Changes in Development Finance in Asia: Trends,Challenges, and Policy Implications

There have been shifts in the composition and nature of development finance in Asia, such as the mainstreaming of private sources of finance and the emergence of domestic resources potentially available for development purposes. In parallel, new trends and challenges are identified in such areas as the transformation of development aid, public–private partnerships, and green finance. A common challenge is how to strengthen financial intermediaries for longer term sustainable financing from domestic and external sources for investment serving development purposes. To address this, policymakers should bear in mind policy coherence and consistency from macro, sector, and micro perspectives. For various financial resources to bring about tangible benefits, policymakers should take account of complementarities and synergies among the full range of available financial resources. The effective utilization of private sources of finance depends on commercial viability. The key to success is incentive design and risk mitigation measures.