MODEL 5: Development finance actors invest in private sector platforms

Model 5 – Private sector assets are pooled and managed by private securitisation platforms, with development finance actors serving as investors, including to build new markets and asset classes.

Model 5 is perhaps the most straightforward to implement. Commercial platforms offer the greatest long-term potential for scale, competitive pricing, and replicability, with development finance actors serving as originators (Model 4) or investors (Model 5). Yet, when serving as one originator or investor among many in commercial transactions, development finance actors may struggle to establish and maintain additionality

Feasibility

MOBILIST’s equity investment in the BIC IV transaction, ADB and AIIB’s initial equity participation in Bayfront Infrastructure Management itself, and AIIB’s successive investments in senior IABS tranches demonstrate the feasibility of this approach. MDB, DFI, and (in the case of MOBILIST) donor systems and capacities are already well-tailored to accommodate direct and indirect equity and debt operations. MDBs/DFIs do not need to build in-house operational capacity, alter standard contract terms, or share more data than they are used to. The securitisation itself is managed by private-sector sponsors using familiar legal and rating frameworks.

Commercial Viability

Since the sponsor and underlying collateral are wholly private, transactions would typically follow standard true-sale or synthetic formats. Mainstream investors already understand these structures, which fosters robust market demand and liquidity. MDB/DFIs acting as anchor investors in certain tranches may also help private issuers secure more attractive pricing by signalling confidence in the structure, which may increase the commercial viability of the overall securitisation. On a purely commercial basis, participating MDBs and DFIs could gain exposure to a diversified set of asset classes and geographies beyond their typical mandate to enhance the quality of their own balance sheets.

Additionality

Because securitisation is fully private, the MDB/DFI must ensure that its participation delivers genuine additionality by unlocking transactions that would not have occurred otherwise or by contributing to systemic impact. If the transaction can easily proceed without development finance support, then MDB/DFI capital may not be truly additional. MDB’s investment in Bayfront Infrastructure Management demonstrates how Model 5 can generate market-building additionality by helping to establish a platform that contributed to the development of a new asset class. Both market-building and value additionality have the potential to allow MDBs/DFIs to generate systemic impact far beyond their own balance sheets.

Scale

Model 5 taps into the vast private-sector CLO pipeline, which represents hundreds of billions of dollars in annual issuance globally. MDBs/DFIs can selectively allocate capital to multiple platforms and deals without the need to assemble large asset pools from their own balance sheets. As illustrated by Bayfront’s repeated issuances, commercial markets can absorb large volumes if the product meets mainstream CLO criteria. But in isolation, Model 5 does not provide a route to enhance MDB/DFI balance sheets.

Replicability

Serving as investors rather is inherently replicable because it relies on standard private platforms, market practices, and large, diversified pools of private sector assets. Any MDB/DFI with the mandate and capital to invest can replicate this approach. Publicising successful investments in frontier markets or less familiar underlying assets can encourage other impact-minded investors to follow suit.

Ultimately, because MDB/DFIs are deal “takers” rather than sponsors or arrangers, their direct influence on establishing new structuring frameworks is lower compared to in-house or multi-originator platforms. Replication thus occurs more organically through private market dynamics.