Balance Sheet Optimisation is a concept most often associated with commercial banks. It consists of a number of methodologies and tools designed to help them maximise their return on capital within the boundaries set by the prudential and regulatory frameworks they are subjected to.
Transposed to the development finance context, where return on capital is in theory subordinated to developmental impact or absolute deployment levels as a proxy, optimisation remains relevant, particularly given the sector’s reliance on finite public funding and the herculean scale of the sustainable development challenge.
While optimisation techniques, ranging from credit insurance and synthetic securitisation to secondary transactions and exposure exchanges can enable development finance institutions and multi-lateral development banks to adjust or diversify their risk exposure, dynamic allocation mechanisms can be brought to bear to more efficiently meet the demand for capital where it arises.
Moderator: Thomas Venon, Founding Partner, Eighteen East Capital
4.3 Making better use of development finance through balance sheet optimisation