Global development has dramatically changed course since 2025, and a new agenda built on jobs and private capital mobilization is taking shape. To work in fragile states, this approach must attract investments while also building peace and stability. This goal may be attainable if, in addition to upgrading their toolkit, multilateral development banks (MDBs) and development finance institutions pursue a dual strategy: first, double down on support for governance and institutions, the very foundations of functional markets; second, put to work an asset these organizations already hold but underuse—their strategic intelligence—the ability to interpret and navigate the social and political forces that keep economies stagnant and make or break deals.
In just one year, aid from advanced economies contracted by 23%, dropping as a share of donor incomes to levels not seen since the mid-2010s. The causes are multifaceted and include pressures on public finances from higher debt, defense spending, and social needs, but also shifts in geopolitics. In this context, MDBs are steering larger shares of their portfolios toward job creation and mobilizing private capital. The World Bank explicitly calls jobs its new North Star, aiming to pair infrastructure financing with policy reforms and guarantees to de-risk investments and help attract capital at scale. The hope is that job creation will effectively absorb the 1.2 billion young people set to enter labor markets in developing economies by 2040 while easing migration pressures on richer countries, though the evidence on the development-migration link remains nuanced.
In fragile states—a group of about 40 countries where extreme poverty is most entrenched—the Bank’s refreshed strategy carries the same logic. But fragile states may be the ultimate test for this new approach. According to the Organisation for Economic Co-operation and Development (OECD), just 11% of the private finance raised globally for development in 2023-2024 went to these countries, while instruments built specifically to crowd in capital in the poorest or most fragile nations, such as the International Development Association (IDA) Private Sector Window, have struggled to deliver. This is partly because fragility’s driving forces—zero-sum politics, social tensions, a state unable or unwilling to provide security and public services, and greater exposure to shocks—create a vicious cycle that leaves firms small, informal, and structurally underdeveloped. These dynamics, strengthened by extractive political and economic institutions that place power in the hands of a small elite, diminish trust in state institutions and fuel discontent. As a result, the social contract—the implicit compact in which citizens grant the state legitimacy and pay taxes in return for security, services, and accountability—breaks down, with lasting economic consequences. According to IMF research, fragile states, where the social contract is most visibly broken, have trailed behind other developing economies for decades, displaying lower growth, weaker domestic revenue mobilization, and lower total factor productivity. The private sector cannot thrive in such contested environments, and even where transformative opportunities exist, they may sit hidden beneath more palpable risks in a context that outside capital cannot interpret.
Roads, energy, mines, and ports are all important for attracting capital and growing the domestic private sector. But governance and effective institutions determine whether these get built at all, and whether they work. Governance can also draw capital directly: strong fiscal institutions—such as revenue administration and public financial management—are associated with larger and higher-quality foreign direct investment inflows in poor countries, while fiscal incentives (such as special economic zones) attract capital only where those institutions are already sound. The reverse is also true: Where governance is ignored, capital can entrench predatory power rather than strengthen the social contract. For example, rapid growth can tempt governments and their partners to overlook corruption and elite capture. In Tunisia before the Arab Spring, firms tied to the president’s family accounted for less than 1% of output and employment yet captured 21% of the economy’s profits. In parts of sub-Saharan Africa and South Asia, years of strong growth masked governance problems that undermined citizens’ trust in the state until social unrest erupted, with immense social and economic costs. These dynamics fail the poor and private capital alike: The first bear the cost of broken institutions; the second cannot price risk, cannot structure deals that would earn a return, and cannot see clearly enough to know when it should try.
Closing that gap is where MDBs hold a powerful and underused asset: their strategic intelligence. Fragility is, in part, an information disorder because poor governance, social tensions, and insecurity create noise and opacity that private capital struggles to interpret. Sophisticated investors do navigate such terrains, but generally outsource political analysis, security risk management, environmental, social, and governance (ESG) analysis, or legal advice to fragmented providers. And even with inputs in hand, they may lack the embedded political-economy judgment needed to separate country-level noise from a specific investable case. MDBs are uniquely positioned to provide it. Between fragility assessments, country strategies, private-sector diagnostics, economic data, and people on the ground—and with help from AI—these institutions have the raw material to turn data and field insight into actionable intelligence. The point is not to rank countries as investable or not, or to add checklists on conflict sensitivity, but to find the specific opportunities that exist even in the most difficult places.
Crafting strategic intelligence differs from ordinary research and analysis in both method and resolution. At the macro level, intelligence goes beyond root-cause or historical analysis to create foresight scenarios arising from how key actors, institutions, and economic or geopolitical forces interact, all in plain language. It can help investors understand not just why a country is fragile today, but which forces will shape its future, and therefore the potential for investment. At the project level, where it matters most to investors, intelligence can provide a living read built for operators and kept current: which local enterprises have real potential, which key ministries are functional, which counterparts have political cover and from whom, or what the security situation around a project site looks like today rather than a few months ago. International financial institutions have produced assessments that offer this kind of candor. For example, the 2023 IMF governance diagnostic for Sri Lanka found “virtually no culture of integrity” in the Customs and Inland Revenue Departments, with corruption acknowledged at every level and rarely leading to any consequences.
When embedded across a portfolio, strategic intelligence can also reshape the universe of investable opportunities. It can widen the pipeline or steer capital away from deals that look bankable but are not, compress due diligence costs, and narrow the risk-perception premium that guarantees are priced against. Paired with stronger governance, it can help ensure that investment serves the public interest, and that both the state and private capital are accountable for the outcomes they produce. Fulfilling this goal will require institutions willing to value synthesis and clarity over fragmented reporting, and leadership willing to protect candid political-economy judgment from the pressures to dilute it.
None of this substitutes for the operational mechanics that make deals close—concessional finance, the right legal infrastructure, or the patient work of building client capacity. Nor will private capital ever be easy to mobilize at scale in fragile states. But governance gives markets something to stand on, and strategic intelligence helps investors see where opportunity is real and reduce the friction and uncertainty of getting capital to those opportunities. Together, they can help make private capital a force for both economic growth and lasting stability.