MCDF Workshop Examines Digital Infrastructure Financing Keys

Keys to mobilizing digital infrastructure financing to meet connectivity demand were examined during the third session of the virtual Digital Infrastructure Introductory Workshop Series on 25 March. The series is cohosted by the Multilateral Cooperation Center for Development Finance (MCDF), African Development Bank (AfDB), CAF—Development Bank of Latin America and the Caribbean, International Fund for Agricultural Development (IFAD), and World Bank.

View the Workshop 3 Video Recordings and Download the Presentations

Speakers from these International Financial Institutions (IFIs) highlighted digital infrastructure financing approaches and lessons learned from Africa and Latin America and the Caribbean, with a focus on IFIs’ financing role within the sector and how developing countries and partners can access and leverage this support. The speakers described how IFIs are slowly moving from simple and risk-less corporate financing to more risk-prone financing structures based on project approaches and returns. They drew upon regional and global case studies and research reports.

CAF Executive Vice President, Mr. Gianpiero Leoncini, opened the workshop by underscoring the priority CAF ascribes to digital infrastructure financing, particularly in advancing digital public infrastructure. Mr. Ivan Rossignol, MCDF’s Senior Advisor on Digital Infrastructure and the workshop series moderator and strategic lead, followed with an introductory presentation which noted the importance of collaboration between IFIs and the public and private sectors for addressing the sector’s USD1.6 trillion financing gap.

A panel of IFI experts subsequently discussed digital infrastructure financing challenges, opportunities, and innovative financing instruments and good practices among IFIs.

Mr. Antonio García Zaballos, Digital Sector Office Director at ADB, said that the digital infrastructure financing gap is much larger than current estimates when taking into account plans to build greater computing capacity. Unlike more ancillary infrastructure sectors, a single IFI cannot satisfy digital infrastructure financing demand without partnering with other IFIs and/or public or private sector financiers, he added.

IFI digital infrastructure financing is constrained by the lack of consensus on whether financing is considered a public subsidy, the rapid pace of change within the sector, and the difficulty to analyze it well and provide internal justification based on economic return analysis, explained Mr. Jerome Bezzina, Senior Digital Development Specialist at the World Bank.

Ms. Brenda Gunde, Lead Global Technical Specialist, ICT for Development at IFAD, stressed that rural needs make massive investment in digital public infrastructure imperative and must come in parallel with investment in agricultural value chains. The value of digital public infrastructure was echoed by Mr. Eduardo Chomali, Senior Executive and Digital Transformation Projects Lead at CAF. Both speakers called for leveraging partnerships to scale digital public infrastructure and extend its impact in underserved rural communities.

Understanding digital infrastructure and digital public infrastructure demand better may eventually change how IFIs process loans and respond to demand, speakers agreed.

Speakers went on to describe financing examples that could be replicated in other countries and regions.

They include Nepal’s data center financed by ADB, Kosovo’s reserve auction financing by the World Bank, Peru’s “last mile” network for connecting underserved communities financed by CAF, Nigeria’s “middle mile” network to link international internet gateways to local last mile access networks financed by AfDB, and Jamaica’s “backbone” network financed by the Inter-American Development Bank.

Mr. Nicholas Williams, Head of ICT Operations at AfDB, emphasized the need for IFIs and partners to push boundaries to tackle the digital divide, such as supporting the financing of consumer goods. He pointed out that investing in backbone and last-mile networks will not change dynamics within the sector unless affordable handsets are made available to the large segment of the population in developing countries and regions which are still not connected.

The Digital Infrastructure Introductory Workshop Series will conclude with its fourth session on 20 May, focusing on artificial intelligence (AI) infrastructure.