A Financial Times op-ed by the Head of World Bank, Ajay Banga, triggered some thoughts that I want to share. The World Bank has long been recognized for mobilizing large-scale capital to transform economies and create jobs. Its emphasis on infrastructure, governance reforms, and systemic investment conditions is essential — and powerful. That said, it struck me that the model relies on one fundamental assumption: that the groundwork for private capital to flow already exists, or can be rapidly created with institutional muscle.

Which left me thinking - What happens in places where that assumption doesn’t hold? Where risk profiles are too high, markets too shallow, and financial ecosystems too fragile to absorb capital at scale — even concessional capital? What about those countries around the world whose credit ratings are below C grade? Afterall, we know based on Convergence Blended Finance analytics, only 4% of global financial assets are invested in low-income and middle-income countries.

This is where the United Nations Capital Development Fund (UNCDF), by mandate of Member States back in 1966, was designed to play a catalytic and complementary role. Today, we are re-pivoting and restructuring to more deliberately align with that founding mandate as its relevance has been amplified by the ongoing Financing for Development discussions. While the traditional regulated and credit-rated development finance institutions strengthen the highway, UNCDF builds the first (or last) mile.

With a unique capability in the UN system to deploy financial instruments (guarantees, loans to the private and public sector (at zero or very low interest) and grants), alongside financial structuring solutions aimed at strengthening sub-national public financial management systems as well as private sector capital market development, UNCDF is re-pivoting its programming focus from largely a technical assistance providing agency to one that specializes in the deployment derisking financial capital for early-stage investments in the world’s most vulnerable economies — the Least Developed Countries (LDCs), Small Island Developing States (SIDS), and fragile contexts often left behind by global capital flows. These are markets that we all rightly identify as high potential — but where the concessional arms of development finance institutions are most impactful only once the enabling environment has started to solidify. So, what happens before that?

We at UNCDF are going to make it a point to enter ecosystems before the enabling environment is bankable, using catalytic concessional first-loss capital to reduce risk and crowd in follow-on investment (loan, grant, guarantee). There isn’t enough of this type of support in the development finance architecture. Our instruments — often modest in dollar terms ($0.5-$7 million per transaction) — will unlock disproportionately large impact. This isn’t about scale for scale’s sake. It’s about precision deployment: demonstrating viability where markets have failed or stalled. It will be about deployment of capital that is more than what microfinance provides, but below the typical $20m floor for most regulated financial institutions. In other words, UNCDF will focus on financing the “missing middle.”

Take the challenge of private capital mobilization. The common refrain heard in many discussions on finance for development of "billions to trillions" narrative glosses over the barriers to market entry. We are working to address exactly those barriers — not just through financing, but by working with local governments, municipalities, fintechs, and MSMEs to prototype and de-risk inclusive financial and infrastructure models.

Our role is pre-investment, pre-bankability — and essential.

Where established financial institutions build national grids and energy policies, UNCDF and our partners in the UN, including UNDP, support off-grid innovators in last-mile communities, piloting payment models that can later be scaled. Where traditional institutions finance major logistics corridors, UNCDF helps seeds SME supply chain platforms that connect rural producers to those corridors. Where the traditional finance institutions work with sovereign governments to unlock private equity, UNCDF engages city governments and local banks to unlock trust and transactions.

We don’t duplicate. We deepen. We connect. We prepare.

The global development financing architecture needs both scale and sequence. UNCDF is part of that necessary sequence — building the scaffolding in markets too often overlooked, helping investors eventually say “yes” to places where they would otherwise pass.

In this sense, UNCDF is not a competitor to the more traditional financial sector — we are effectively their advance, off-balance sheet, de-risking team.

Together, institutions like UNCDF, UNDP and others in the UN Development System, alongside the MDB/DFI architecture can create a truly inclusive development finance continuum. One that starts with bold risk-taking in overlooked markets and ends with scaled-up investment that delivers jobs, stability, and growth.

In a world where private capital only flows to where confidence exists, UNCDF helps create that confidence — project by project, community by community.

Because before you build the future, someone must first unlock it.