Research Paper: Market Awareness of MDB Securitisations

A new market is emerging in Multilateral Development Bank (MDB) securitisations. The pace of progress will depend on the visibility of these transactions and how the market views them. This report, commissioned by MOBILIST and produced by Risk Control, examines market awareness of MDB securitisations and asks market participants about their views on the factors that will drive future growth.

The MDB securitisation market remains early-stage, and private investor participation has been cautious and concentrated among a small group of specialised or impact-oriented institutions. Growth could permit MDBs to realise a significant change in the development and climate-transition impact on the borrower countries they serve and so, the stakes are high.

As with any new market in financial instruments, the degree to which information is available to investors and potential issuers is a key factor in ensuring that volumes grow. For innovative transactions to generate follow-on deals, they must be economically viable for all parties, be straightforward to implement, and the transactions and their successful execution must be visible to other market participants.

Innovative transactions encourage follow-on deals in which other market participants adopt similar financing approaches. If market participants are aware of MDB securitisations, the volume of such transactions is more likely to grow.

SURVEY RESULTS

Do MDBs and private investors see securitisation differently?

About the survey

Risk Control surveyed 91 respondents from 64 institutions to gauge their awareness of MDB securitisation transactions to date, as well as their views on the future of the market. Of these, 46 are classified as private-sector participants, 30 are from MDBs, while the remaining 15 are drawn from other sectors (academic, non-MDB public sector and NGOs).

Select a question, then drag the green line across each chart to compare how private sector and MDB respondents answered.

Market Awareness
Obstacles
Helpful Actions
Deciding Factors
Future Participation
Five-Year Outlook

Private investors know EBRD’s Mosaic best, while MDB respondents rank it seventh of nine deals

Awareness of MDB securitisation transactions varies substantially across deals and respondent groups. Across all participants, the AfDB Room2Run transactions are the best known. IDB Invest’s Scaling4Impact is also comparatively well recognised. Awareness is lower for the more recent IFC and EBRD transactions (in part perhaps because they are recent), while BOAD’s DOLI-P transactions are the least familiar.

Private-sector participants display relatively strong awareness of AfDB’s Room2Run, IDB Invest’s Scaling4Impact and EBRD’s Mosaic. Overall, market awareness remains concentrated around a relatively small number of prominent MDB securitisation transactions, with newer or more regionally focused transactions having achieved less visibility.

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Figure 3.1, MDB participants: awareness of MDB securitisation transactions

Figure 3.1, private sector participants: awareness of MDB securitisation transactions

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Drag the green line to compare private sector and MDB responses

Investors’ biggest obstacle is unfamiliarity with MDB portfolios; for MDBs it is producing a regular flow of deals

Private sector participants emphasised lack of familiarity with MDB loan portfolios. MDB participants viewed this as somewhat less important, with the challenges of sustaining loan origination emphasised more. MDB respondents were much more concerned with standardised structures and documentation than private sector participants, reflecting the fact that the latter are used to the variety of approaches employed by commercial banks.

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Figure 3.2, MDB participants: importance of obstacles to MDB securitisation

Figure 3.2, private sector participants: importance of obstacles to MDB securitisation

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Drag the green line to compare private sector and MDB responses

Investors ask for more portfolio information, while MDBs put standardised structures first

Respondents favour a combination of better information, greater standardisation and a more regular transaction pipeline. Across all participants, publishing historical default and recovery data and using standardised structures and documentation receive the strongest support, followed closely by establishing a regular programme of transactions.

Private-sector participants place relatively greater emphasis on historical performance data and detailed portfolio information, while MDB participants give the highest weight to standardised structures and documentation.

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Figure 3.3, MDB participants: most helpful actions to develop the market

Figure 3.3, private sector participants: most helpful actions to develop the market

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Drag the green line to compare private sector and MDB responses

Investors decide on track record and expected return; MDBs expect structure and investor protection to matter most

Expected return, portfolio diversification and historical credit-performance data are the factors most frequently identified as important.

Private-sector participants place particularly strong emphasis on expected return and historical credit-performance data, while MDB participants assign relatively greater importance to transaction structure and investor protection. Credit rating matters somewhat for both groups but ranks below several of the other factors.

