Beyond Official Development Assistance: Development Finance in a Multipolar World

Photo by Jocke Wulcan on Unsplash  

Official Development Assistance (ODA) is the foundation of international efforts towards poverty reduction and infrastructure development. However, global ODA has declined in recent years, with countries including the USA, the UK and Germany cutting aid budgets. Changes in the development landscape signal a need for fresh approaches to development finance.

Enter blended finance. It leverages funding from the public sector and philanthropy to minimise risk and mobilise private investment. It’s an approach that works: between 2012 and 2020, blended finance vehicles attracted over $51 billion in private capital. However, this covers only a fraction of the estimated USD2.5 trillion needed annually to address the SDG financing gap in developing countries. Faced with this daunting gap, countries, multilateral development banks (MDBs), public and private stakeholders are exploring new ways of leveraging blended finance.

Sustainability-Linked Bonds and Loans 

These financial instruments tie a country’s cost of borrowing to measurable environmental or social targets. In collaboration with the World Bank, Côte d’Ivoire launched a Sustainability-Linked Finance Framework in July 2025. This framework adjusts interest rates based on progress toward targets (such as increasing non-hydro renewable energy capacity) and limiting net deforestation. Annual reporting, remote sensing verification and a World Bank-run Feasibility and Ambitiousness Assessment ensure accountability and transparency in this process.

Debt-for-Nature Swaps 

Innovative debt swaps enable countries to exchange external liabilities for investments in environmental conservation or green industries. The Economic Commission for Africa (ECA) is piloting a debt-for-nature-and-industrialisation swap in the Democratic Republic of Congo (DRC) that links debt forgiveness to the development of battery and electric-vehicle value chains. This combines fiscal sustainability, debt relief and green industrialisation.

Private Capital and Philanthropy 

Mobilising private capital for the Sustainable Development Goals (SDGs) means using public and multilateral development finance as a lever to attract far larger private flows. Private capital mobilisation leverages existing financial instruments to promote commercial investment into sustainable development projects that would otherwise remain under-financed. Organisations such as the Gates Foundation and newer impact investors support health, education and climate initiatives, bringing both capital and technical expertise.

In a truly multipolar world, Official Development Assistance cannot be the sole architect of global progress. The future of development finance is a shift away from fragmented approaches and towards shared frameworks rooted in ethics, sustainability and collaboration. Complementing traditional aid with blended finance, sustainability-linked instruments and debt swaps can build inclusive and resilient development finance architecture.