The world faces challenges, like biodiversity loss and pandemic threats, that require collective action across borders. Yet, countries often prioritize internal problems over shared global concerns. How can nations be encouraged to make investments and reforms that benefit both themselves and their neighbors?

A New Financial Incentive Framework
The World Bank created the “Framework for Financial Incentives (FFI) for Projects that Address Global Challenges with Cross-Border Externalities.” Supported by donor funds, it channels extra resources toward initiatives that deliver shared benefits to multiple countries and the world.

Why We Need Innovative Solutions
Many vital projects would never launch without incentives—collaborating to solve urgent global issues is expensive. With the FFI, the World Bank can lead large-scale cooperation by offering targeted financial rewards. Beginning in February 2025, countries borrowing from the International Bank for Reconstruction and Development (IBRD) become eligible for:

·       Additional Financing: By 2026, billions of dollars in extra funds will be available yearly.

·       Extended Repayment Terms: Loan maturities may be stretched up to 50 years.

·       More Concessional Support: Through the Livable Planet Fund (LPF), high-impact projects can receive grants or lower interest rates.

Eight Priority Areas
The FFI focuses on projects that address at least one of these key global challenges and generate positive “spillovers” beyond national borders:

1.     Digital Enablement

2.     Energy Access

3.     Food and Nutrition Security

4.     Fragility and Conflict

5.     Climate Change Adaptation and Mitigation

6.     Pandemic Prevention and Preparedness

7.     Biodiversity and Nature Conservation

8.     Water Security and Access

Projects are chosen through a competitive process. To qualify, they must clearly demonstrate how local action produces benefits for neighboring countries or the world.

Example: Coastal Mangrove Restoration
Consider a country-led effort to restore mangroves along its coastline. This would protect communities from storm surges locally, improve fish habitats regionally, and boost food security globally. It would also sequester carbon, helping mitigate climate change. By showing these multiple effects, such a project would win extra support from the FFI.

Supporting Ambitious Ideas
Whenever a project idea offers benefits beyond one nation—whether securing water supplies for a river basin or setting up cross-border disease monitoring—the FFI can step in. By providing enhanced financing, the World Bank hopes to elevate projects from “good” to “game-changing.”

Learning by Doing
Since measuring cross-border benefits can be complex—how do you put a value on preventing a future pandemic?—The FFI will evolve using a “learning by doing” approach. The Bank will monitor progress, refine metrics, and adjust criteria based on real-world outcomes. This ensures that incentives are well-targeted and only as generous as necessary.

Ensuring Efficient Use of Funds
The framework aims to provide the “least financial incentive” needed to make a project viable. By calibrating incentives carefully, resources flow to where they have the highest impact, encouraging more countries to step up on global challenges.

Mobilizing Additional Resources
Thanks to the Global Solutions Accelerator Platform (GSAP), the IBRD balance sheet expands through tools like hybrid capital, portfolio guarantees, and enhanced callable capital. This creates an extra $2 billion per year in IBRD lending capacity. Meanwhile, $220 million in grants are available in the first year via the LPF. For the first time, shareholders can channel funding toward cross-border solutions, motivating countries to borrow from the IBRD for projects requiring concessional financing.

A Broader Message
Beyond money, the FFI signals a shift: the most effective solutions often cross national borders in our interconnected world. By aligning financial incentives with shared global goals, the World Bank invites countries to think regionally and globally when investing in development.

Conclusion
The FFI represents a significant change in development finance, rewarding collaboration on issues that affect us all. As the world grapples with complex threats, this framework provides the tools and incentives needed to turn ambitious ideas into reality, ensuring that projects with cross-border benefits can move forward now.