndicated B-loans and simple co-financing (creating space for private co-lenders) to guarantees, mezzanine finance, subordinated debt and first-loss structures. Lower-risk instruments can drive larger volumes in the near term, while catalytic, risk-bearing instruments are essential for market creation.
Stylised illustration of financial instruments and their functions
Note: The figure illustrates a ‘ladder of mobilisation’, signalling that instruments can be sequenced from lower-risk/volume to higher-risk/market-creating uses. Most of the instruments can mobilise at both transaction and portfolio level. SPVs = special purpose vehicles.
Source: Authors’ elaboration.
Balance-sheet recycling is underused to scale mobilisation. Development banks and DFIs hold substantial volumes of mature, income-generating assets. Transitioning from originate-to-hold models toward originate-to-share/distribute models by selling or syndicating seasoned exposures can channel private capital into lower-risk assets and make balance-sheet space available for earlier-stage, higher-impact projects. Securitisation complements this shift by pooling assets into investable securities to transfer risk, create liquidity and expand market access, though deployment remains limited by capability and data gaps.
Existing portfolio patterns underscore the need for change. Most institutions still prioritise direct disbursements and hold assets to maturity. Multilateral and bilateral development bank portfolios are overwhelmingly debt-heavy and sovereign-oriented; with debt-instruments consistently accounting for around 85-95% of their financial operations. DFIs deploy a more diversified instrument mix, with equity and shares in collective investment vehicles (CIVs) representing between 10% and 25% of their financial operations (Figure 1.3).
Share of financial instruments used by type of provider, 2016-2023, percentage of total
Note: Debt relief is excluded in the figure as it reflects transactions on existing debt rather than the deployment of financial instruments for new development finance.
Source: OECD (2025), OECD Data Explorer.
Moreover, mobilisation tends to concentrate in less risky markets. Figure 1.4 highlights that most private capital mobilisation occurs in countries where market risk perceptions closely match credit performance. In contrast, mobilisation volumes remain limited where markets systematically overprice risk – thus where development banks could add the most value. This points to a missed opportunity, as development banks and DFIs underutilise their comparative advantage in operating in higher-risk environments, where they can outperform market perceptions and demonstrate investment-worthiness.
Cumulative private finance mobilised for development by credit risk perception gap in the market, 2016–2023, in constant USD billion
Note: For detailed methodologies, see Annex C. Due to limitations in data availability, the categorisation used in this figure differs from those presented in other sections of this report.
Source: Authors’ estimate based on Damodaran (2025[14]) and GEMs (2024[15]).
Operating at the “efficient risk frontier” allows enhanced scale without compromising financial soundness. Not all mobilisation raises risk: pari passu syndication, unfunded guarantees with robust risk-sharing and risk transfer of seasoned assets can expand mobilisation within existing ratings and risk parameters. At the same time, targeted catalytic tools are needed to open new markets. The task is to distinguish innovations that materially raise portfolio risk from those that primarily demand institutional change (e.g. distribution policies, investor relations, servicing infrastructure).
Recent practice shows feasibility. IDB Invest’s shift to an originate-to-share model, coupled with the Scaling4Impact securitisation mechanism, aims to recycle up to USD 1 billion while US credit rating agency Fitch Ratings reaffirmed its AAA credit rating. The African Development Bank (AfDB)’s Room2Run programme used synthetic securitisation to transfer risk on private and then sovereign portfolios, unlocking new lending capacity. These cases illustrate how risk-transfer mechanisms and delivery-model reform can amplify deployment without jeopardising institutional creditworthiness.
Taken together, this argues for a portfolio view of mobilisation. Combining lower-risk, higher-volume instruments (syndications, guarantees, senior tranches) that can scale quickly with selective, higher-risk catalytic interventions (mezzanine, equity, first-loss) builds markets over time. The balance will vary by country, sector and mandate, but using the full instrument set and sequencing it to context is central to scaling results.
Delivering this shift requires flanking measures. Clear shareholder authorisation; adjustments to capital, pricing and risk-transfer policies; and dedicated distribution policies are needed to support originate-to-share/distribute approaches. Internally, strengthened risk management, investor-facing capabilities and alignment across investment, risk, legal and treasury are critical to moving mobilisation from a side activity to a core function.
Finally, capabilities must match ambition. Institutions will need skills to structure blended and risk-sharing transactions (including pari passu syndications and A/B-loan distribution), engage institutional investors, originate bankable projects in challenging markets and navigate legal and fiduciary risks, while operating at speeds compatible with private markets. In short, scaling mobilisation is as much about financial frameworks and management as it is about culture, incentives and skills; and success will come from adjusting the use of the full toolkit to country and market conditions.
Many institutions often have yet to translate mobilisation ambitions into organisational practices and delivery systems. Institutions’ structures, staff allocation and skills are decisive in shaping private capital mobilisation outcomes, and scaling up mobilisation requires a transformation in culture and operational practices. Mechanisms to translate mobilisation objectives into departmental workplans, team responsibilities and individual performance frameworks are key to underpinning stated targets with systematic approaches for implementation. Mobilising private capital requires skill sets that often remain underdeveloped or concentrated in specialised, siloed teams.
