The Barbados-based Caribbean Development Bank (CDB) is putting itself in a better position to mobilise capital, including private finance.
This objective was outlined by CDB President Daniel Best at the Pierre Mendès France Conference Center, Ministry of the Economy and Finance in Paris, France as he participated in the Finance in Common (FiCS) G7 special event on April 29.
FiCS is the global network of all public development banks, and aims to align financial flows on the 2030 Agenda and Paris Agreement for Climate Change.
Best highlighted several initiatives the CDB had implemented or was pursuing as part of its embracing of innovative financial instruments to benefits Barbados and its 18 other borrowing member countries (BMCs).
In the session on Financial Instruments To Lower The Cost of Capital, he mentioned the CDB’s US$450 million Exposure Exchange Agreement (EEA), undertaken in partnership with the Central American Bank for Economic Integration and a US$200 million first-loss portfolio guarantee with the Government of Canada, which, once finalised, would unlock between US$300 million and US$400 million in financing for BMCs.
On the EEA, he said: “This transaction reduced our top five borrower concentration ratio from 61 per cent to 38 per cent without any new shareholder capital injection. So our limitation was indeed not demand nor risk appetite, but concentration rules, and this . . . translated immediately into new lending capacity.
“For a small multilateral development bank like CDB, with 19 board member countries and a balance sheet of just US$2 billion, the significance of having tight constraints on lending cannot be overstated.”
He said regarding the first-loss portfolio guarantee that “as I speak the technical team from the Government of Canada is in Barbados finalising the details of that portfolio credit guarantee”.
Best also said that “together with the Inter-American Development Bank, the World Bank and Development Bank for Latin America and the Caribbean, or CAF, we are actively working to structure a Multi-Guarantor Debt For Resilience Transaction”.
“It addresses a core challenge for us in the Caribbean. High debt burdens and extreme climate vulnerability are mutually reinforcing for the Caribbean. By leveraging guarantees from our fellow MDBs and private sector partners, this initiative will create the fiscal space for resilience investment without adding new debt to our borrowing member countries,” he explained.
“In other words, our member countries will be allowed to invest in resilience before disaster strikes, as opposed to what has obtained recently, which is on the back end of disasters.”
Best noted that the overall objective of this initiative was to “reduce borrowing costs, extend maturities and generate fiscal space without increasing net debt”.
Contingent capital facility
“And so working with IDB, CAF and the World Bank is of paramount importance to what we’re delivering.”
He also spoke about the Contingent Capital Facility Instrument which the CDB was designing.
“In June 2025 we launched a pilot to design a contingent capital facility, and . . . it is a standardised MDB loss absorbing instrument intended to qualify as tier two capital. The phase one feasibility was completed in September of last year, and generic contractual templates will be shared across the MDB system by October of this year,” he said.
“And the facility essentially will provide a structured framework through which highly rated shareholders may formally commit to inject capital only if an objective financial trigger is breached scenarios.
“The objective is financial resilience support is contractually when it is needed most, of course, our rating.”
Best added: “So instruments are being strategic plan and of originated transfer, as a catalyst and anchor mobilisation, while balance sheet.”
One of the outcomes a plan to scale up financing financial innovations approaches “that align and financial stability public and private This included the Development Bank breached within clearly defined stress is to strengthen our resilience by ensuring that capital contractually available precisely most, while protecting, rating.” taken together, these being brought on the overall long term risk strategy transfer, positioning the bank anchor for private capital while consciously leveraging our outcomes of the FiCS meeting was financing and to accelerate innovations through integrated align climate, development, stability agendas, and combine financial flows”. the advancement of a Public Bank Guarantee hub aiming to mobilise US$10 billion in guarantees “to reduce risks and unlock private capital in emerging and developing economies”.
At a press conference after the FiCS meeting, Remy Rioux, chief executive officer of French Development Agency and chairman of FiCS, acknowledged the challenges countries like Barbados faced in accessing affordable financing.
“Of course, there are specific issues we all know about for small developing islands and we know the specificities of these kind of territories. There are discussion within FiCS, and there are proposals about whether we are missing an instrument [to help such countries,” he stated.
“And the issue about debt graduation of Prime Minister Mia Mottley, who, I was part of the Bridgetown Initiative, is pushing on the agenda that maybe we should a bit change our lenses and better understand the specificities of your countries.” (SC)
