This pp talks about the importance of private investment in development.

1. THE ROLE OF PRIVATE
FINANCE IN DEVELOPMENT
World Bank MOOC Financing for development
Billions to Trillions To Action, 2015

2. PRIVATE FINANCE IN 2030 AGENDA
• In order to achieve the Sustainable Development
Goals (SDGs), a more ambitious financing for
development strategy is needed.
• It is essential to mobilize more public, private, and
“blended” finance.
• Official development assistance (ODA), on its own,
will be incapable of meeting financing needs but it
can, through leverage and catalytic support, help
mobilize substantially more private capital.
• Private investment underpins economic growth,
know-how and technology transfer, job creation, and
productivity gains.

3. WHICH ARE THE SOURCES OF PRIVATE
FINANCE?
Private resources can be domestic or international:
• foreign direct investment (FDI)
• international portfolio investment
• bank loans
• capital markets
• domestic financial markets
• private transfers (remittances)
• private philanthropy

4. PRIVATE FINANCE ALSO
ENCOMPASSES COMMERCIAL FINANCE
– WHAT’S THAT?
• It consists of public sources of funds, such as
sovereign wealth funds and public pension funds
that have the same type of investment return
motivations as private sector funds.
• These include a range of investors and actors: not
just domestic and multinational companies, but also
sovereign wealth funds; institutional investors;
public and private pension funds; and migrant
workers who send remittances home.

5. DO THE DRIVERS OF PRIVATE FINANCE
DIFFER FROM THOSE OF THE PUBLIC
SECTOR?
Yes, private finance do not pre-commit in the same
manner as governments.
• It is driven by two variables: risk and return.
•Individual firms cannot be told where to invest and will
rarely pre-commit long-term resource allocations beyond
the boundaries of specific projects. They require flexibility
in order to adjust their long-term strategies in step with
the constant evolution of market competition.

6. EXCEPTIONS?
•Remittances
•Private philanthrophy
Don’t make any income of their help
• In the case of private philanthrophy, its drivers
motivation are opportunities to make a difference
through relatively small but risk tolerant resources
(where the help can make a difference to the total
effort).
• The financial instruments used are: grants, equity
investments, guarantees and debt buy downs).

7. REMITTANCES
• Are a key financial flow directed (mainly) to developing
countries, which help financing consumption, savings, and
investments, and improves the balance of payments.
• Remittances contribute to fight poverty in both urban and rural
areas.
•In 2013, remittances were significantly higher than foreign
direct investment (FDI) to developing countries (excluding
China) and were three times larger than official development
assistance.
• Global remittances, including those to high-income countries,
were estimated at $582 billion last year.

9. HOW CAN GOVERNMENTS AND THE
PUBLIC SECTOR SUPPORT A MORE
FAVORABLE CLIMATE FOR PRIVATE
INVESTMENT?
Governments have a fundamental role in providing a
conducive investment climate through:
• supportive governance structures
•competition policy
•hard and soft infrastructure
•instruments that foster healthy, commercially
sustainable markets

10. CAN THE INTERNATIONAL FINANCIAL
INSTITUTIONS
PROVIDE A BRIDGE BETWEEN PUBLIC AND
PRIVATE FINANCE?
Yes, the Multilateral Development Banks (MDBs)
and the International Monetary Fund (IMF) support
private development finance and investment,
including through policy guidance to countries.
These institutions advise, intermediate and co-
invest on efforts to build strong macroeconomic and
investment climates, to mobilize and crowd in
private investment.

11. ARE THERE ANY PRECONDITIONS TO
INFRASTRUCTURE INVESTMENT IN
DEVELOPING COUNTRIES?
Although there is a large need for infrastructure
investments, and private investors with record amounts of
savings need long term investments, not enough
investments are directed towards infrastructures.
A supportive business environment and a sound
macroeconomic framework are critical to attract private
capital flows, including foreign direct investment.

12. POLICY MEASURES TO ATTRACT
INVESTMENT
The policy measures to attract investment vary
according to country needs and circumstances, but
should include:
•A clear and predictable tax regime;
•Reasonably open trade policy;
•A sound monetary policy framework and sustainable
exchange rate policy;
•Streamlined and consistent administrative and
regulatory processes;
•Predictable investment framework and rule of law;
•A regulatory framework that supports open
competition and well-functioning labor markets;
• Structures that support entrepreneurship and

13. SUSTAINABILITY AND
INNOVATION IN FINANCING
DEVELOPMENT?
Companies are increasingly including in their long term
strategies sustainability considerations related to the
environment, society and governance (ESG).
Inclusive business models that involve low-income
consumers, distributors and suppliers can bring income
generating opportunities and provide products and
services where they were previously unaffordable or
unavailable.
Innovative business models represent an annual US$ 5
trillion market (in purchasing power parity terms) with
over 4.5 billion people.

14. Innovation in finance is needed through:
• Increasing public-private partnerships (PPPs)
•Blended finance: a complementary use of grants (or grant-
equivalent instruments) and non-grant financing from private
and/or public sources to provide financing on terms that would
make projects financially viable and/or financially sustainable. By
blending grants with loans, this innovative approach to
development finance aims to achieve a number of objectives –
from increasing the volume of development finance in a context of
constrained resources, to increasing the viability of investments,
to enhancing the overall effectiveness of aid.
Recipes for success in financing
development

15. TO SUM UP
The SDGs are a constant work in progress that evolves the
society as a whole, and depends on the public, the private and the
MDBs efforts for managing and innovate its financing for
development.