The Private Sector Turn:
There has been a major expansion in private sector lending within development finance in recent years. The International Finance Corporation’s (IFCs) private sector portfolio has more than quintupled since 2002, while the European Investment Bank’s (EIBs) operations in Africa and elsewhere are almost exclusively private. Crucially, more and more of that private investments goes not into projects but to financial intermediaries (FIs) and private equity funds.
Despite the market failures such mechanisms have caused, their use is increasing; Public Development finance, goals and policies are mediated more and more by financial markets and their actors. It appears as if leading development actors are pushing a new paradigm aimed at making development finance another field of intervention of financial markets.
The implications of the rise in the private sources of funds (grants, debts and equity) and the channelling of an increased proportion of development funds towards the private sector are significant. It implies a move away from the traditional development focus on single projects and towards more arcane financial arrangements. The lines between public and private finance are becoming blurred, new mechanisms and funding strategies are likely to emerge in the coming years which existing strategies and campaigns are less adept at dealing with.
From this turn to the private sector, opportunities arise to create new alliances between Northern and Southern groups who as a result find themselves on common ground.
The conference brought together a range of different organisations that have begun to concentrate on the turn to private finance, notably through FI and private equity lending. It focused on the IFC and EIB as perhaps the two longest-standing private finance supporting international financial institutions (IFIs), but also on other funders involved in the same activities such as the Commonwealth Development Corporation (CDC), African Development Bank (ADB) and the International Monetary Fund (IMF).
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