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Figure 3.4, MDB participants: most important factors when deciding to participate

Figure 3.4, private sector participants: most important factors when deciding to participate

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Drag the green line to compare private sector and MDB responses

The same share of both groups say yes, but MDB respondents are twice as likely to answer maybe or no

Among private-sector participants, 43.5% respond positively and a further 15.2% indicate that they may participate, while 39.1% say participation is not applicable to their organisations. MDB participants are somewhat more cautious: 43.3% respond positively and 26.7% answer “Maybe”, while 10.0% indicate that they would not participate.

These results should be interpreted with care: those who respond are more likely to be predisposed to invest in MDB credit risk than market participants in general. The results should be read as showing that reasonably knowledgeable market participants remain well-disposed towards MDB securitisation, rather than as a measure of executable demand.

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Figure 3.5, MDB participants: would consider participating within three years

Figure 3.5, private sector participants: would consider participating within three years

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Drag the green line to compare private sector and MDB responses

Investors are most confident about mobilising private capital; MDBs rate securitisation higher as a balance-sheet tool

Responses indicate a generally positive outlook for MDB securitisation over the next five years. Respondents are most optimistic about its role in mobilising private capital for development and as a balance-sheet management tool for MDBs.

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Figure 3.6, MDB participants: likelihood MDB securitisation becomes significant in five years

Figure 3.6, private sector participants: likelihood MDB securitisation becomes significant in five years

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Drag the green line to compare private sector and MDB responses

PUBLIC STATEMENT ANALYSIS

This strand of evidence takes the shape of a form of ‘sentiment analysis’ of the public commentary that accompanied each transaction. While the interviews capture private views on an anonymised basis and the survey measures them at scale, the sentiment analysis draws on the public record: the statements, press coverage and analytical commentary published around each deal. Its purpose is to establish how each transaction was received by the wider market, and by whom. Read together, the publicly available material reviewed describe a market whose independent commentary remains concentrated among a familiar group of specialist investors, insurers, advisers and trade publications, and in which the pioneering transactions attracted noticeably more attention, and more critical scrutiny, than the follow-on deals that came after them.
Download the full report for more on this analysis.

INTERVIEW FINDINGS

How the market sees MDB securitisation

Interviews were conducted with market participants including investors, insurers, securitisation arrangers, investment bankers, rating agencies and MDB staff. All statements were treated as confidential and anonymous.

Investor Perceptions

Question 1: How do investors perceive recent MDB securitisations?

Investors generally perceive recent MDB securitisations as attractive in principle, but still specialised and not yet a mainstream asset class. MDB assets are viewed positively because of MDBs’ strong credit culture, preferred creditor status, development mandate, and historical performance. However, these advantages are not automatically understood or priced by the wider market.

The strongest appetite appears to come from specialist investors, insurers, reinsurers, and impact-oriented asset managers. Insurers were repeatedly described as a natural investor base because they already understand MDBs and emerging-market credit. Broader funded investors are more cautious, especially where transactions are unrated, illiquid, bespoke, or difficult to compare with standard CLO, ABS, or commercial-bank SRT products.

Overall, MDB securitisations are seen as promising but still immature. Investors want stronger disclosure, more standardised data, clearer rating treatment, repeat issuance, and greater liquidity before the market can broaden beyond specialist participants.

MDB vs Private Deals

How do MDB structures differ from standard private-sector transactions?

MDB securitisations are shaped by MDB mandates, portfolio characteristics, and rating constraints. In commercial-bank SRTs, the objective is usually clear: reduce regulatory capital usage at an acceptable cost. For MDBs, the economic case is more complex because transactions must balance capital recycling, mobilisation, development mandate, rating agency headroom, preferred creditor status, and institutional income.

The underlying assets are also less standardised. MDB portfolios often include emerging-market sovereign, non-sovereign, infrastructure, financial institution, or project finance loans, many of which are unrated, bespoke, and supported by MDB-specific features. Investors must also understand the MDB’s role as lender, including local presence, government relationships, and preferred creditor or transfer-risk advantages. This makes MDB securitisations more reliant on investor education, data disclosure, and rating-agency interpretation.

For synthetic SRT securitisations, there is not a huge difference between the way MDBs approach these deals and a commercial bank deal. True sale transactions are more complex, both legally and for investors, who must carry out the full cash flow analysis needed for a CLO.

Quote: There's so many legal inhibitions from being able to do a true sale transfer of [MDB] loans. Global head of securitisation, leading commercial bank

Wider Participation

What features are important for wider market participation?

