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Lowering the Threshold

image of Lowering the Threshold

This publication is the revised version of a study and report commissioned by the Secretariat entitled 'Lowering the Threshold: Changing Private Investors’ Perceptions by Reducing the Cost and Risk of Investment in Least Developed, Small and Vulnerable Economies'. The main premise of the study was that much effort by governments, aid donors and international financial institutions (IFIs) and regional development banks has been expended to improve the climate for private investment. However, the reality is that the least developed, small and vulnerable economies face particular problems in attracting private investment. The report considers the practicalities of developing marketfriendly financial instruments as a way of providing an incentive to investors in these economies.

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Intervening to Reduce Costs and Risks

Of the many ways that LDCs and SVEs try to make themselves more attractive to SME investment, none of which are sufficient by themselves, this chapter focuses on measures intended to reduce financial cost and risks. These have a long history and various sponsors; several of them make use of ODA in some form, usually to defray administrative costs. Appendix A provides a brief taxonomy of the facilities currently available to assist with investment costs and risks, in theory at least, in LDCs and SMEs.

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