Emerging Market Lending by MDBs Shows Strong Resilience, GEMs Data Finds

A new report by the Global Emerging Markets (GEMs) Risk Database Consortium reveals that multilateral development banks (MDBs) and development finance institutions (DFIs) lending to private entities in emerging and developing economies (EMDEs) has performed as strongly as in advanced markets, defying perceptions of elevated risk.

According to the GEMs Consortium's latest statistics, average default rates in EMDE private lending stood at 3.54%, while recovery rates reached an impressive 72.9%, surpassing global benchmarks. The findings, derived from an extensive dataset of credit exposures across dozens of MDBs and DFIs, provide a clearer, data-driven picture of the true investment risk landscape in developing economies.

Lending Resilience Amid Global Volatility

The GEMs Consortium — a collaboration of major development finance institutions and multilateral lenders — compiles and analyses data from thousands of loan and investment exposures in over 100 countries. Its findings challenge long-held assumptions that lending in emerging markets is significantly riskier than in advanced economies.

"These results show that MDBs and DFIs have been able to maintain robust credit performance in some of the world's most complex and volatile markets," said a GEMs representative. "This underscores the effectiveness of development finance risk management frameworks and the viability of scaling private investment in these regions."

The GEMs database, which tracks historical default and recovery patterns, helps institutions understand trends in sovereign, sub-sovereign, and corporate credit risks, providing vital inputs for risk modeling, pricing, and portfolio management.

Global Financing Gap: Over $10 Trillion by 2050

The study comes amid growing concerns over financing shortages in developing countries. According to estimates by the Organisation for Economic Co-operation and Development (OECD), EMDEs face a potential cumulative financing gap exceeding $10 trillion by 2050, particularly in infrastructure, climate adaptation, and sustainable development projects.

While these economies account for nearly 60% of global GDP growth, they still attract less than one-fifth of total private capital flows, largely due to perceived risk and data scarcity. The GEMs findings suggest that those perceptions may be overstated, offering a new evidence base for mobilizing private-sector finance toward sustainable development.

"By providing more granular statistics, GEMs enables investors, credit-rating agencies, and policy institutions to better understand and manage investment risks in regions that have historically been underserved by empirical credit-risk information," said Rachel Robboy, Chief Risk Officer at IDB Invest, one of the key GEMs participants.

She added that reliable data helps development financiers "scale investments in ways that are both sustainable and commercially viable."

Data Transparency and Private Capital Mobilization

The GEMs Consortium's latest publications stress the central role of data transparency in attracting global investors to EMDEs. For decades, the lack of consistent credit-risk data has constrained financial flows to high-potential markets, limiting growth in infrastructure, energy, and social development sectors.

By aggregating and anonymizing data from multiple MDBs and DFIs, GEMs provides a comprehensive empirical foundation for understanding credit behavior in these regions — including default frequencies, loss given default, and sector-specific risk metrics.

The data covers lending to public, private, and sovereign or sovereign-guaranteed entities, providing cross-sector comparability and helping institutions set realistic risk-adjusted pricing models.

According to GEMs experts, the average recovery rate of nearly 73% reflects the resilience of EMDE borrowers and the quality of due diligence by MDBs and DFIs, even in challenging political and economic conditions.

Strengthening Risk Knowledge for a Sustainable Future

The GEMs Consortium, established in 2009, includes more than a dozen multilateral development banks and DFIs such as the World Bank Group, the European Investment Bank (EIB), the African Development Bank (AfDB), the Asian Development Bank (ADB), and IDB Invest. Its mission is to provide standardized and comparable credit-risk data to strengthen financial stability and enhance the flow of investment to developing markets.

The new GEMs publications — available at www.gemsriskdatabase.org/recent-publications — present the most comprehensive view to date of MDB and DFI credit performance. These findings are expected to inform global policy debates around development finance architecture reform, particularly efforts to increase private capital mobilization in emerging markets, a key priority identified by the G20 Independent Review of MDB Capital Adequacy Frameworks.

A Foundation for Scalable Investment

The report concludes that EMDEs are far more resilient investment destinations than often assumed and that strengthening data-driven analysis can catalyze billions in private finance for the Sustainable Development Goals (SDGs).

By showcasing real-world credit performance, the GEMs Consortium offers an evidence-based tool for risk mitigation and a pathway to closing the investment gap in regions critical to global growth and climate action.

As Rachel Robboy of IDB Invest summarized:

"Investments in these economies need to be scalable, and GEMs provides the statistical foundation to help investors, policymakers, and development institutions achieve that goal."