Wider market participation will require MDB securitisations to become more standardised, transparent, and easier to compare with existing securitised credit products. Interviewees consistently highlighted the importance of robust loan-level data, clear portfolio disclosure, historical default and recovery information, consistent internal rating mappings, and standardised documentation.

Market participants also emphasised the importance of structural familiarity and repeat issuance. Funded and rated transactions are likely to be more accessible to a broader investor base, especially if they are listed, supported by credible rating treatment, and designed with sufficient liquidity. Wider participation is likely to depend on a movement from bespoke one-off deals toward programmatic issuance with clearer pricing benchmarks, familiar structures, meaningful credit enhancement, and enough investor education to explain MDB-specific features.

Quote: If it's funded and rated, it becomes much more accessible. Securitisation expert, leading investment bank

Investor Demand

What factors drive or limit investor demand?

Investor demand is driven by MDBs’ strong credit profile, preferred creditor status, emerging-market expertise, and historically strong portfolio performance. MDB transactions can offer investors exposure to diversified EMDE assets through institutions with strong underwriting, local knowledge, and borrower relationships. This is particularly attractive to specialist investors, insurers, reinsurers, and impact-oriented asset managers.

Investor demand is limited by unfamiliarity, limited standardisation, data gaps, liquidity concerns, and pricing uncertainty. MDB portfolios can be heterogeneous, with exposures across countries, sectors, currencies, and borrower types, making them harder to assess than standard CLO, ABS, or commercial-bank SRT pools. Some investors also struggle with country risk, unrated assets, limited secondary-market liquidity, and the lack of repeat issuance.

Making investors familiar with MDBs and their loan portfolios remains a challenge. MDBs are making significant efforts, providing historical performance data on defaults, vintages and recoveries, although the data provided has not always been as extensive as a global bank would give.

Quote: We spent so much time educating our investors about what was a multilateral development bank... and what is the track record and performance. Head of investment team, asset manager

Rating Agencies

How do credit rating agencies assess MDB securitisations, and what are the implications?

Credit rating agencies assess MDB securitisations, first, in the context of assessing the MDBs’ own supranational rating and, second, if they are asked to rate securitisations, in the context of their structured finance methodologies. On the supranational rating, the analysis focuses on whether genuine risk transfer has occurred, how the retained tranches should be treated, whether the transaction improves capital adequacy, and whether it has any adverse effect on the MDB’s overall credit profile.

The implications for the MDB’s own supranational ratings are therefore mixed. MDB securitisations can support rating strength if they are recognised as effective risk-transfer tools and improve capital headroom, but rating agencies may give limited benefit if the structure is too small, poorly evidenced, unrated, or difficult to analyse.

When rating the securitisations themselves, agencies apply global structured finance rating criteria and pay attention to whether the same standards are met for historical data and loan-level information. In the absence of agency ratings on the underlying loans, agencies must rely on internal MDB ratings and map them to their own scales. This makes the rating process longer and more data-intensive.

Rating Impact

How have MDBs designed securitisations to avoid negative rating impact?

MDBs have so far engaged in limited scale of transactions, retaining meaningful exposure, and structuring deals so that they are seen as balance-sheet optimisation tools rather than evidence of weakening asset quality. Several transactions have used first-loss retention, donor or MDB junior participation, guarantees, or mezzanine protection to demonstrate that risk transfer is controlled and that incentives remain aligned. MDBs have focused on performing portfolios and have sought to show that securitisation does not remove only the best assets.

MDBs have also sought to give rating agencies sufficient comfort through data, portfolio transparency, and structural simplicity. This includes providing loan-level information, internal rating mappings, historical default and recovery data, and clear evidence of how the transaction affects capital adequacy. Where assets are unrated, agencies may require extensive mapping to their own rating scales, making data quality central to rating recognition.

MDB Constraints

How do internal MDB constraints shape securitisation design, structure and pricing?

Unlike commercial banks, MDBs do not have a simple regulatory-capital metric to demonstrate the benefit of a transaction, so they must justify deals through rating headroom, capital recycling, mobilisation, portfolio-limit management, and development impact. These constraints have encouraged MDBs to favour carefully sized, often synthetic or hybrid structures that preserve lender-of-record status, avoid unnecessary legal transfer issues, and maintain alignment with their development mandate.

