Multilateral Development Banks and Private Sector Financing: The Case of IFC

Abstract

Recent years have witnessed important changes in the area of development finance, both internal and external. Regarding external development finance in particular, the volume of net official flows has been decreasing and the net private flows have been not only very volatile but also geographically concentrated in favour of just a few countries.External official support for private sector development (PSD) in these countries is a way of rectifying this situation and, arguably, this is better implemented within amultilateral framework than if donor countries do so individually. This realization has thus prompted a resurgence of specialized affiliates, units or windows of the existing global and regional multilateral development banks that provide direct support for PSD in these countries. Some multilateral development banks, particularly the European Bank for Reconstruction and Development (which exists solely for providing support for PSD in the transition economies), have also been established. There is a clear need to shed light on how these multilateral institutions have been performing, how they allocate their portfolio, how they accomplish their missions, and so on. This can be done by looking at a prototype or representative one, as a case study, although a substantial degree of variation may be expected among different multinational development banks (MDBs).