Co-financing is an effective approach that can improve strategic alignment, generate efficiencies through reduced transaction costs for client countries, and maximize development impact by leveraging the comparative advantages of co-financiers. Likewise, it can address larger cross-sectoral issues that require multi-pronged interventions, which are otherwise difficult to implement with each financier focusing only on their own projects.
Co-financing is an important financing mechanism of the World Bank. The World Bank works with Multilateral Development Banks (MDBs), bilateral agencies, and other development partners to allow funds to flow directly from co-financers to the recipient client country and finance activities within the scope of a World Bank operation. Under these arrangements, World Bank resources and third-party resources are deployed in a coordinated manner to World Bank operations that are led by the International Bank for Reconstruction and Development (IBRD) or the International Development Association (IDA)
For the World Bank, co-financing is not only an important form of resource mobilization but also a key pillar of partnerships. It provides an opportunity to:
i) Crowd-in resources to better address country, regional, and global priorities
ii) Mobilize concessional financing that can help countries address global challenges
iii) Strengthen development partner coordination to leverage the comparative advantages of co-financiers
iv) Reduce the administrative burden on recipient countries
While no single channel of financing will be sufficient to address the multiple and overlapping crises facing the world, through co-financing the World Bank can improve strategic alignment, generate efficiencies through reduced transaction costs for client countries, and maximize development impact by leveraging the comparative advantages of co-financiers.
The Global Collaborative Co-Financing Platform
To channel additional capital for development and scale, a coalition of ten Multilateral Development Banks established the Global Collaborative Co-Financing Platform. The platform is an important initiative that is helping to strengthen partnerships and improve coordination across the multilateral and bilateral systems. For countries, the new platform will reduce the administrative burden and transaction costs, and enable better coordinated financing in line with their priorities—resulting in greater development impact. By leveraging partnerships and promoting transparency, the platform will enable MDBs, partner agencies, and client countries to address global challenges more effectively and efficiently.
Learn more about the Global Collaborative Co-Financing Platform.
World Bank Co-financing in Action
Co-financing has proven to be an efficient source of streamlined funding, including for global priority programs and emerging global challenges, as recently evidenced by a spike in co-financing from some partners for the international response to the COVID-19 pandemic.
In FY20-22, co-financiers provided $2.1 billion to IBRD/IDA operations globally for COVID response, 85% of which was from other Multilateral Development Banks (MDBs).