A central constraint is that many MDB loan portfolios carry relatively low spreads, especially sovereign or concessional exposures, making it difficult to pay market-clearing investor returns without eroding institutional income. From the MDB issuer perspective, the premium paid on a synthetic risk-transfer transaction may “gobble up most, if not all” of the interest income on the loans. This pushes MDBs toward structures that minimise cost, use donor or retained first-loss support, or focus on higher-spread non-sovereign assets.

Quote: The data [provided to ratings agencies and investors] was not as extensive probably as a global bank would give. MDB securitisation specialist

Innovation and Scale

Have recent innovations made MDB securitisations competitive, scalable and replicable?

Recent innovations have succeeded in proving that MDB securitisations are feasible, but they have not yet made the market fully scalable or mainstream. Synthetic risk-transfer structures, donor-supported first-loss positions, insurer-wrapped mezzanine tranches, hybrid true-sale/synthetic approaches, and listed funded notes have helped MDBs address specific constraints around capital relief, investor comfort, and mobilisation. Different structures attract a different investor base and different appetite, suggesting that innovation has widened the range of potential investors.

However, these innovations remain at a proof-of-concept stage. Scalability is still limited by low underlying loan spreads, bespoke MDB loan documentation, limited standardisation, data challenges, rating agency complexity, and the absence of regular issuance. Broader scale will require programmatic issuance, standardised data, clearer rating treatment, and more predictable pricing benchmarks.

Quote: Without volume and without standardisation... it's hard to develop an asset class. Senior rating agency staff member

Investor Requirements

What are private investor perceptions and requirements for MDB securitisations?

Private investors generally perceive MDB securitisations as attractive but specialised products. They value the quality of MDB-originated assets, the MDBs’ preferred creditor status, strong underwriting standards, emerging-market expertise, and historical performance. However, investors need to understand not only the portfolio, but also the MDB’s role as lender, including its local presence, borrower relationships, and potential transfer-risk advantages.

Investor requirements are therefore centred on transparency, standardisation, structural clarity, and credible risk-return compensation. Investors need robust loan-level data, historical default and recovery information, clear internal rating mappings, country and sector breakdowns, and documentation that allows them to compare MDB transactions with familiar CLO, ABS, or SRT products.

Requirements also differ by position in the capital structure. Senior investors tend to focus on rating stability, credit enhancement, liquidity and regulatory treatment, whereas mezzanine and junior investors focus more on attachment points, stress losses, correlation, recovery timing, control rights and relative value. This is consistent with the investor base observed so far, in which credit insurers and specialist funds have taken mezzanine and first-loss risk, while broader institutional investors have only recently begun to buy senior notes.

Quote: We always ask them to be granular and get the details of the exact size of their experience, number of contracts, everything. Credit protection team head, prominent insurer

Building Confidence

What features are needed to build confidence, comparability and investor participation?

To build confidence and comparability, MDB securitisations need stronger standardisation of portfolio data, documentation, and analytical assumptions. Investors and rating agencies require loan-level data, historical default and recovery information, vintage performance, internal rating mappings, country and sector concentrations, and clear definitions of default and loss.

Structurally, investors need familiar and transparent features: clear attachment and detachment points, meaningful first-loss retention, robust credit enhancement, straightforward waterfalls, and predictable treatment of guarantees or insurance wraps. For mainstream participation, funded and rated instruments are generally more accessible, particularly where there is listing, liquidity, and documentation that investors can compare with CLO, ABS, or SRT benchmarks.

GEMs data support market-level confidence in MDB loan performance but do not replace information on the specific MDB and transaction pool. MDBs could usefully agree a minimum investor data pack covering internal ratings and their mapping to agency scales, rating migration, country and sector concentration, maturity and amortisation, spread, security, arrears, restructurings, recoveries and servicing arrangements.

Quote: There's going to be more awareness about what we do, how we do it, this kind of dual mandate, impact development and financial sustainability. MDB securitisation specialist

Conclusions

As well as awareness, the data presented in this report shows what factors different market participants regard as important for whether the new market expands, what contribution securitisations will make to MDBs and investors and whether there is willingness by investors and MDB sponsors to engage in future deals. Its primary conclusions are:

Market awareness is not the only factor that could influence growth in the market for MDB securitisations. Read our companion study, MDB Securitisation and Rating Agencies, to learn how the assumptions credit rating agencies make about MDB loans can impact the development of MDB securitisation issuance.