Staff performance frameworks generally continue to focus on traditional metrics of capital deployment that are not conducive to private capital mobilisation. Financial commitments and disbursements continue to serve as core performance indicators at institutional, departmental and individual levels. As a result, incentives are not aligned with the objective of mobilisation, as it does not directly contribute to traditional capital deployment metrics. Mobilisation transactions are typically more complex and time-consuming to structure than direct lending operations, requiring engagement with multiple stakeholders and bespoke risk-sharing arrangements. This creates a built-in incentive for staff to prioritise simpler transactions that fulfil internal disbursement targets, rather than those that involve additional mobilisation-related efforts and their accompanying complexities.
Staff capacity reflects the traditional focus on direct lending over mobilisation. Compared to sovereign and direct lending, mobilisation requires technical capacity to design and execute complex financial structures, including securitisations. Unlike traditional direct lending, securitisation demands specialised skills in asset pooling, risk tranching and investor marketing. These capabilities are often not present in conventional project teams, especially those with a public-sector orientation. Development banks and DFIs seeking to mobilise capital at scale need to invest in, or partner with, actors who can provide these skills. Similarly, frontline teams and origination can divert attention from mobilisation at the earliest stages of project development. These teams, traditionally focused on sovereign clients or direct private lending, are often not mandated or equipped to prioritise mobilisation. As they play an essential role in shaping transactions early, they risk being biased away from approaches that support private capital mobilisation from their inception. When mobilisation objectives are not embedded into planning, metrics or staff responsibilities, these objectives risk being overlooked.
While these challenges are systemic, several development banks and DFIs have begun to address them through targeted reforms. This includes institutionalising mobilisation responsibilities across departments, introducing it into individual performance assessments and investing in internal skills. Emerging experience supports the impact of aligning operational incentives with substantial increases in mobilisation in the wake of such reform.
Reform remains uneven despite this progress, and addressing these gaps is critical to moving from ad hoc efforts to systematic mobilisation across institutions, sectors and regions. Prevailing systems mostly disincentivise mobilisation and crowding-in private capital. Existing staff profiles should be complemented to ensure broader and deeper expertise across various organisational levels. The scale of change required is unlikely to come organically from within existing structures and cultures. Mobilisation outcomes are bound to remain below expectations for scaling if they are not addressed through reforms that mainstream them into organisational design.
Scaling up private capital mobilisation requires more than new instruments or pilot initiatives: it demands a system-wide transformation of development banks and DFIs, underpinned by clear shareholder direction and support. At present, competing priorities and inconsistent guidance often inhibit reform. Shareholders can help resolve trade-offs and support a recalibration of development banks and DFIs toward a more catalytic role. Three levers of change emerge for development banks, DFIs and their shareholders:
1. Clarify and strengthen mandates and strategic direction – To generate change in outcomes, mobilisation should be embedded as a recognised institutional function alongside other priorities.
2. Enable financial models and risk frameworks that support catalytic mobilisation – Mobilising private finance in developing countries requires complex risk management, patient capital, portfolio management and instruments that go beyond traditional lending. Regearing financial frameworks towards mobilisation while protecting financial sustainability and robustness is a major undertaking that requires action on capital adequacy policies, recognising the lower risk of diversified catalytic portfolios, pricing policies and expanded use of risk-sharing mechanisms and securitisation.
3. Build mobilisation capabilities and align operational incentives – Investing further in skills and capabilities, and ensuring that internal incentives structure align with mobilisation incentives and enable impactful deployment of enhanced capabilities, are key to enhancing mobilisation outcomes.
The more such action is pursued through system-wide collaboration – including through the DAC’s development of a policy roadmap to work as an efficient system in mobilising private finance – the greater the impact that can be expected on mobilisation outcomes. Harmonised definitions, measurement and overall approaches to enhancing mobilisation will be key to improving accountability and trust, while generating market scale and reducing transaction costs for private capital.
To achieve evolving policy objectives, development banks and DFIs must be organised to deliver on them. Mobilisation is increasingly recognised as a core function to meet the investment needs of developing countries. Yet, most development banks and DFIs are still not sufficiently aligned with this objective. Evidence shows that scaling mobilisation is possible without compromising financial soundness – and that doing so is essential to making efficient use of scarce development finance. Decisive, collective follow-through by shareholders and institutions is needed to equip development banks and DFIs for this expanded role.
References
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← 1. Private capital mobilisation refers to the private finance that can be causally attributed to an official development intervention for a specific project. It captures the additional private resources made available as a result of instruments such as syndicated loans, guarantees, equity participation in collective investment vehicles, direct investments in companies, credit lines, project finance, co-financing arrangements, or selected technical assistance.
← 2. Overall development finance (ODF) 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.[16]).