By Ajay Banga and Sjoerd Sjoerdsma

Over the next 10 to 15 years, 1.2 billion young people in developing countries will reach working age, but their economies are expected to create only around 400 million jobs. That 800 million gap could have implications for poverty, migration, and stability. But, with the right ingredients, this generation can drive growth and prosperity at home and around the world.


It is an objective that cannot be met with public finance alone. Much progress has already been made in building public-private partnerships that deliver the resources needed to realize growth in emerging markets and developing countries. 


We can therefore build on progress. For instance, the World Bank Group has grown private capital mobilization from $35 billion in 2022 to $112 billion last year. Comparatively, all OECD countries mobilized approximately $600 billion between 2012 and 2024. 


•A KIOO employee in Tanzania checks glass bottles for inconsistences or defects. Copyright: World Bank Group


It is the product of a workplan and a model that we believe should be replicated among governments and development banks working together with the private sector to multiply their impact by using their own resources to attract far more capital than they could provide alone.


Most of this has been done through individual deals, and this gets us only so far. The next frontier is bringing institutional capital into development at scale. Institutional capital is invested in almost everything, from government bonds and office towers to private credit and renewable energy. Yet one enormous investment opportunity remains largely untapped: investing in businesses across emerging and frontier markets.


We want to change that.


For decades, multilateral development banks have held loans they provide to finance businesses and infrastructure on their own balance sheets. They have accumulated financial assets, expertise and hard-won knowledge of how these investments perform. Now, rather than keeping those assets, development banks are making them available to institutional investors. Transferring those assets to long-term investors frees up capital for new projects, multiplying the impact that development banks have with the resources available.


The Netherlands and the World Bank are working together to further unlock these opportunities. The World Bank brings investments, country knowledge, and experience in managing risk. The Netherlands has a strong development tradition, financial expertise and institutional investors that see value in investing in emerging markets. This leads to concrete results. For instance, ILX invests capital on behalf of Dutch and Danish pension funds alongside the IFC in sustainable forestry in Uruguay. This allows for expansion of sustainable forestry while reducing waste and enhancing exports, leading to more jobs and growth in Uruguay while supplying sustainably sourced wood for construction in Europe and elsewhere.  


The opportunities are already available, but further scaling-up institutional investments requires changing how assets reach the market. Pension funds need scale, diversification, reliable information and familiar structures. They cannot assess thousands of individual loans, each with different terms and documentation. That is why the World Bank Group and five other multilateral development banks are working on common ways to assess, document, package and transfer investments. Done well, this can attract more investors and release development bank capital for the next generation of projects.


We know that institutional investors often consider emerging markets to be risky investments, but the data shows that this is not the case.


The Global Emerging Markets Risk Database, or GEMs, draws on decades of lending experience of multilateral development banks (MDB) and development finance institutions (DFI) originated private debt. With 30 years of information on loans, it provides a clear picture of credit performance. It shows that the average default rate of EM market private debt is comparable to developed markets. However, recovery rates are above many global benchmarks. Crucially, the default patterns are only weakly correlated with developed markets, making emerging market investments with MDBs/DFIs a compelling diversifier in institutional portfolios.

The World Bank Group has demonstrated what can be achieved. Dutch investors have shown that institutional capital can participate. Now the ambition is to make that participation commonplace. If only 1% of the USD 100 trillion assets under management from global institutional investors and pension funds would go to emerging and frontier markets in the coming years, this would mean USD 1 trillion extra in investments in clean water, energy transition, healthcare and jobs. It would also mean that institutional investors gain access to attractive markets, and we build new ties between countries. A triple win worth investing in together.


And if we get this right, a young boy can go to school to realize his dream of becoming an engineer. A woman can grow her business into an international business. This will shape the economic future of a generation.


Source: World Bank