Multilaterals Leading the Innovation Path

During the last century, significant improvements are seen in the financing of infrastructure projects the world over. Public services that were traditionally being provided by government has been gradually provided by private sector also with the government taking over the role of enabler in place of provider of services to the users. Along the way, developing countries are pushing for structural and institutional reforms to meet the loan disbursements from multilateral agencies and to attract private sector investments into infrastructure. NGOs exerted sufficient pressure on governments and multilateral development banks to adopt sustainable policies and approaches alongside the development goals. The four main funding sources for MDBs include (1) paid-in capital or subscribed capital, (2) callable capital, (3) retained earnings and accumulated reserves, and (4) preferred creditor status (PCS). The various instruments that are offered by MDBs include loans, grants, credit lines, technical assistance (TA), guarantees, and equity. A significant share of MDB loans is concentrated in China, India, Indonesia, Philippines, and Pakistan. The range of instruments that the MDBs have been offering is quite wide; however, the sophistication and the customization have increased substantially in response to the need of the DMCs. The landscape of innovative financing is gradually shifting from simple resource mobilization to including results-based and outcome-based financing mechanisms. The time taken in getting the loan processed by the MDB is a matter of concern.