Improving access to development capital

Relieving scarcity of start-up funds
Easing outside capital access
Obtaining capital access means
Securing necessary capital access
Demonstrating outside capital investment

Description

Improving access to development capital involves implementing mechanisms to increase the availability and affordability of financial resources for projects in underserved regions or sectors. This strategy focuses on removing barriers such as high interest rates, inadequate collateral, and limited financial infrastructure. Practical actions include establishing microfinance institutions, credit guarantees, and public-private investment partnerships, thereby enabling entrepreneurs, small businesses, and communities to fund development initiatives, stimulate economic growth, and address poverty and inequality.

Claim

The concern for poor countries is not so much how to manage the dislocations caused by the volatility of short-term capital flows, but rather how to attract capital, especially long-term finance, to support faster and sustained growth.

The phenomenal surge in capital flows in the past decade has fuelled the belief that the development financing needs of developing countries would be met by the more or less normal functioning of the market. However, the reality is that there is a high concentration of FDI flows in middle-income countries in South-East Asia and Latin America, while the low-income countries on the whole have been bypassed.

Combined with a low level of domestic resource mobilization resulting from low-incomes, sub-Saharan Africa and South Asia are the most capital-scarce regions of the world. They are also the least integrated into world financial markets and heavily dependent on falling aid flows.