Donor governments and multilateral institutions have provided grants and loans to private companies operating in developing countries for decades. However, since the 1990s the scale of this support has increased dramatically. In 2010 external investments to the private sector by IFIs exceeded $40 billion. By 2015, the amount flowing to the private sector is expected to exceed $100 billion – making up almost one third of external public finance to developing countries. As global ODA stagnates, several aid agencies have suggested a dramatic scaling up of public finance devoted to supporting private sector investments.
This report assesses whether external (non-domestic) public finance for private investments in the South lives up to promises to provide finance to credit-constrained companies in developing countries and to deliver positive development outcomes. More precisely, it looks into how much development finance goes to the private sector, as opposed to the public sector; which institutions deliver this type of finance and how; which types of companies are benefiting the most from public support; and how development institutions ensure they support responsible investments that contribute to equitable and sustainable development.