As 2018 begins, we would do well to reassess these optimistic projections for private finance for development, and ask are the “billions to trillions” materializing? The data and trends to date are far from encouraging.

This is the time to consider a broad array of options; here are just a few illustrative examples.

  1. Off-balance sheet operations (special purpose vehicles) could systematically be deployed for the riskiest slices of high-impact projects in ways that better crowd in both the private sector and on-balance sheet multilateral development banks (MDB) operations. A small amount of off-balance sheet investment can be highly catalytic.
  2. To fund such off-balance sheet activities, it would make sense to consolidate and rationalize the many balkanized trust funds aimed at mobilizing private investment in order to achieve greater scale and efficiency.
  3. For some private sector windows (PSWs), there may be scope to increase leverage (debt/equity ratios) and credit exposure. It may even make sense for PSWs to move a notch below the AAA rating.
  4. Or PSWs could radically change their business models to specialize in high-risk activities such as greenfield infrastructure. PSWs could focus on early stage operations — project origination and construction — and sell projects at the brownfield stage.

Read the full article on private finance by Nancy Lee at Devex International Development