Understanding the basic principles and investment strategies greatly helps companies better pitch and present projects.

Achieve measurable development impact.

Before pitching your project to a development bank, it is important to first understand what is driving the decision made by DFIs. In general, these institutions have a clear mandate to deploy finance on projects that will:

  • Catalyze private sector growth in emerging markets.

  • Offer additionality in financing and risk mitigation.

  • Maintain financial sustainability to ensure long-term operations.

  • Prioritize high-risk, high-impact markets.

  • Uphold strong ESG standards.

  • Encourage partnerships and blended finance to mobilize greater resources.

  • Provide capacity building and technical assistance.

How can my project secure financing from a development bank for my project?

For project to be considered impactful, it must clearly align with the development bank's broader mission and objectives, particularly in addressing pressing economic, social, or environmental challenges. Alignment ensures that the project contributes meaningfully to long-term development goals, meets priority sector and geographic criteria, and is consistent with both global and local development agendas.

Borrowers must prepare an investor pitch that clearly conveys all aspects of a project that will have a positive impact on planet or people, as well as whether the project demonstrates new or innovative practices to the local market.

35% 

of all DFIs

have an investment mandate

to positively impact

social, economic, and

environmental

of a country, region or world.

Understanding DFI Investment “Mandates”

The 300+ development banks around the world focus on different challenges, industries, sectors, populations, or geographical areas. It is imperative to understand which DFI(s)are most appropriate for your project.

  • General Development: DFIs with a flexible development mandate are mandated to support social, economic, and environmental development without confining their missions to specific sectors or clients. This type of PDB is usually very large. Representative cases include CDB in China, KfW in German, and many MDBs.

  • Agricultural development banks or financial institutions, with a specific mandate to support the agricultural industry and mostly concerned with small scale family farming, since agriculture is certainly the key sector, while the price of agricultural products is volatile and the income of farmers is relatively low. Agricultural PDBs can be as big as the Agricultural Development Bank of China, with $1 trillion of total assets, or as small as the Banco Agropecuario in Peru, with a size of $96 million.

  • Exim banks use financial facilities such as letters of credit, forfaiting, and export factoring to promote trade. Forty countries have established an Exim bank.

  • This type of PDB or DFI specializes in financing buildings or housing, most often for underprivileged populations. To provide social housing, PDBs and DFIs utilize financial instruments both in the “primary market” with traditional mortgage lending and in the “secondary market” with mortgagebased securities and asset-based securities to facilitate the liquidity of the mortgage market. Two mega banks, Freddie Mac and Fannie Mae, fall into the latter category, with $2.2 trillion and $3.5 trillion in total assets respectively.

  • Infrastructure financing is often characterized by long-term, large-scale, and high-uncertainty projects, so commercial banks and private capital markets alone are unwilling or unable to fill the infrastructure financing gap. Specialized PDBs are DFIs are established to fill the infrastructure deficit. Typical cases are the Asian Infrastructure Investment Bank (AIIB) and PT Sarana Multi Infrastruktur in Indonesia.

Recommended Steps for Private Sector Companies seeking DFI investment:

  • Define the core problem your project addresses and why it matters. Development banks focus on projects with social, economic, or environmental impact, so highlight the broader purpose of your initiative, such as job creation, poverty alleviation, or climate change mitigation.

  • Look into which development bank aligns best with your project's goals. Different banks have specific focuses, such as infrastructure, sustainability, or regional development, so targeting the right one can increase your chances of success.

  • Ensure that your project meets the eligibility criteria for the development bank you're approaching. These institutions often have specific requirements, such as the project's size, sector, or expected impact, that need to be met before applying. If the information is not on the website, this can be done by emailing or calling the various DFI regional or global offices, or emailing their general mailboxes. Ensure that your project meets the eligibility criteria for the development bank you're approaching. These institutions often have specific requirements, such as the project's size, sector, or expected impact, that need to be met before applying.

  • Research the specific goals of the development bank you’re approaching. Align your project’s objectives with their priorities, whether they are focused on sustainable development, infrastructure, or inclusive growth. Be explicit about how your project fits into their mandate. If you see that a bank is trending towards a certain type of investment in a region or sector, research further to see if there are societal, economical or environmental impacts beyond the most obvious ones. Showcase the impact your project will have on the community or region, including measurable social, economic, or environmental benefits. For instance, explain how many jobs will be created, how local economies will be strengthened, or how environmental sustainability will be improved.

  • Development banks prefer projects with a strong potential for success. If you have prior achievements, partnerships, or successful project completions, share those to build credibility. If this is a new venture, demonstrate your team's experience and capabilities to carry out the project.

