The World Bank Group plays a key role in the global effort to end extreme poverty and boost shared prosperity. The World Bank Group consists of five institutions: the World Bank, including the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID).
Working together in more than 100 countries, these institutions provide financing, advice, and other solutions that enable countries to address the most urgent challenges of development.
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, 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.