Lending by multilateral development banks (MDBs) and development finance institutions (DFIs) to private entities in emerging markets has performed comparably to that in advanced economies, with an average default rate of 3.54 percent and recovery rates exceeding global benchmarks at 72.9 percent, according to new statistics from the Global Emerging Markets Risk Database (GEMs) Consortium.

The findings provide valuable insights into investment risks and opportunities in emerging markets and developing economies (EMDEs) and emphasize the importance of greater data transparency to support private capital mobilization and portfolio diversification in these regions.

Despite facing significant financing challenges, including a potential cumulative shortfall of more than $10 trillion by 2050 as projected by the Organisation for Economic Cooperation and Development (OECD), GEMs data indicate that credit performance in EMDEs has been more resilient than commonly perceived. This resilience underscores the potential for scaling up investment in these markets.

“By providing more granular statistics, GEMs enable investors, credit rating agencies, and policy institutions to better understand and manage investment risks in regions that have historically lacked empirical credit risk information,” said Rachel Robboy, Chief Risk Officer at IDB Invest. “GEMs offers the statistical foundation that helps IDB Invest and peer institutions mobilize investment at scale in emerging markets.”

Source: (Caribbean News Global)

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