_Financial Solutions on the Ground_ 2.12 **International efforts to support innovative financial solutions on the ground employed at least an estimated US$52.7 billion in official flows or 5.7 percent of total official flows to developing countries between 2000 and 2008** (Figure 2.1). These innovations, which were more heavily focused in middle-income countries, grew an average of 10 percent annually in volume terms over this period. The World Bank Group was responsible for nearly half of these international efforts (or US$23.7 billion over the 2000–8 period). As such, the Bank Group’s catalytic efforts at the country and global levels as well as its PPP efforts to promote private finance for public service delivery both have influenced international trends, highlighted below:

- **Over the 2000–8 period, US$39.4 billion (or three-quarters of all innovative uses) supported** **_catalytic_ country-level efforts in the financial and productive sectors.** These efforts typically used risk-mitigation instruments, primarily partial credit guarantees and local currency lending using derivatives. Even though developing country efforts to catalyze private catastrophe insurance markets, for example, property catastrophe insurance for householders and crop insurance for farmers, totaled only US$181 million to date, it remains a cutting-edge area with initiatives in the pipeline. Also in the pipeline is the US$1.5 billion pilot AMC, which aims to correct market failures in the global market for vaccines.

- **_Public-private partnership mechanisms_ employed a range of available multilateral and bilateral risk management instruments, totaling US$8.6 billion in guarantee amounts, to leverage private finance for public services in infrastructure and the social sectors.** Of these, most were carried out using partial risk and political risk guarantees. OBA schemes accounted for US$3.7 billion or a third of international PPP efforts. Multilaterals, such as the Bank Group, have helped countries access global insurance markets to cover sovereign catastrophe risks. To date, US$451 million in support and intermediation services supported such efforts. Debt conversions, totaling US$87 million, were financed by private donors.

- **Innovative solutions using** **_solidarity mechanisms_ totaled only US$481 million.** These comprised debt buy-downs financed with bilateral aid, as well as counter-cyclical lending, which allow countries to adjust terms and conditions in response to shocks.

2.13 **PPPs, and to a lesser extent, catalytic mechanisms, leveraged additional resources on the ground** (Annex 3.3). While complete estimates of international efforts were not available, Bank Group-supported _PPP mechanisms_ registered leveraging ratios of 6.7 through Bank Group partial risk guarantees and insurance schemes, 7.5 through partial credit guarantees, and 5.6 on debt buy-downs using private donations. The leverage from OBA schemes was conservatively estimated to be 1.8. Similarly, leverage estimates for _catalytic mechanisms_ were 2.8 using Bank Group partial risk guarantees and 2.2 using partial credit guarantees.

2.14 **Middle-income countries tended to benefit in terms of official flows deployed through innovative mechanisms.** Annual per capita official flows supporting innovative financial solutions in IBRD countries averaged US$78 over the 2000–7 period.<sup>14</sup> IDA and blend countries together averaged US$54 per capita official flows (by definition, ODA).

> 14 As noted earlier, the data on IBRD-eligible middle-income countries may be underestimated. A significant portion of these funds flows were uncategorized in part because IFC local currency lending was not classified by country. Another US$1.5 billion of commitments went to the AMC global program.

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