World Bank private capital push raises flows, leaves poorest countries behind

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World Bank private capital push

Highlights

World Bank Group mobilised $112bn of private capital in the fiscal year ending June, up from $35bn four years ago by increasing use of guarantees and risk-sharing tools.
Private capital mobilisation for upper-middle-income countries surged to $50bn in the last fiscal year and to $37bn for lower-middle-income countries, while low-income countries remain flat at $3bn.
Ajay Banga acknowledged the institution's failure to boost private capital flows to the 25 lowest-income countries, despite improved aggregate figures and declining foreign aid.

Private investment strategy shows stronger mobilisation

As reported by Financial Times, the World Bank Group says it mobilised $112bn of private capital in the fiscal year ending in June, more than triple the $35bn recorded four years earlier. The increase reflects wider use of tools such as guarantees and junior positions in capital structures to reduce risk for private investors.

Since taking charge of the World Bank Group in 2023, president Ajay Banga has pushed to use the institution's balance sheet more strategically. The approach aims to turn the bank from a direct provider of finance into a platform that channels a larger share of global private funds into developing countries.

The logic behind that strategy is rooted in scale. The World Bank Group's $829bn asset base remains small against an estimated $4tn annual financing gap for developing countries to meet the UN's sustainable development goals, and even smaller beside the $280tn of privately managed funds concentrated mainly in developed markets.

The approach is also drawing criticism. In a paper released this week, the European Network on Debt and Development says development finance institutions that focus on de-risking private investment may be prioritising private profitability over development outcomes and climate action.

Questions also remain over transparency and additionality. The World Bank Group's disclosures on deals including IFC loans this year to Rio Tinto for an Argentine lithium mine and to NTT for data centres in India provide limited detail on expected development benefits, making outside assessment of impact more difficult.

Low-income countries remain a weak point

Country distribution remains a central concern for the strategy. A stronger focus on private capital mobilisation risks favouring middle-income markets that are more attractive to global investors, rather than the poorest economies where development needs are most severe.

The latest annual report underscores that gap. In upper-middle-income countries such as Brazil and South Africa, private capital mobilisation more than quadruples from 2022 to $50bn in the last fiscal year, while in lower-middle-income countries including India and Nigeria it rises 2.6 times to $37bn.

In the 25 low-income countries, however, the figure stays flat at about $3bn. That stagnation comes as those countries are also hit by sharp reductions in foreign aid budgets from wealthy governments.

Banga acknowledges the shortfall at a session earlier on Tuesday in Bangkok, saying the institution has not yet succeeded in generating the right level of private capital growth for the lowest-income and fragile countries. He says the World Bank is stepping up efforts to catalyse more investment in those markets, calling the task crucial even as the broader headline mobilisation figure improves.

Our earlier article on General Atlantic’s planned IPO in 2027 explained how the private capital firm is considering a public listing to fund expansion and broaden its platform beyond traditional private equity. We also noted the wider backdrop of consolidation in private markets and how large managers are positioning themselves to attract more investor money, including into growth-oriented strategies.

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