Maximizing Finance for Development (MFD) is the World Bank Group’s approach to systematically leverage all sources of finance, expertise, and solutions to support developing countries’ sustainable growth. In embracing the Sustainable Development Goals (SDGs), countries’ resource needs surpass their own budgets and available donor funding. Meeting the SDGs demands that we find solutions to crowd in all possible sources of finance, innovation, and expertise to meet this challenge. The WBG institutions—IBRD, IDA, IFC, and MIGA—work in concert to help countries transform sectors to reduce poverty and inequality and support growth. We do this by improving the enabling environment, developing regulatory conditions, building capacity, putting in place standards, financing a first mover or innovator, and reducing risks.
Why now? Developing countries have raised their ambitions for sustainable and inclusive growth. By adopting the SDGs in late 2015, they committed to a better life for their poorest citizens and joined together in tackling climate change and other global concerns. But countries know that their goals transcend what traditional financing models, heavily focused on aid, can accomplish. They need new ways of accessing finance, especially from the private sector.
Who is driving this shift? This is a global effort among countries, international organizations, and financial institutions. While the development goals set for 2030 call for funding on a much larger scale, there is also considerable capital, concentrated in the private sector of wealthier countries, that could play a larger role. In July 2017, the G20 finance ministers approved a set of principles that give the World Bank Group and other multilateral development banks a framework for increasing private investment to support countries’ development objectives.
What is changing? For multilateral development banks (MDBs), this means a much more coordinated approach to the public and private sides of development. At the World Bank Group, we have strong experience in both areas but need to connect it much more closely. With our support for policy and regulatory reforms, private finance can become an option for countries that have not been able to access it because they lack the right institutions or markets. At the same time, our instruments can help address risks for investors.
How does it work? Whenever a project is presented, we consider a spectrum of solutions, private as well as public. We will work to help clients tap a variety of financing opportunities, incorporate global lessons and good practices, and address equity and affordability for consumers. The nine member countries are piloting the new approach more systematically, and we will report our lessons from them.
How will this make a difference? If we equip countries to attract and manage private solutions, we help level the playing field for the poorest. Working with partners, the World Bank Group can help low- and middle-income countries expand their range of options for financing efforts to sustainably grow their economies, reduce poverty, and expand opportunity. While every country has unique needs, we can help each find the right mix of public and private funding to meet their objectives.
The World Bank Group is piloting the MFD approach in nine countries where clients have requested private sector solutions to advance critical development projects: Cameroon, Cote d'Ivoire, Egypt, Indonesia, Iraq, Jordan, Kenya, Nepal, and Vietnam. In addition to these nine countries, the World Bank Group is facilitating high impact private sector investments in Lebanon, Sri Lanka, Kazakhstan, Bhutan, and Bangladesh in support of the goals in the IDA18 IFC-MIGA Private Sector Window. The MFD approach already has shown positive results in Colombia, Madagascar, Afghanistan, Turkey, the Solomon Islands, and West Africa.
The World Bank Group has diagnostic tools to support MFD. These include the Infrastructure Sector Assessment (InfraSAP), a strategic planning tool that helps teams working with governments to identify opportunities to maximize finance for priority investments and the sequenced actions needed to unlock those opportunities; and the Country Private Sector Diagnostic (CPSD), which takes an investor perspective in reviewing all economic sectors to identify opportunities for action to spur private sector-led growth. CPSDs have been piloted in Kazakhstan and Ghana.
