Scaling4Impact shows that MDBs with well-rated corporate exposures can design securitisations that are both capital-efficient and attractive to private investors. It highlights the evolving sophistication of MDB financial engineering and the need to balance multiple strategic goals in mobilising development finance.
The Challenge
MDBs often face trade-offs between mobilising private capital and optimising their balance sheets. Structuring transactions that balance cost-effectiveness with capital mobilisation—especially in emerging markets—requires careful calibration of risk, ratings, and investor appetite.
The Approach
Building on AfDB’s Room-to-Run model, IDB Invest launched its Scaling4Impact transaction in 2024. It selected $1 billion in assets from a $10 billion portfolio, comprising standardised products rated B or higher across 10 sectors and 17 countries. IDB Invest’s transaction attracted almost exclusively private capital.
Compared to AfDB’s earlier transaction, IDB Invest’s reference portfolio had a higher average credit rating (BB- vs. B+), allowing for a thicker senior tranche and thinner mezzanine layers. This structure attracted nearly all private capital, demonstrating strong market appetite for well-rated emerging market assets.
The design reflected a strategic balance: while a thinner mezzanine tranche was sufficient for achieving rating uplift and capital efficiency, it also limited the volume of private capital mobilised – highlighting a tension between balance sheet optimisation (BSO) and private capital mobilisation (PCM) goals.
Comparison of Scaling4Impact, R2R, and R2RS
The Impact