[FDArchitects]

Bilateral and Multi-lateral financial institutions for mobilization of any project of public interest.

Official bilateral and multilateral financial institutions contribute to the financing of long-term investments by providing direct financing through loans and equity investments, attracting other sources of financing to projects, and/or offering indirect support through risk mitigation, knowledge, and assistance in creating favorable conditions for private investment.

 The motivation for official sector involvement generally stems from the need to address market failures, particularly when the broader social benefits of a project exceed private returns. This notably applies to infrastructure, an area in which public-sector involvement also derives from the public sector’s responsibility for the underlying regulatory framework.
Multilateral financial institutions have multiple governing members, including both borrowing developing countries and developed donor countries.  They raise money from a variety of sources, including capitalization from governments and borrowing programs and income from loans. Example of MFI

·         European Commission (EC)
·         OPEC Fund for International Development (OPEC Fund)

A multilateral development bank (MDB) is an institution similar to MFI.  MDBs finance projects in the form of long-term loans at market rates, very-long-term loans (also known as credits) below market rates, and through grants.

The following are usually classified as the main MDBs:
·         World Bank
·         Asian Development Bank (ADB)
·         Asian Infrastructure Investment Bank (AIIB)


There are also several multilateral financial institutions (MFIs). MFIs are similar to MDBs but they are sometimes separated since they have more limited memberships and often focus on financing certain types of projects.

A bilateral financial institution set up by one individual country to finance development projects in a developing country and its emerging market, hence the term bilateral, as opposed to multilateral. Bilateral financial institutions (BFIs) are institutions or funds primarily belonging to or governed by individual Countries Examples include:

·         CDC Group (British Development Finance Institution)
·         COFIDES (Spanish Development Finance Institution)
·         DEG (German Development Finance Institution)
·         Development Bank of Austria (OeEB)
·         Entrepreneurial Development Bank of the Netherlands (FMO)
·         Japan Bank for International Cooperation (JBIC)
·         Overseas Private Investment Corporation (OPIC, US)
·         SIMEST (Portuguese Development Finance Institution)

BFI can help in mobilization of public project
·         Main delivery channel for rapid financing.
•        Allocation of funds decided through bilateral government negotiation.
•        Predictable and flexible delivery.
•        Eligibility to participate in funds and specific conditions/criteria differ from one entity to the other.

Multi-lateral financial institutions(MFI) has much to contribute given its ability to leverage resources from various sources while simultaneously enhancing investment impact. While the magnitude and nature of this contribution varies across institutions and sectors, the MFI can help in mobilization of project through a combination of:
·         a strong financial position;
·         preferred creditor status;
·         technical expertise
·         prudent risk management policies
·         credible application of well-understood standards in project design, execution, and corporate governance
·         a long-term perspective
·         and cross-country experience.

Moreover, the MFI is often able to provide and leverage financing counter-cyclically, lending or retaining positions when private investors pull back.
The rationale for MFI rather than private financing is grounded in the view that under certain circumstances, without official-sector involvement, private financing for socially-productive investments would be either insufficient or entirely unavailable. The reluctance of private-sector agents to provide financing is often attributable to market failures, such as problems arising from asymmetric information. Furthermore, private sector financing is not always forthcoming for public goods. Additional issues stem from lack of experience with particular types of investments or economic activities (e.g., infrastructure). In the wake of the global financial crisis, financial fragility and the need to rebuild balance sheets significantly constrained the ability of many private-sector entities (e.g., European banks) to provide long-term financing or reduced their risk tolerance and lending horizon