In this article, Hun Kim, AIIB Chief Partnerships Officer and Director General of the Sectors, Themes and Finance Solutions Department, discusses how AIIB is using product innovation and partnership solutions to design financial solutions for infrastructure projects.
Asia needs to build – and build fast. On one hand, the region faces a staggering investment gap to meet its Sustainable Development Goals. Estimates put this figure at roughly USD2.5 trillion annually, a figure which dwarfs available public resources. On the other hand, there are unprecedented opportunities – over USD4.5 trillion in private capital seeking sustainable, impactful investments. The fundamental challenge lies in bridging the gap between ambition, action and capital.
The traditional development finance model is under increasing strain. Official development assistance (ODA) fell by 7.1% in real terms in 2024 compared with 2023, the first such drop in five years, and is projected to decline by a further 9%-18% in 2025 if current donor cutbacks persist.
Meanwhile, private flows and foreign investment in developing Asia have also weakened, with deal count down 27% and aggregate value down 43%. These figures reveal critical gaps: Most of this capital flowed into middle-income countries and was concentrated in a few key sectors, such as energy. Crucially, the regions and sectors most in need, including climate adaptation and the world's least developed economies, are still struggling to attract scalable private investment.
This divergence between critical needs and capital allocation makes one thing clear: Traditional financing models alone will not solve Asia’s development equation. With ODA declining and domestic fiscal space under pressure, we must make blended and innovative finance the central pillar of Asia’s development architecture. This requires more than traditional banking or philanthropy. It demands a new, more strategic approach to partnership and product innovation.
The Engine of Innovation: A Systematic Approach to Product Development
“Whether it’s through targeted guarantees, blended finance vehicles, or results-based financing, we’re proving that smart structuring can unlock capital for even the most challenging development priorities.”
Recognizing that true innovation requires dedicated capacity, the Asian Infrastructure Investment Bank (AIIB) has established a Product Development and Management Team (PDMT) to design financial solutions that actually work. This team serves as the institutional engine for this transformation, to ensure that our solutions are not only innovative, but strategic, scalable and impactful.
Our approach aligns with OECD findings that effective blended finance requires “dedicated capacity and clear governance structures for product development and management.” The PDMT helps fulfill this mandate through a disciplined three-part process:
- Identify and prioritize: Acting as a single entry point, we consolidate product ideas from across the Bank and the market. Through rigorous strategic assessment, we focus resources on the most catalytic opportunities, weighing business impact against investment to ensure we’re solving real problems, not just creating new products.
- Structure for scale: Working closely with operational teams and the New Product Working Group, we shepherd proposals from concept to approval. The goal is not simply viability for a single project, but scalability across markets and sectors, transforming individual successes into replicable solutions.
- Evaluate and evolve: Our responsibility doesn’t end at approval. We conduct regular reviews of approved products to gather lessons learned and refine our offerings based on real-world performance. This continuous improvement cycle ensures our products remain relevant and effective.
Where Partnership Meets Products: The “6 Ps” Framework in Action
We’re moving beyond individual projects to create platforms that support greater standardization and aggregation, enabling scale. By bringing together governments, development partners and private investors, we can create the scale needed for meaningful impact. This approach reduces transaction costs, standardizes documentation and makes it efficient for institutional capital to participate in emerging markets. Experience shows that when we combine deep sector knowledge with financial innovation, we can address the specific risks that deter private investment. Whether through targeted guarantees, blended finance vehicles or results-based financing, we’re proving that smart structuring can unlock capital for even the most challenging development priorities.
To make this systematic and scalable, we deploy what we call the “6 Ps” framework:
- Pipeline development: enhancing project preparation to create bankable opportunities
- Pooling and structuring: creating aggregation vehicles for institutional capital
- Partner alignment: building intermediaries to connect investors, DFIs, and governments
- Policy coordination: implementing supportive regulations to mitigate risks
- Platforms: establishing hubs to anchor and coordinate capital
- People-centricity: ensuring capital reaches the most vulnerable and funds climate adaptation.
From Theory to Practice: Three Ways We’re Making It Work
As Chief Partnerships Officer, I am establishing three foundational pillars to transform how AIIB approaches partnership and financing. Here’s how we’re making this work in practice:
- Institutional foundation and strategic mandate: Our Corporate Strategy provides a strong foundation for scaling blended and innovative finance. It articulates AIIB’s mission as “Financing Infrastructure for Tomorrow” through four thematic priorities. This operational focus, combined with targets to double annual financing to USD17 billion by 2030 with balanced support for sovereign and non-sovereign clients, positions private-capital mobilization as central rather than peripheral. Our investment teams possess invaluable ground-level intelligence in political, regulatory and technical risks. By embedding this operational expertise into blended finance vehicles, we can create structures that mitigate the specific risks deterring private investors.
- Recent strategic development: The most powerful partnerships are those where we jointly design solutions. The Bank’s accreditation as an Implementation Partner of the Green Climate Fund provides access to GCF funds through a flexible combination of grants, concessional debt, guarantees and equity instruments. GCF brings substantial concessional resources that we can blend with our own financing and mobilize private capital. AIIB’s participation in Alterra, the UAE’s USD30 billion climate investment fund, opens additional partnership opportunities; Alterra’s dual financing structure complements AIIB’s own capabilities. The partnership with the Monetary Authority of Singapore’s Financing Asia’s Transition Partnership (FAST-P) initiative will further position AIIB within Asia’ s evolving blended finance ecosystem. As FAST-P develops its pipeline and deploys capital across energy transition, green investments and clean technological themes, opportunities exist for AIIB to participate as co-investor, provide guarantees enhancing credit quality or contribute technical assistance supporting project preparation.
- Building platforms, not just projects: As highlighted in our 2025 Partnerships Report, we’re moving beyond one-off transactions. By acting as an investor in multi-donor platforms, we can pool resources, standardize documentation and lower transaction costs, making it efficient for institutional capital to participate in emerging markets. Building on successful precedents like the infrastructure securitization platform Bayfront, AIIB can systematically originate infrastructure loans that meet securitization criteria, warehouse these assets, and periodically execute securitization transactions to bring them to capital markets. Structured funds could aggregate smaller projects in specific sectors – renewable energy, sustainable transport, digital infrastructure – creating more diversified vehicles accessible to institutional investors and global asset managers.
The Way Forward: A Call for Collaborative Action
Mobilizing the trillions of dollars required to address Asia’s infrastructure needs and SDG financing gap demands transformational change in how blended finance is conceived, structured and deployed. AIIB is well positioned to catalyze this transformation: Our infrastructure specialization, growing institutional capacity, recent GCF accreditation and emerging partnerships provide essential foundations. AIIB’s credibility, based on member-driven governance, ensures accountability to members confronting these financing challenges directly.
The task ahead is immense, but the path is clear. Asia cannot afford incremental approaches to development financing. Climate change, demographic transitions, technological disruption and geopolitical shifts demand infrastructure investments of unprecedented scale and urgency. Success will require coordinated action across three fronts: policy innovation to create enabling environments, financial innovation to develop fit-for-purpose instruments, and partnership innovation to align incentives across public, private and philanthropic capital.
The future of development finance in Asia isn’t about working harder. It’s about working smarter together. The data show us the way. Now we must walk the path with discipline, innovation and unwavering commitment to our shared sustainable future.
