On the other hand, the private sector may have larger financial capacity but is traditionally more inclined to support low-risk and well-served customers, whilst high risk customers are either left out or are charged quite expensively to buffer for uncertainties. In overcoming these challenges, DFIs ought to collaborate with other entities in mobilising capital and diversifying risk across different institutions, thus providing an opportunity for the private sector to participate in these segments within the comfort of their risk tolerance. In parallel, DFIs need to continuously build their internal expertise and deepen their understanding of the sectors or segments through regular engagement with the industry, as well as enhance industry analysis, leveraging on access to data within the government. This would augment DFIs’ credibility to lead and crowd-in the private sector towards participating in innovative funding structures. There are two noteworthy solutions that DFIs may wish to find ways to adapt to the local context: Firstly, a risk-sharing facility that can catalyse private capital. This entails offering instruments that enhance the private sector’s willingness to finance high-risk segments. For example, USAID partnered with the Medical Credit Fund (MCF) in Africa in providing USD 1 million catalytic first-loss capital which successfully drew in USD 17 million debt financing from impact investors. MCF, in turn, worked with African financial institutions to provide loans and technical assistance to healthcare SMEs in providing quality healthcare services as well as ensuring business sustainability. Secondly, the use of blended finance while offering financing instruments that promote customer resilience.

While measures have been taken to increase housing supply, it will take some time for this supply to come onstream. Second, should demand remain resilient, COE premiums are likely to stay high. This could present upside risks to the 4.0–4.5% forecast for CPI-All Items inflation. In sum, the costs of imputed rentals on owner-occupied homes and private road transport will account for about 60% of CPI-All Items inflation this year. CPI-All Items inflation will also be volatile from month to month. Two factors are significant: one, the fluctuations in COE premiums; and two, the base effects associated with the timing of the government’s disbursement of service & conservancy charges and rental rebates.2 This factor, for example, accounted almost entirely for temporary rise in inflation from 5.0% in  2  S&CC and HDB rental rebates were given out in June, September and December last year, but were discontinued after March 2012. This will result in higher temporary contributions from accommodation cost in the corresponding months in 2012. 2  BIS central bankers’ speeches  May to 5.3% in June. We expect inflation in July to fall to around 4%, in part reflecting the reversal of this base effect. Let me now move on to MAS’ monetary policy. Monetary policy Monetary policy has had restraining effect on inflation and current policy stance remains appropriate The persistence in Headline Inflation has led to some questions about efficacy of Singapore’s exchange rate-centred monetary policy framework. MAS has studied this issue very carefully.