Major development banks launch new guidelines to capture, boost, cash mobilisation

A group of 30 multilateral development banks and finance institutions is launching new joint methodologies that aim to accurately measure, and eventually increase, the amount of capital they funnel to emerging markets.

The methodologies, launched on ‌Thursday, are the latest in a years-long effort backed by the G20 to boost development banks’ capital mobilization.

The push to mobilise more private capital has become increasingly urgent as developing countries’ financing needs far exceed public lending and aid budgets, while many Western governments have redirected spending towards defence and other domestic priorities.

The group includes the world’s top development banks, including the World Bank, the African Development Bank (AfDB), the Asian Development Bank (ADB), the Inter-American Development Bank and the European Bank for Reconstruction and Development (EBRD)

The methodologies are the first major update to the group’s mobilization rules since 2018. They aim to capture – and encourage broader use of – innovative financial tools that help them lend more without expanding their balance sheets

“This comes from common shareholder, and stakeholder, pressure to do more with the capital ‌that we have,” said Daniel Borrego Cubero, the head of the EBRD’s debt mobilisation product development

The guidelines aim to help fully capture money mobilized through innovations such as collateralized loan obligations (CLO) and significant risk transfers (SRT), which can free a lender’s capital by transferring credit risk to private investors

“It captures what is there,” said Bart Raemaekers, the ADB’s head of mobilization and blended finance. “It also has the effect of showing to other participating entities what products you can use to actually mobilise”

In May, the EBRD launched a 1 billion euro SRT, which it called “a major milestone” in efforts to mobilise private capital and scale up lending

Earlier this month, the World Bank said it attracted $112billion in private capital in the year to end-June, a 60% year-on-year increase, and more than triple the amount in fiscal 2022.