2020 Economic Development Mapping

Mobilising Private Development Finance: Implications for Overall Aid Allocations

Samantha Attridge, Matthew Gouett, Polly Meeks

The use of development finance to ‘catalyse’ private finance has become a growing trend in development cooperation. This study focus on one specialised form of development finance – Official Development Assistance (ODA) – and its increasing use for ‘catalytic’ purposes. The study concentrates specifically on ODA invested in ‘private sector
instruments’ (PSIs).

This study use a combination of literature review, in-depth quantitative analysis, and qualitative enquiries with a sample of ODA providers.

The report was presented during the seminar Financing Private Development Investments in Sub-Saharan Africa.

Recommendations
The study calls for common international reporting practices, to make clear what private finance is to be counted as aid:

  • Improved reporting by donors to the OECD-DAC, using a private sector instrument “flag” in a consistent way.
  • Provider countries refraining from setting predetermined limits on grants or other forms of financing – so that needs steer.
  • Before committing to spending, aid donors ought to assess and document the expected development effects from private sector instruments, as compared to alternative uses of aid.

Authors
Polly Meeks, Independent consultant, London
Matthew Gouett, PhD, Development Finance Researcher, Overseas Development Institute, London
Samantha Attridge, Senior Research Fellow, Overseas Development Institute, London