I’ve spent a lot of time in recent weeks talking to experts about what we can expect in development finance in the year ahead. One thing that has emerged is that the days of talk and hope are in the rearview mirror — and 2026 will need to be one rooted in reality, practicality, and action.
With traditional aid budgets under unprecedented strain and geopolitical shifts redrawing the map of cooperation, the pressure on private capital to fill the gap has never been higher.
What does the road ahead look like? From the rise of “originate to share” models to a renewed focus on domestic resource mobilization, the centers of development finance are shifting.
Here are some trends to keep an eye on:
• A greater focus on private capital mobilization and on changing models, including at multilateral development banks. This will mean an emphasis on scaling de-risking mechanisms and on trying to change how markets work.
• Pressure on MDBs and development finance institutions to deliver as official development assistance declines, and increasingly being the avenue through which donors are using their development dollars.
• A change in the “center of gravity” from external capital to domestic capital mobilization. That means a greater focus on local institutional capital and local and regional institutions.
• A renewed focus on local currency lending and continued focus on reducing the cost of capital — especially where it’s high as a result of mispriced risk.
• More self-interest: DFIs will increasingly be asked to link their work to domestic benefits in the U.S. and beyond. Also, keep an eye on the role of export credit agencies.
Read: Development finance trends to watch in 2026 (Pro)
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Art of the new deal
Speaking of deals at scale, Allianz has a new blended finance fund: the Allianz Credit Emerging Markets Fund, which aims to be a $1 billion fund. British International Investment, the U.K. development finance institution, is an anchor investor, while Global Affairs Canada, IDB Invest, the Swedish International Development Cooperation Agency, and Impact Fund Denmark have also contributed to the $150 million of concessional capital for the fund.
That junior concessional tranche will de-risk the investment for commercial investors who will make up the senior tranche of the fund, which has so far secured $690 million in commitments. Allianz SE and GastroSocial Pensionskasse will be the anchor investors for the senior tranche.
The fund will focus on climate, including renewable power, clean transportation, agriculture, and financial services, with about 40% of the investments intended to be made in Africa.
“There’s a lot of talk about blended finance and the role that blended finance can play. I think it’s really important to see actual transactions at size come into the market to demonstrate that this can work,” Jo Fry, the investment director at BII, tells me. “The role that this fund can play, and other funds like this, is bringing investors who haven’t invested in climate and emerging markets into our markets,” she says, adding that this includes insurance and pension funds that may have requirements to invest in an investment-grade-type structure.
“There’s a real demonstration effect from these types of transactions,” and seeing that a portfolio performs over time can help investors both now and in the future feel more comfortable investing in emerging markets, Fry tells me.
For those keeping track, this fund has a roughly 6:1 mobilization ratio and is the third transaction through the £100 mobilization facility, launched by U.K. Prime Minister Keir Starmer in 2024.
Meanwhile, the U.S. International Development Finance Corporation also announced a new deal of sorts: a new partnership with International Holding Company, a large Abu Dhabi-based investment fund. DFC called it a “landmark collaboration” that is “aimed at accelerating private-sector investment in strategic markets and projects of mutual interest.”
“By leveraging IHC’s and DFC’s global reach and investment expertise, both nations will be positioned to deliver high‑return projects and promote world‑class investment standards,” DFC CEO Ben Black said in a statement.
The partnership is expected to focus on critical minerals, energy infrastructure, logistics, pharmaceuticals and health care manufacturing, ICT, food security, and more. There are very few details about the type of partnership, how much money it will include, how long it will last, or what other parameters it might follow.
New addresses
The World Bank has officially opened an office in Doha, Qatar, hosted at the Qatar Fund for Development’s headquarters in collaboration with the Ministry of Finance. The office aims to support Qatar’s sustainable development road map, National Vision 2030; better engage the local public and private sector; and “to promote outbound investment into emerging markets across the region and globally.”
The World Bank also signed a memorandum of understanding with the QFFD to strengthen cooperation on a variety of global development issues, including the bank’s Mission 300 electricity initiative for Africa and its AgriConnect platform aimed at improving the lives of smallholder farmers.
“This milestone further reinforces Qatar’s position as a global hub for economic and financial cooperation and highlights QFFD’s role as a catalyst for impactful international partnerships that advance equitable and sustainable development,” the bank wrote in a press release.
In other moves, the U.S. DFC announced that Adrian Bastien would be DFC’s regional managing director for Jakarta, Indonesia. The move expands DFC’s geographic reach and strengthens its ability to originate transactions and partner with the private sector across the Indo-Pacific, the agency said in a press release.
“DFC is strategically positioned to unlock new opportunities that strengthen global partnerships and address critical economic development challenges in regions of strategic importance to the United States,” Bastien said in a statement. “There is strong potential to expand infrastructure, reinforce supply chains, and build deeper economic ties in the Indo‑Pacific that promote lasting prosperity.”
Related: Half of Africans don’t have electricity. Can Mission 300 change that? (Pro)
Background reading: Inside the World Bank’s plan to boost jobs by investing in agribusiness
Davos watch
2.18 million
—That’s the estimated number of social enterprises in Africa. According to a report by the Schwab Foundation for Social Entrepreneurship, in partnership with the World Economic Forum, discussed in Davos last week, these organizations generate $96 billion in annual revenue — 3.2% of the continent’s gross domestic product.
“It just goes to show that it’s not just the traditional enterprises that are a core part of Africa's economy,” said Angela Oduor Lungati, executive director of Ushahidi, an open-source technology company. “The other thing that’s quite striking is who’s driving that growth? … One in 2 of these social enterprises are led by women … and a third by young people. And these leaders are, in turn, creating jobs that are then going to hire women and going to hire young people.”
But access to capital remains a frustration among many of these entrepreneurs, with Lungati citing what she calls the “middle funding gap” between small grants or microfinance and traditional commercial financing.
One solution is for philanthropies to take on more risk and offer patient, flexible financing. Progress will also involve entrepreneurs getting creative and the private sector better understanding the “unique nature of social enterprises.”
At a separate Davos panel, International Finance Corporation Managing Director Makhtar Diop talked about how the World Bank’s private sector arm is shifting its strategy to help better meet emerging market needs, especially for micro, small, and medium enterprises. That includes more equity investment, which Diop called “an important pillar,” and a focus on MSMEs and private capital mobilization. It is also providing more guarantees and plans to scale up the amount of financing it does in local currency, he said.
ICYMI: Davos Dispatch — a blizzard of development news in the Alps
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What we’re reading
Minigrid firms need $46 billion to meet the World Bank power plan. [Bloomberg]
The U.K. extends a $1 billion climate-pact guarantee to South Africa. [Bloomberg]
German development financier DEG commits to the Africa debt fund. [Africa Private Equity News]
U.N. seeks private finance drive for development projects. [Financial Times]
About the author
Adva Saldinger@AdvaSal
Adva Saldinger is a Senior Reporter at Devex where she covers development finance, as well as U.S. foreign aid policy. Adva explores the role the private sector and private capital play in development and authors the weekly Devex Invested newsletter bringing the latest news on the role of business and finance in addressing global challenges. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.
