The power of public private partnerships – mobilising capital where it matters most
Pushing boundaries in development finance can unlock new capital for real-world impact.
Insights from Charles Corbett, Global Head, Public Sector Coverage, Standard Chartered on leveraging the use of risk mitigation frameworks and local currency solutions to enhance debt sustainability and boost trade, investment and economic growth.
- Multilateral Development Banks and Development Finance Institutions are increasingly under pressure to use their capital more efficiently. There is a heightened need for innovation and collaboration across the private sector to mobilise additional capital.
- Risk mitigation frameworks such as guarantees and risk participation agreements, as well as local currency solutions, are emerging as viable long-term solutions.
- Scaling up these collaborative approaches could support and accelerate economic development.
In the Bahamas, an innovative financing solution is helping the country reach its ocean conservation goals by releasing millions of dollars. By playing to each other’s strengths, Standard Chartered, the Inter-American Development Bank, a family office philanthropy platform and an insurer have launched a debt conversion for nature and climate that is expected to generate USD124 million, which will help to protect and conserve vital habitats like coral reefs, seagrass meadows, and mangrove forests.
This is a project of firsts, both for Standard Chartered and for the industry at large. A key innovation in this first-of-its-kind structure was the addition of new counterparties, notably a family office platform that brought a philanthropic dimension to the financing.
This novel collaboration exemplifies the power of credit guarantees. Standard Chartered lent the Bahamas government USD300 million for 15 years in November 2024 to refinance an existing bond. The new financing package was backed by a USD200 million guarantee from the Inter-American Development Bank, alongside a USD70 million co-guarantee from the Builders Vision philanthropy platform, and USD30 million in credit insurance from AXA XL. The result is a debt refinancing at far lower cost than the original government borrowing that it refinanced. This reduced the government debt service costs by USD124 million over the lifetime of the new facility, which could then be applied towards marine conservation and adaptation, across projects closely monitored by The Nature Conservancy.
Just as the Bahamas refinancing shows the exciting potential of innovative public-private collaborations, so there are reasons to believe they are set to become increasingly common. A confluence of factors is forcing multilateral development banks, development finance institutions and commercial banks to optimise their use of capital. At the same time, many governments across emerging markets are gaining negotiating power.
Necessity is proving the mother of invention in the development finance space, including export credit agencies. It’s no secret that governments are encouraging them to optimise their balance sheets, take more risk and increase leverage capacity. But, commercial banks must also optimise their use of capital following the Basel III Reforms implemented in the 2010s. For any country facing heavy debt burdens, innovative structures that bring debt relief are welcomed. Surging debt interest payments threaten to squeeze budgets and limit available resources for essential development spending. According to the IMF, emerging market and developing economies’ interest bills have risen by over two and a half times in a decade: from around USD13 billion in 2014 to USD35 billion in 2024.
Strategic collaborations bringing results
Faced with this perfect storm, the public and private sectors are working together closely to craft new approaches. Over the past few years, the increasing use of credit and capital guarantees, debt swaps and local currency solutions has offered a glimpse of what’s possible if widely applied. Evidently, there’s potential to ensure that the capital available for development can be deployed far more effectively.
Take capital guarantees such as those backing the Bahamas refinancing. Not only do they mean that the development finance institution can allocate less capital under a guarantee than if it had simply provided the funds as a loan, but the improved credit rating of the guarantee structure also reduces the capital intensity of commercial banks’ lending, allowing them to increase leverage and reduce loan interest rates. After all, the development finance institutions capital guarantees benefit from AAA credit ratings; far higher than is typical for emerging market countries.
Use of capital guarantees is becoming increasingly sophisticated, as shown by a recent EUR433 million sustainability-linked loan for the Republic of Côte d’Ivoire signed in August 2025. Structured by Standard Chartered, the loan is the first ever transaction to include a first-loss guarantee from the World Bank Group’s International Bank for Reconstruction and Development, alongside a second-loss guarantee from its Multilateral Investment Guarantee Agency. The loan effectively allows these institutions to make better use of their capital, while giving the borrower competitive interest costs, all linked to renewable energy, deforestation and reforestation targets.
Another effective solution is via risk participation agreements, a clear example of which is the USD100 million trade finance facility between British International Investment (BII) and Standard Chartered. Under the agreement, the commercial bank and BII share risk in trade and working-capital finance to support companies in Kenya and Tanzania. The risk participation mechanism enables Standard Chartered to extend financing where it might otherwise be constrained by risk and capital costs, unlocking much larger trade flows across critical sectors such as agriculture, healthcare, infrastructure and food production.
Turning to local currency solutions, by borrowing in their own currencies rather than dollars or euros, emerging market borrowers avoid the risk of a falling exchange rate against major currencies over time. Banks such as Standard Chartered with a footprint across Asia, Africa and the Middle East attract substantial local currency deposits, which they can lend to development finance institutions for them in turn to make local currency loans to local entities, thus removing the foreign exchange risk from the borrowing entities and allowing them to focus on growth.
That’s why a May 2025 agreement signed with the International Finance Corporation (IFC), the private sector arm of the World Bank, to bolster local currency lending by partnering with Standard Chartered was so significant. To start the partnership, Standard Chartered has lent 9 billion Kenyan shillings (approximately USD70 million) to the IFC, for it to lend to companies building out Kenya’s digital infrastructure.
Calling for more scaling up
This broad agreement provides a structure for scaling up the public-private collaborations that are proving so successful for the mobilisation of capital. To date, these transactions have typically been bespoke. But the IFC partnership and others like it which Standard Chartered is exploring with other development finance agencies, pave the way for local currency loans across emerging market countries in a way which complements and builds on existing FX swap markets.
What can be done to industrialise public-private collaboration? To an extent, this is happening through the World Bank’s Private Sector Investment Lab (PSIL). Launched in 2023 to increase private sector investment in emerging markets, it’s considering how to leverage World Bank capacity to bring in private capital to fund projects in a scalable way thereby complementing or replacing the requirement for direct work bank loans. Additionally, the PSIL is exploring how to structure financing vehicles backed by World Bank guarantees (under the unified guarantee platform) that can effectively leverage commercial bank capital at scale.
One can imagine the potential impact of scaling up initiatives such as these, especially if they lead to more widespread use of guarantees. Industrialising today’s innovative collaborations would make a limited pool of capital go much further, attract more philanthropic capital, and reduce the burden of surging debt interest costs.
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