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Improving Yields and Incomes for Raisin Farmers Through Markets: The World Bank Group is supporting a transformation in Afghanistan’s underdeveloped raisins sector to recapture its former status as a world-class raisin producer and exporter. Read More | Watch Video
Connecting Afghans to Reliable Power: A private conglomerate plans to build and operate a new gasfired power plant near the city of Mazar to help address the chronic electricity shortage. The World Bank Group collaborated to develop the structure of the transaction, project documentation, and instruments to enhance credit. Read More
Creating a Market for Green Energy: Argentina has set a goal of establishing 20 percent renewable energy by 2025 and has committed to reducing carbon emissions by 30 percent by 2030. To meet these goals, the government, with support from the World Bank Group, has created a green energy market. Read More
Sanitation Microfinance for Rural Households: The World Bank Group is a longtime partner of the Bangladesh government in improving access to sanitation. Strong progress has been achieved, and the Bank Group continues to support the government’s initiatives. Read More
Broader Access to Water for Rural Communities: In 2006, as a result of reforms, private sector operators began to assume the management of rural piped water systems. The World Bank Group supported this effort by improving the efficiency of rural water sector management through public-private partnership (PPP) programs. Read More
Providing Electricity and Strengthening Local Capital Markets: The country’s first independent power plant to run on natural gas—the first infrastructure project to obtain long-term financing in local currency—was built in 2013. The World Bank Group helped support the project using a project finance structure that overcame constraints. Read More
Connecting People to Markets, Jobs, Opportunities: Colombia’s Fourth Generation Roads Concession Program (4G) is a large-scale plan to create a nationwide toll road network with private sector participation. The World Bank Group provided integrated advisory and financing support. Read More | Watch Video
Improving Opportunities Through Cashew Value Chains: Côte d’Ivoire’s cashew subsector has strong potential for growth if the value chain, and especially local processing, can improve. A World Bank project is cutting regulatory costs, developing industry associations, and providing farmers with better extension services. Read More
Providing Affordable Clean Energy: The Egyptian government initiated reforms in 2014 to improve the sector’s operational and financial performance, attract private investment, and expand renewable energy sources. It partnered with the World Bank Group, which provided technical and financial support. Read More | Watch Video
Maximizing Finance to Power Development
How can countries, like Indonesia, access the financing—but also knowledge and solutions—they need to make the critical, but costly, investments toward sustainable and inclusive development? Read More
Tapping Geothermal for Greener Growth: Indonesia is poised to become a leader in geothermal energy, addressing long-standing supply issues, fostering sustainable economic growth, and driving progress toward its target under the Paris Agreement. The World Bank Group is developing an innovative credit facility to manage risks. Read More
Enabling Private-Sector Participation in Infrastructure and Social Services: Kenya is developing programs to foster private sector participation in infrastructure investments to help address the funding gap in the sector. The World Bank Group has provided $90 million to kick-start public-private partnership (PPP) programs. Read More
Using Private Financing to Improve Water Services: Kenya’s national development plan seeks to make basic water and sanitation available to all by 2030. The World Bank Group supported the country through a series of measures that has successfully attracted private financing of $25 million. Read More
Improving Farmers’ Incomes: Madagascar has the potential to earn significant foreign exchange receipts from cattle and goat exports. Its government, with World Bank support, is helping rural herders and farmers improve incomes by improving veterinary services and developing new road infrastructure. Read More
Building Infrastructure with Local Financing: In 2015, with assistance from the World Bank Group, the government of Peru embarked on reforms to attract more commercial financing for its public-private partnerships (PPPs) while reducing the need for government guarantees to cover projects’ commercial risk. Read More
Sustainable Fisheries and Jobs: World Bank Group support is boosting capacity to sustainably manage fish resources, increase tuna catches, and tackle key obstacles at the only processing facility, SolTuna, where two-thirds of the staff are women. Read More
Transforming Health Care for All: The Turkish Government is transforming its healthcare sector so that all its citizens have access to quality services, by partnering with the private sector on a major program to improve the country’s hospitals and healthcare infrastructure. The World Bank Group is providing support. Read More | Watch Video
Transforming Livelihoods for Coffee and Rice Producers: Vietnam’s emergence as a leading exporter of agro-food commodities contributes to its food security and poverty reduction. The World Bank Group is providing strategic and investment support to strengthen farmers. Read More
WEST AFRICAN ECONOMIC & MONETARY UNION
Taking Care of Housing Needs: World Bank Group-supported interventions are expanding access to housing finance for lower-income groups in WAEMU in collaboration with regional mortgage financing company Caisse Régionale de Refinancement Hypothécaire. Read More
WEST BANK & GAZA
Securing Energy for Growth and Development: Power demand in West Bank is fast outpacing supply and Gaza is already experiencing severe shortage with electricity supply of less than six hours per day, affecting homes, hospitals, schools, and businesses. The World Bank Group is supporting an ambitious energy reform agenda. Read More
Harvesting Agricultural Potential: The World Bank has supported investments in Zambia's agriculture sector since 1969. In 2008, the World Bank Group focused on helping local financial intermediaries invest in agriculture businesses. Read More
