Global capital does not flow evenly. It tends to concentrate in wealthier markets, leaving too many countries – particularly frontier markets – on the margins of international investment. Yet these are the places where investment is often needed most: to support businesses to grow, create jobs, and expand essential services.
Development finance institutions exist to help correct this imbalance. At British International Investment (BII), our role is to invest where commercial capital struggles to go, by taking on greater risk, deploying patient capital, and helping lay the foundations for investment to follow. But in many frontier markets, capital alone is not enough. The barriers run deeper: a shortage of investment-ready businesses, shallow financial ecosystems, or regulatory frameworks that deter long-term investors.
In response, we have been testing a more deliberate, programme-led approach to market building. Rather than addressing constraints one transaction at a time, we focus on identifying the underlying factors holding markets back and working to remove them. This brings together our investment capital with tools beyond capital – including technical assistance, policy engagement, partnerships and convening – with the aim of influencing behaviour across the market and catalysing wider flows of investment.
Although this approach is still relatively new for us, the early results are encouraging. Programmes in Nepal, Ghana and Zambia, alongside the Africa Resilience Investment Accelerator (ARIA), are beginning to demonstrate what is possible with sustained, coordinated effort. Together, our market-building portfolio has contributed to 32 investments worth $415 million. Beyond individual transactions, this work has helped businesses become investment-ready, supported investors to adapt their strategies and tools, influenced policy reforms, and strengthened environmental, social and governance practices across financial institutions.
This experience is shaping how we look ahead. Frontier markets – defined in line with the UN’s Least Developed Country classifications – are home to over a billion people and 40 per cent of the world’s extreme poor, yet receive less than 1 per cent of global foreign direct investment. Over the next five years, we intend to deepen our focus on these markets, building on what we have learned so far. In a small number of countries, this will involve adopting our market-building approach that combines capital and support to unlock specific investments with sustained ecosystem engagement.
This report distils what we have learned so far: what market building looks like in practice, where it can be most effective, and how DFIs can use their capital and influence to help markets work better over time.
