Newly released data on loan recovery rates across 25 multilateral development banks, or MDBs, and development finance institutions, or DFIs, aims to ease investor concerns about the risks of lending in low- and middle-income countries. The Global Emerging Markets, or GEMS, database, covering loans from 1994-2022, shows relatively low loss rates for these institutions' loan portfolios in emerging markets. However, a closer look reveals important limitations in using this data to gauge true investment risks for private capital in developing economies.
Investor uncertainty over the potential losses of investing in low- and middle-income countries is an obstacle to increased private capital flows. Investors don’t have enough experience in these markets to even quantify the risks. So showing the track record of the MDBs and DFIs that have actually invested in those markets over many years is a welcome step forward to dispel some of that uncertainty.
Hence the excitement in the global development world when the GEMS database, which pools loan recovery data across 25 MDBs and DFIs — disclosed data from 1994-2022, showing low loan losses across a wide range of emerging markets and developing economies, or EMDEs.
About the author
Neil Gregory
Neil Gregory is a senior research associate at ODI. He teaches at Johns Hopkins School of Advanced International Studies and advises development finance institutions and impact investing firms. He previously held a range of senior research, strategy, and operational roles at International Finance Corporation and the World Bank.
