Addressing Prudential Barriers to Private Capital Mobilisation for EMDEs
Emerging markets and developing economies (EMDEs) are expected to account for an increasing share of future global growth and investment demand. Yet despite the significant opportunities these markets present, private capital investment continues to fall short of what is needed to support sustainable growth, resilience and the transition to decarbonised global economy.
Building on previous work by the Taskforce, this paper, led by the Institute of International Finance (IIF), explores how policymakers can help support greater private investment by ensuring prudential regulations more accurately reflect the underlying risk of investments supported by multilateral development banks (MDBs) and development finance institutions (DFIs).
The paper finds that current banking and insurance frameworks do not always recognise the risk-mitigating role played by MDBs and DFIs, potentially limiting the flow of private capital into EMDEs. It sets out a series of practical, evidence-based recommendations designed to better align regulation with actual risk, while maintaining robust prudential standards.
The paper includes recommendations for the UK’s G20 Presidency across banking and insurance, alongside longer-term proposals that could inform future developments to international prudential frameworks.
By removing barriers to greater private investment into EMDEs, policymakers can help investors to access growth opportunities, strengthen global resilience and support the UK’s position as a leading international financial centre.