  • DFIs want to ensure that the projects they fund are financially sound. Be transparent about your financials—include detailed revenue projections, costs, and potential returns. Outline risks associated with the project and how you plan to mitigate them, such as through risk-sharing mechanisms or robust management practices. Issues such as a politically compromised shareholder, corruption, and other issues may disqualify a company before they even are able to pitch their project. Therefore, it is recommended that you approach with a "light overview" and company prospectus, shareholder names, and other relevant details if you feel there may be an issue.

  • Development banks are interested in the long-term sustainability of the projects they fund. Discuss how your project will continue delivering benefits after the funding period, either through scalability, self-sufficiency, or lasting community impacts.

  • Highlight partnerships with local governments, NGOs, or private sector entities. Development banks look for projects that have stakeholder buy-in and community support. Mention any endorsements, collaborations, or letters of support.

    1. Use Compelling Storytelling: While facts and figures are essential, a well-told story can make your project stand out. Share personal stories of how your project will change lives or contribute to the region's development, making an emotional connection to the bank’s goals.

  • While facts and figures are essential, a well-told story can make your project stand out. Share personal stories of how your project will change lives or contribute to the region's development, making an emotional connection to the bank’s goals.

Identifying and Showcasing Your Project's Positive Impacts

  • Poverty Reduction

    Projects that directly or indirectly help reduce poverty, such as improving access to education, healthcare, or affordable housing, are aligned with the bank’s goals.

  • Inclusive Growth

    Inclusive Growth

    Projects that ensure broad-based growth, benefiting marginalized groups like women, rural communities, or the poor, are prioritized.

  • Economic Stability

    Economic Stability

    Infrastructure projects that contribute to sustainable economic growth—such as roads, energy, or water supply systems—fit this goal.

  • Climate Change

    Projects aimed at reducing carbon emissions, increasing energy efficiency, climate adaption, or renewable energy.

Common Misperceptions and Questions

  • Answer: Each DFI will assess each project to see if concessional funding is necessary to make the project viable and attract private capital, demonstrate commercial viability, or other development of climate impacts.

    Blended finance is applied to projects that meet specific criteria:

    • Projects in sectors or regions where private investment is limited due to perceived high risks (e.g., emerging markets, infrastructure, clean energy, agriculture).

    • Projects that align with the SDGs, such as climate resilience, renewable energy, gender equality, and sustainable agriculture.

    • Projects that would not be financially viable or scalable without some form of concessional support.

    DFIs focused on the private sector use blended finance only when it can help de-risk a project, making it more attractive to private investors, and when the project would have significant development or climate impact.

    2. Types of Capital Used:

    • Concessional Finance: IFC deploys concessional capital from donor partners or through trust funds like the IFC Climate Finance Program or IDA Private Sector Window. This capital can be in the form of:

      • Subordinated Debt: Lower priority in repayment compared to commercial lenders.

      • Equity: Investing in the project with a lower expected return.

      • Risk Guarantees: Providing guarantees to reduce perceived risk for private investors.

      • Grants: Direct financial support for technical assistance or project feasibility studies.

    • Commercial Finance: DFIs also invest their own capital in the project on commercial terms, alongside private investors, demonstrating a commitment to the project’s viability.

    3. Blending Concessional and Private Capital:

    • Risk Mitigation: Concessional finance helps de-risk projects by taking on the riskiest portion of the investment. For example, concessional capital might absorb first losses or provide guarantees that reduce risks like currency fluctuation, political instability, or regulatory uncertainty.

    • Market Catalyzation: By blending concessional funds with private capital, DFI can attract commercial investors who might otherwise hesitate to invest in higher-risk projects or markets. The concessional funds improve the risk-return profile, making the project more attractive to private investors.

    4. Structure of Blended Finance at IFC:

    • First-Loss Position: Concessional capital often takes a first-loss position, meaning that it absorbs the initial losses if the project underperforms. This reassures private investors that they will not face disproportionate risk.

    • Subordinated Debt: A DFI can structure concessional capital as subordinated debt, meaning it will only be repaid after other commercial investors. This boosts private investors' confidence by reducing their risk exposure.

    • Performance-Based Grants: In some projects, banks deploys grants or concessional loans tied to specific performance metrics (e.g., reductions in carbon emissions, achieving certain milestones in project development).

  • Answer: No, borrows should not assume that DFIs provide “lower interest rates” than their local bank or financial lender. While DFIs are competitive, the terms depend heavily on the specific project risk, sector, country, and currency.

    Interest rates for development banks like the International Finance Corporation (IFC) and IDB Invest (the private-sector arm of the Inter-American Development Bank) vary depending on several factors, including the risk profile of the borrower, the type of project, market conditions, and the currency in which the loan is denominated. These institutions typically offer competitive rates that are often more favorable than commercial loans, but they are still structured based on market conditions and the specific project.

