“We have to change the culture,” Inter-American Development Bank President Ilan Goldfajn told us recently. “We have to change the incentives.”
With shareholders last month approving $3.5 billion for its private sector arm, IDB Invest, and $400 million for its innovation branch, IDB Lab, Goldfajn also wants to change how the bank defines success.
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Development impact, not volume of loans, is now the key metric, he tells my colleague Adva Saldinger. And countries in Latin America are also on notice that IDB’s role as a “banco amigo” for helping implement the government’s priorities will now only apply where those plans align with IDB’s objectives on climate resilience, poverty reduction, regional integration, and infrastructure.
Devex Pro members can read about how Goldfajn wants to roll out the reforms.
And he also discussed IDB’s efforts to sherpa the infamously secretive group of heads of multilateral development banks toward joint objectives on the likes of measurement, mobilization, and country-level coordination, in time for the World Bank Spring Meetings later this month.
“We’re having a very tough time getting all the 12 MDBs to define a concept note and actual deliverables,” he tells Adva. In other words, the more things change ...
Read: IDB reforms, new funds have been approved. What’s next? (Pro)
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Trussed hands
The United Kingdom government has been doing its best to portray a return to the fray in championing official development assistance after years of painful cuts. There is a forecast £900 million (about $1.14 billion) rise in the aid budget for the 2024-25 financial year, for instance.
However, my colleague Rob Merrick has this important story on claims that around two-thirds of that increase will go solely on private sector investments by British International Investment, or BII, and other development finance bodies.
The requirement to double these transactions to almost £1.2 billion in 2024-25 was agreed by former Prime Minister Liz Truss when she briefly led the Foreign, Commonwealth & Development Office in 2021 and has not been unwound, Rob writes.
The U.K. is fondly remembered in European development circles for its expertise — pre-Brexit — in fragile and low-income countries. By contrast, BII has been criticized for lacking a focus on poverty eradication and investing too much in middle-income countries.
For now, Ian Mitchell, a senior policy fellow at the Center for Global Development, tells us: “FCDO still has its hands tied by the government’s refusal to move on from the Truss-era approach to private sector investment.”
Read: Why most of the UK’s aid budget rise cannot be spent on frontline aid (Pro)
+ A Pro membership also lets you get the most out of our coverage of the U.K. aid sector.
Vaccination activation
Gavi, the Vaccine Alliance is months away from launching a $1 billion financial instrument to boost Africa’s nascent vaccine manufacturing sector. The African Vaccines Manufacturing Accelerator will be formally announced this June at an event in Paris with French President Emmanuel Macron, but Devex Senior Reporter Sara Jerving has the latest on the plan.
Manufacturers will receive grants of between $10 million and $25 million provided they meet World Health Organization quality control thresholds for the production of priority vaccines such as against Ebola or cholera.
The payment is intended to support manufacturers in offsetting the costs of reaching WHO’s threshold, as well as helping them bridge the gap between this point and production.
Another payment is possible once manufacturers secure a UNICEF tender to sell vaccines. For every dose a manufacturer provides during the duration of that tender, they receive a top-up of between $0.30 to $0.50 in addition to the designated price.
The aim is to create a stronger business case for the manufacturer, Sara writes, which may help them bring in other types of finance, such as low interest rate loans.
Read: High risk, high reward — Gavi’s investment in Africa vaccine production
+ This story is part of our new content series, Roots of Change, in which we examine the current state of localization — the global development sector’s initiative to shift power to the countries and communities where aid work is implemented. Explore the series.
Don’t forget to also get your copy of our newly updated report: The localization agenda 2.0. Download it now.
(Another) Bridge investigation
The chief executive of the U.S. International Development Finance Corporation, or DFC, has requested a review of whether the lender exercised reasonable care over a loan to the Bridge International Academies, a for-profit chain of schools in which child abuse was reported in Kenya in 2020.
The move comes after a separate investigation found that the World Bank’s private sector arm, the International Finance Corporation, turned a blind eye to reports of abuse by some teachers at Bridge, in which IFC had also invested.
DFC provided a loan, whereas IFC and other investors made equity investments in the company, giving them an ownership stake. “This means that [DFC] did not have a seat on the board or access to internal documents that others may have had,” a DFC spokesperson tells Adva.
For now, DFC said it has no reason to believe it had any knowledge of concerns of abuse when it gave Bridge a $10 million loan in 2013. The loan was fully repaid in 2022.
The findings of the DFC review by its independent Office of Accountability will be made public, the spokesperson says.
Read: US DFC calls for probe of Bridge schools investment
Mayoral call
A group of more than 30 mayors from around the world have called on the world’s multilateral development banks to make urban climate finance a key part of the MDB reform agenda.
In an open letter ahead of the World Bank Spring Meetings this month, the mayors are calling on MDBs to:
• Include urban climate finance in their strategies.
• Provide cities with scaled-up concessional financing, technical support, and policy advice.
• Help them mobilize private investments.
Large cities in high-income countries often have sufficient fiscal autonomy to borrow directly on international markets, Andrea Fernández, managing director of climate finance at C40 Cities, a network of nearly 100 mayors, tells Devex. But it’s far more difficult for cities with constrained balance sheets in debt-laden low- and middle-income countries.
Dozens of cities have developed climate plans assessed by C40 to be aligned with the goal of limiting global warming to 1.5 degrees Celsius.
“As cities we do not lack climate ambition. What we lack is the finance to make this ambition a reality,” the mayors write.
Read: Mayors with ‘climate ambition’ urge MDBs to help plug finance gap
Related op-ed: Why MDB financing is critical for cities’ climate action plans
What we’re reading
$205 billion a year could slash agri-food systems emissions by nearly half. [Devex]
The World Bank unlocks secret data for emerging market finance. [Bloomberg]
Is sub-Saharan Africa’s credit crunch really over? [Center for Global Development]
Fossil fuel-focused Africa Energy Bank on track to start this year. [Reuters]
About the author
Vince Chadwickvchadw
Vince Chadwick is a contributing reporter at Devex. A law graduate from Melbourne, Australia, he was social affairs reporter for The Age newspaper, before covering breaking news, the arts, and public policy across Europe, including as a reporter and editor at POLITICO Europe. He was long-listed for International Journalist of the Year at the 2023 One World Media Awards.
