Oil and Water? Mainstreaming IB within Multi-lateral Development Banks W. Robert de Jongh Specialist Leader, Social Impact Deloitte Consulting LLP February 2016

Page 2 © Deloitte Consulting LLP 2016 Context: Opportunities for the Majority More than 45 projects $400m invested through debt/pcgs/credit enhancements Leveraged more than $1 billion Created more than 40,000 jobs for the BoP Increased income for more than 300,000 low-income families Extended credit to more than 220,000 micro-entrepreneurs Mainstreamed as a Priority Business Area within the new private sector arm of the IDB (4% of private sector portfolio) – focus basic services In 2007, with support from Bank President Luis Alberto Moreno, the IDB launched an “inclusive business” debt facility to support BoP ventures in LAC

Page 3 © Deloitte Consulting LLP 2016 Requirements: Opportunities for the Majority $5-$10m medium and long term loans and partial credit guarantees (market rates, long tenors) Financially and structurally sound Able to cover 25-40% of the total project cost Market-based and BoP centered; Sustainable, replicable and scalable over the long term Inclusive of innovations that forward development agenda Combined social and economic outcomes In 2007, with support from Bank President Luis Alberto Moreno, the IDB launched an “inclusive business” debt facility to support BoP ventures in LAC

Page 4 © Deloitte Consulting LLP 2016 The BoP Market Opportunity in Latin America

Page 5 © Deloitte Consulting LLP 2016 Ten Lessons from the IDB OMJ Experience 1.IB is a significant and growing market opportunity 2.MBDs can create value and additionality 3.IB was successfully mainstreamed within the IDB 4.Internal adjustments were necessary to accommodate inclusive business transaction in IDB’s processes 5.Assuring evaluability was essential for model validation and learning 6.Blended financial instruments are essential for investment “relevance” vis- à-vis inclusive business investees

Page 6 © Deloitte Consulting LLP 2016 MDBs and DFIs can play a catalytic role in market building, innovation, derisking and knowledge systematization in inclusive business. The Additionality of MDBs in Inclusive Business Track record Networks Reach Leverage Capital Proof of concept Mitigate Risk Crowding In Knowledge

Page 7 © Deloitte Consulting LLP 2016 Ten Lessons from the IDB OMJ Experience 7.A strong and diverse team is needed to identify, evaluate and approve inclusive business investment opportunities 8.Inclusive business does no mean higher risks and lower returns – market rates are possible 9.Based on IDB experience, ADB should consider 3 Cs – capabilities, coordination, coherence 10. ADB should consider progressive steps – TA, dedicated pool of capital, eventual dedicated fund

Page 8 © Deloitte Consulting LLP 2016 Lessons from the ADB Experience Since 2011, the ADB has learned some important lessons regarding the development and implementation of inclusive business in Asia