Research Note: Securitisation for Sustainable Development

Securitisation has a powerful role to play in mobilising private capital to finance sustainable development in emerging market and developing economies (EMDEs).

It allows banks to transform illiquid EMDE assets into tradeable, interest-bearing securities. The sale of these securities enables banks to transfer risk to institutional investors while freeing up their balance sheets to finance new loans at a lower cost of capital. Banks can prioritise financing sustainable development when extending these new loans.

The global securitisation market remains dominated by developed countries. Expanding the role of securitisation in financing sustainable development in EMDEs requires innovations related to demand, supply, and policy and regulation.

MOBILIST’s investment in an infrastructure asset-backed securities vehicle sponsored by Bayfront Infrastructure Management illustrated that investing in the equity tranche of a debt securitisation is commercially viable and can have a significant multiplier effect by enabling both commercial banks and MDBs to recycle capital faster.

This MOBILIST Research Note on Securitisation shares insights from this transaction, the benefits of securitisation for both borrowers and investors and the different ways development finance actors can accelerate the use of securitisation for sustainable development.