Emerging markets and developing economies (EMDEs) require trillions in external financing to meet sustainable development goals, yet cross-border capital flows remain weak constrained by a range of structural and policy-related factors. A critical factor is the regulatory environment—specifically, aspects of the prudential framework that curtail the degree to which multilateral development banks (MDBs) and development finance institutions (DFIs) can mobilize private capital for vulnerable developing countries.

A new analysis from the IIF highlights how refining bank prudential regulations to be more risk-sensitive could help unlock private financing for creditworthy projects. The paper outlines specific regulatory barriers and recommends targeted reforms to Basel standards and local banking requirements to facilitate a meaningful increase in private sector involvement in MDB/DFI lending structures, as well as recommendations to the GEMs Consortium in relation to their uniquely valuable credit risk database.