The World Bank Group nearly doubled the amount of private capital it mobilizes to fund development projects in poorer countries, hitting close to $112 billion in the latest fiscal year.
President Ajay Banga sees the record haul as proof that his drive to make the Washington-based lender leaner, faster and more impactful is working.
Banga said private capital snowballed this year thanks to the changes he implemented since taking over in mid-2023, including merging some departments and country offices and cutting project approval times.
“The private sector doesn’t like working with people who take three and a half years to make up their minds,” Banga said in an interview at the bank’s offices in Washington.
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The former Mastercard Inc. chief has tried to bring more private-sector, investor-friendly practices to the development lender – an effort that might please Wall Street but has occasionally ruffled feathers inside the massive institution.
The bank’s private sector effort comes as foreign aid, known as official development assistance, fell by a record 23% to $174 billion last year, according to data from the Organisation for Economic Co-operation and Development.
Roughly three-quarters of that decline came from the US – the bank’s largest and most powerful shareholder – as the Trump administration slashed foreign assistance. Most the remainder was cut by Germany, the UK, Japan and France as budgets are strained and debts mount, especially with higher defense spending amid worsening geopolitical tensions.
“For the last so many years, even the rich world has got fiscal challenges,” Banga said. “So it’s getting harder to raise money in the old way.”
The International Finance Corporation, the bank’s private arm, is still mobilizing a major part of that $112 billion, though other sectors that provide guarantees or insurances to reduce risks are growing.
Earlier this year, for instance, Argentina secured a $2 billion loan with commercial banks backed by guarantees from World Bank institutions to pay down a relevant portion of its upcoming debt maturities.
World Bank projects are mainly focused on infrastructure, the financial sector and energy, and the private capital figure comes alongside $123 billion the bank provided from its own resources. That mainly comes from country-members’ capital contributions and fund raising in public markets.
Banga isn’t the first World Bank president to try reorganizing its private sector work, with other attempts in 1999, 2003, 2007 and 2014, according to analysis by think-tank Center for Global Development.
Banga said he’s also looking at ways to package different projects under one security, like a bond or composite loan, so as to offer pension funds and asset managements ways to invest larger sums.
“They are not interested in individual projects,” which could vary from countries like Kenya to Vietnam and Egypt, he said.
“This is looking forward,” he said, adding that the bank did two securitizations this year for $1.5 billion. “So at least we know now there is a demand in the market.”