    Here’s an overview of how interest rates work at development banks like IFC and IDB Invest:

    1. Base Rate:

    Development banks generally use a benchmark interest rate as the base for their lending. These could be:

    • LIBOR (London Interbank Offered Rate): This was traditionally used as a base rate but is being phased out and replaced by other benchmarks.

    • SOFR (Secured Overnight Financing Rate): This has replaced LIBOR in many markets and is now a common base rate for USD-denominated loans.

    • Euribor: Used for loans in euros.

    • Local Market Rates: For loans in local currencies, IFC and IDB Invest may use domestic benchmark rates such as the country's government bond yields or central bank rates.

    2. Credit Spread:

    In addition to the base rate, a credit spread is applied to reflect the risk of the borrower and the project. This spread compensates the lender for the perceived credit risk. Factors influencing the credit spread include:

    • Borrower’s creditworthiness: Stronger, more financially secure borrowers generally get lower spreads.

    • Project type and sector: High-risk sectors (e.g., renewable energy in emerging markets) might have a higher spread than lower-risk sectors.

    • Country risk: Projects in countries with higher political or economic instability generally face higher spreads.

    • Loan term: Longer-term loans typically have higher spreads to account for greater risks over time.

    The combined base rate and credit spread determine the total interest rate.

    3. Interest Rate Range:

    While rates are project-specific, development banks like IFC and IDB Invest typically offer interest rates that are competitive with commercial lenders but may fall within these broad ranges:

    • USD-denominated loans: Base rates like SOFR + a spread, which could range from 2% to 6%, depending on the factors mentioned above.

    • Local currency loans: Interest rates may be higher due to additional currency risk, often reflecting local inflation or government bond rates.

    For example:

    • A project with moderate risk in a stable emerging market might have an interest rate of SOFR + 3%, translating to an all-in interest rate of around 5% to 7% for USD-denominated loans.

    • Riskier projects in less stable markets could see interest rates closer to 8% to 10% or higher, depending on the specific circumstances.

    4. Other Loan Terms:

    • Tenor: Development banks offer long-term financing, with tenors often exceeding those available from commercial lenders. IFC and IDB Invest can offer loans with maturities of 7 to 15 years or more.

    • Local Currency Financing: Development banks often provide loans in local currencies to mitigate foreign exchange risk, but these loans typically carry higher interest rates than USD or EUR-denominated loans.

    • Blended Finance Rates: For projects that involve blended finance (using concessional funding), rates can be significantly lower, sometimes as low as 1% to 2%, depending on the concessional capital involved.

  • Not receiving investment from a Development Finance Institution (DFI) after an initial meeting doesn’t necessarily mean your project or company is unqualified. DFIs, such as the International Finance Corporation (IFC) or IDB Invest, evaluate projects based on a range of factors, including financial viability, development impact, risk profile, and alignment with their specific investment mandate.

    Here are a few common reasons why an investment might not proceed:

    1. Project Stage or Readiness: DFIs often look for projects that are investment-ready, with a clear business plan, secure funding, and regulatory approvals in place. If your project is in an earlier stage, it may not yet meet their criteria for financing.

    2. Development Impact: DFIs prioritize projects that generate significant development impact, such as job creation, environmental sustainability, or improvements in local infrastructure. If your project didn’t demonstrate strong potential in these areas, that could be a factor.

    3. Financial Viability: DFIs need to ensure that projects are commercially viable and capable of generating returns. If there were concerns about the financial sustainability of your project, it might not have met their investment thresholds.

    4. Sector or Geographic Focus: DFIs have specific investment mandates that prioritize certain sectors (e.g., renewable energy, infrastructure) or regions (e.g., emerging markets). If your project didn’t align with these priorities, that could have been a reason.

    5. Risk Management: If the perceived risks—such as political instability, market uncertainty, or environmental factors—were too high without adequate mitigation measures, the DFI may have opted not to invest.

    What to Do Next:

    If your project didn’t secure investment, it doesn’t mean you should give up. Consider revisiting the proposal with these steps:

    • Seek Feedback: If possible, ask the DFI for feedback on why the investment didn’t move forward. This could provide valuable insights for refining your project or business model.

    • Strengthen the Proposal: Ensure your business case clearly addresses development impact, financial viability, and risk management. Demonstrating how your project aligns with the DFI’s goals could improve your chances in the future.

    • Explore Partnerships: DFIs often prefer to invest in projects with other co-investors. You might consider building partnerships with other private sector companies, local governments, or financial institutions to strengthen your proposal.

    Meeting with a DFI is already a positive step, and with adjustments, your project may still be eligible for future consideration. Keep refining and growing your business, and explore other DFIs or blended finance options that could better align with your specific needs.