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Title page 1

Contents 5

Foreword 4

Abbreviations and acronyms 8

Executive summary 10

1. Overview 12

1.1. Development banks and development finance institutions are central to scaling up private capital mobilisation 13

1.2. Institutional levers can help focus on private capital mobilisation 15

1.3. Legal and strategic frameworks provide the authorising environment for private capital mobilisation 15

1.4. Mobilisation requires smarter use of financial frameworks and management 16

1.5. Aligning organisational features and culture is essential to turn ambition into results 20

1.6. There is a need for a system-wide transformation 21

References 22

Notes 23

2. Institutional levers for scaling up private capital mobilisation 24

2.1. Development banks and development finance institutions have untapped mobilisation potential 25

2.2. Institutional levers affect the focus on scaling up private capital mobilisation 26

2.3. A co-ordinated international reform agenda is key 29

References 32

Notes 33

3. Legal and strategic frameworks define purpose and priorities 34

3.1. Legal and strategic frameworks can enable private capital mobilisation 35

3.2. Static mandates limit responsiveness to evolving mobilisation objectives 35

3.3. Corporate strategies can bridge the gap between mandates and delivery 38

3.4. Key performance indicators can help translate strategy into action 40

3.5. Legal and strategic frameworks remain a lever to develop 44

References 45

Notes 48

4. Financial frameworks and management embed mobilisation in operations 49

4.1. The use of financial instruments and models across the risk spectrum can scale up mobilisation 50

4.2. A focus on senior debt and holding assets to maturity limits mobilisation potential 53

4.3. Balancing financial robustness with efficient risk management can expand the use of mobilisation instruments and delivery models 59

4.4. Some institutions are shifting their approach and underlying models 60

4.5. Implications for the institutional factors of development banks and DFIs 60

References 62

Notes 63

5. Organisational features and culture influence incentives, skills and delivery 64

5.1. Aligning organisational features and culture with mobilisation to turn ambitions into results 65

5.2. Legacy metrics and incentives prioritise lending over private capital mobilisation 65

5.3. Staff capabilities remain geared towards traditional lending 67

5.4. Institutions are beginning to align internal incentives and build mobilisation capacity 68

5.5. Strengthening the operational backbone of mobilisation is essential 68

References 69

6. Policy options for a breakthrough in private finance mobilisation 70

References 74

Annex A. Landscape of development banks and DFIs 75

References 77

Annex B. Methodology used to assess institutional focus on mobilisation 78

Annex C. Methodology to measure the credit risk perception gap 80

References 80

Tables 7

Table 3.1. Mandates of selected development banks and DFIs 35

Table 3.2. Overview of selected development bank and DFI strategies 39

Table 4.1. Each leveraging instrument serves a distinct mobilisation function and can be tailored to different investment contexts 51

Figures 6

Figure 1.1. Development banks and DFIs account for more than 90% of private finance mobilised through development finance 14

Figure 1.2. Financial instruments differ in their primary functions: Senior debt closes financing gaps, while equity and other instruments mobilise private capital 17

Figure 1.3. Overall, development banking relies overwhelmingly on debt instruments, while DFIs deploy a more diversified instrument mix than development banks 18

Figure 1.4. Most private finance mobilised through development finance occurs in markets with low credit risk perception gaps 19

Figure 2.1. Development banks and DFIs account for more than 90% of private finance mobilised through development finance 26

Figure 2.2. Stylised illustration of how institutional levers shape private capital mobilisation efforts of development banks and DFIs 29

Figure 3.1. Private capital mobilisation in mandates of development banks and DFIs 37

Figure 3.2. Private capital mobilisation in corporate KPI targets 41

Figure 4.1. Financial instruments used by development banks and DFIs to mobilise private capital: Functions, mechanisms and applications 51

Figure 4.2. Overall, development banking relies overwhelmingly on debt instruments, while DFIs deploy a more diversified instrument mix than development banks 55

Figure 4.3. Use of leveraging instrument differs markedly across provider types 56

Figure 4.4. Bilateral DFIs mobilise private finance through a shifting instrument mix, with guarantees declining and equity-type instruments increasing 57

Figure 4.5. Private finance mobilised concentrates in markets where credit risk perception gaps are lowest 58

Figure 5.1. Challenges to scaling up private finance mobilisation at development banks and DFIs 66

Boxes 7

Box 2.1. Definitions of development banks and DFIs used for this report 27

Box 3.1. DBSA's strategic shift: Integrating mobilisation into its institutional model 42

Box 3.2. Setting meaningful mobilisation targets: Balancing ambition, context and incentives 43

Box 6.1. Contributing to the DAC Policy Roadmap on mobilising private finance 73

Annex Tables 7

Table A A.1. Development banks and DFIs included in this report 76

Annex Figures 7

Figure A A.1. Landscape of development banks and DFIs 76