Mobilizing private capital has become a crucial issue for development financing in developing countries (DCs). Faced with insufficient public funding and the complexity of economic, social, and environmental challenges, a structured action plan is necessary to attract and optimize private investments.
A Major Challenge for the Development of DCs
The financing needs for DCs are estimated between 2,500 and 4,000 billion dollars per year, of which 70 to 90% will need to come from private capital, according to the UNFCCC and the IMF. This reality requires maximizing the leverage effect of public funds to mobilize the underutilized potential of private capital, especially in key sectors such as infrastructure, energy, and economic transformation.
Key Success Factors for Effective Mobilization
Recent experiences, notably in Africa, show that several factors are essential for successful mobilization:
- Strong governmental leadership with a clear mandate for cross-sector coordination.
- Early engagement of social partners and the private sector to ensure national ownership.
- Clear definition of national development priorities to guide investments.
- Innovative financial instruments such as blended finance mechanisms, risk-sharing, and guarantees.
- Investment in developing a pipeline of bankable projects, i.e., projects ready to attract private capital.
These elements are supported by the African Development Bank and other international institutions, emphasizing the shift from discussion to concrete implementation.
Strategies and Tools to Mobilize Private Capital
To attract private investors, several levers must be activated simultaneously:
- Strengthening local financial markets and institutional capacities.
- Policy reforms to improve the business climate.
- Development of a solid pool of projects with good profitability potential.
- Knowledge sharing, training, and awareness-raising among local actors.
- Private equity financing with risk-sharing mechanisms, first-loss provisions, and credit enhancement.
The Role of Financial Expertise Hubs
A major innovation proposed is the creation of National Financial Expertise Hubs. These structures bring together specialists in private financing (transaction advisors, lawyers, risk experts) to:
- Increase the volume of bankable projects.
- Use advanced financial techniques (structured finance, project finance, co-financing, guarantees).
- Promote investments in local currency with local banks and institutional investors.
- Integrate these Hubs into national development platforms for strategic use of limited public resources.
This approach is presented as an immediately deployable and scalable solution, particularly relevant in a context of sovereign debt crises and reductions in official development assistance.
An African Vision for Structural Transformation
Senegalese President Bassirou Diomaye Faye emphasized the importance of mobilizing internal resources through initiatives like “Team Africa” to reduce dependence on foreign financing. He highlighted the acceleration of the African Continental Free Trade Area (AfCFTA), the development of energy infrastructure, and professional training adapted to technological changes, notably digitalization and artificial intelligence.
Conclusion
Mobilizing private capital in DCs relies on a combination of political leadership, innovative financial tools, capacity building, and better institutional coordination. The creation of national platforms and Financial Expertise Hubs appears as a promising path to transform development ambitions into concrete investments, essential for achieving the Sustainable Development Goals (SDGs) and the economic resilience of developing countries.
