There are persistent disparities in the level of private investment in infrastructure between high-income countries (HICs) and low- and middle-income countries (LMICs), with LMICs representing only one-third of the total value of global private infrastructure investment in the decade from 2013 to 2022. To mobilize private capital into LMIC markets, support from non-private institutions such as multilateral development banks (MDB) or government agencies is often critical, whether it be in the form of guarantees, other risk mitigation instruments, technical assistance, or direct co-financing. The involvement of a non-private institution can signal the viability, stability and creditworthiness of an infrastructure project, in turn reducing risk and attracting more private capital.
In 2022, over half (55%) of private infrastructure investment in LMICs involved co-financing from at least one non-private institution. In other words, 45% of investment was financed by the private sector alone, a share that has been trending up since 2017 (when it was only 26%). The largest contributor to this rising trend is the renewables sector, as the market has matured and investors have grown increasingly confident in financing deals without support from non-private entities. This trend is also likely to be linked to smaller average project sizes in the renewables sector (mostly onshore wind and solar projects), with data showing that larger (and therefore, likely riskier) deals are more likely to require co-financing with non-private institutions. From 2018-2022, a deal involving co-financing from a non-private entity was more than double the average size of a private sector-only deal (USD417 million compared with USD192 million).
On a regional basis, Eastern Europe and Latin America were the regions most likely to see private sector-only deals (accounting for 64% and 54% of their respective total regional investment). However, this was predominantly driven by individual countries – Russia for Eastern Europe and Brazil in Latin America. In general, transactions in large LMIC markets such as Brazil, India, Russia and South Africa, were more likely to attract private-sector only financing. On the other end of the spectrum, only 8% of investment in the Middle East (mostly reflecting Turkey) and 24% in Africa were financed by the private sector alone. However, excluding South Africa, only 13% of investment in Africa did not require non-private co-financing, highlighting the criticality of non-private support in smaller markets.
While the share of LMIC investment being financed by the private sector alone has slowly risen over time, more than half of investment in these markets still require co-financing support from non-private entities. This highlights the significant role of non-public institutions in developing markets in reducing risk for private financiers and helping to crowd in much-needed private investment capital to infrastructure.
Infrastructure Monitor insights