Q. What is the origin of MFD?
A. The MFD approach is rooted in the Addis Ababa Agenda for Action, a global agenda to mobilize additional resources to achieve ambitious development goals. The 2015 Development Committee paper From Billions to Trillions: Transforming Development Finance highlighted the need to shift focus from "billions" in official development assistance (ODA) to "trillions" in investments of all kinds to achieve the Sustainable Development Goals (SDGs). The paper argued to use concessional funds strategically to crowd in other sources of finance—noting that while the largest supply of development resources remains domestic public spending, the greatest potential for expansion lies with private finance and the engagement of private business in the development process. From Billions to Trillions laid out an approach that asked Multilateral Development Banks (MDBs) to enhance their financial leverage, ramp up assistance for domestic resource mobilization and efficient public spending, and catalyze private investment.
Q. How is the MFD approach different?
A. Maximizing resources for development is not a new goal for the WBG. Various parts of the WBG have worked together to support client governments to identify bottlenecks, develop legal and regulatory frameworks, and leverage private sector solutions to maximize development impact. MFD seeks to make such engagement more systematic, making this increasingly the norm for how the WBG does business. This means routinely considering a range of financing and delivery options as part of project and program analysis, consistently coordinating policy reforms and technical assistance at the sector and country levels, and prioritizing the complex projects that tackle binding sector or market constraints.
Q. Is the MFD vision and approach shared with the WBG's development partners?
A. MFD is part of an ambitious MDB-wide effort agreed through the G20 and articulated in the Hamburg Principles, which set out MDBs' collective strategy for crowding in private sector finance for growth and sustainable development. Aside from recognizing the importance of country ownership, the Principles include supporting the country’s investment climate, market liquidity and project management capabilities and governance, prioritizing commercial finance and pursuing cost effective, non-government guaranteed financing, and contributing to the optimal use of scarce public resources. MDBs have committed to collectively increase private financing mobilized by 25-35 percent over the next three years, and are to review and strengthen internal incentives for crowding in private solutions.
Q. How does MFD align with IFC’s Creating Markets approach and other WBG initiatives?
A. MFD complements the IFC’s Creating Markets strategy by strengthening regulatory or policy frameworks, promoting competition, and achieving demonstration effects, as well as launching a cross-WBG program to develop local capital markets. Applying MFD will also provide opportunities to deploy the IFC-MIGA Private Sector Window created under IDA18 to help mobilize private investment and contribute to creating markets in the most challenging economic environments. The WBG has also been developing strategies and interventions to mobilize private financing and solutions to global challenges such as climate change.
Q. How will the MFD approach apply in low-income, fragile, or conflict-affected countries?
A. Private solutions that are feasible and appropriate may differ from country to country and sector to sector. A focus in these countries will be on reforms that create markets and institutions that can attract and manage private capital, so that projects pose an acceptable level of risk to investors. Without this upstream work, many of these countries remain excluded from the private financing options that wealthier countries enjoy. We will be building an evidence base to test implementation of MFD in the most challenging economic environments in coordination with the implementation of IDA18.
The MFD approach builds on years of substantial experience across the World Bank Group in helping governments crowd in the private sector to help meet development goals.