“In development finance, there is room for cooperation but also competition”

Sabine Gaber, the head of the Austrian Development Bank (OeEB), explains her institution’s mandate and mission and sets out how the development community will succeed in moving “from billions to trillions" 

OPEC Fund Quarterly: The Austrian Development Bank (OeEB) was set up in 2008. How was Austrian development assistance organized before and what changed with the establishment of your institution? 

Sabine Gaber: Traditional development aid remains an important pillar of Austrian Development Cooperation in the fight against poverty. The Austrian Development Cooperation Act lays down the country’s strategy and goals in development, which are delivered by several agencies. In 2008, Austria implemented its long-cherished plan to establish a bilateral development bank after recognizing the rapidly growing, significant investment gap in developing countries globally. There was an urgent need to finance long-term, sustainable investments in the private sector to reduce poverty, achieve developmental effects and support environmental and social sustainability and the green transition. 

With its financing instruments, OeEB is leveraging capital from private investors beyond its own commitments to close the enormous financing gap in developing countries especially in Least Developed Countries and Lowand Middle-Income Countries. OeEB’s mandate complements the Austrian Development Cooperation services, but the methods and instruments involved vary significantly. 

OFQ: OeEB is a subsidiary of Oesterreichische Kontrollbank (OeKB) and you are also a member of the European Development Finance Institutions Association. You are presenting yourselves as a business. Do you also have a political mandate? 

SG: In 2008, the Federal Ministry of Finance appointed OeEB AG, a public limited company, as the official development bank of the Republic of Austria based on a statutory mandate. OeEB is a specialized financial institution committed to the goals and principles of our country’s development policy in accordance with the Austrian Development Cooperation Act. As such, OeEB is subject to the applicable regulatory framework and acts on behalf of the Republic of Austria and has no political mandate. 

Within its mandate OeEB aims to contribute to sustainable private sector development in line with our strategy by financing private projects in developing countries where access to finance is not or only rarely available on the local market. OeEB’s investments comply with international environmental and social standards. Despite being the youngest national European development finance institution (DFI), to date OeEB has executed 500 private sector development projects successfully worldwide and ranks as Europe’s seventh-largest development finance institution. 

In its activities, OeEB is bound by the objectives and principles set out in the Austrian Development Cooperation Act and in our Strategy and Development Policies. Our investments must have a positive development impact, e.g. contribute to the creation of jobs and national income, improve access to affordable clean energy, etc. The impact created by our projects is measured by a development effectiveness rating tool and reported in our annual Impact Report. The achievement of strategic objectives is monitored in a results framework and evaluated regularly by independent experts. 

OeEB is a European Union “9-pillar” certified institution, which qualifies OeEB to apply for EU funds within the framework of the European Fund for Sustainable Development+ including derisking EU guarantees and non-repayable Technical Assistance support. 

OFQ: OeEB is rated AA+, the same as the OPEC Fund. How important is a such a rating for development institutions? 

SG: OeEB shows a very good credit rating with its Standard & Poor’s rating of AA+ indicating a minimal probability of default. AA+ is still very close to the excellent AAA and in line with the rating of the Republic of Austria and this works well for OeEB. 

OFQ: What kind of projects do you support, what are the criteria, what are your focus areas and are there things you do not do? 

SG: In its strategy OeEB positions itself as a thematically focused development bank with four main business areas: 1. Green finance, 2. Micro, small and medium-sized enterprises and financial inclusion, 3. Private infrastructure and industry, and 4. Gender equality. 

We operate exclusively in developing countries according to the OECD Development Assistance Committee list and our aim is to achieve a broad, geographically balanced diversification of our committed portfolio and to strengthen our commitment in Africa and the Least Developed Countries. 

We are also committed to the United Nations Sustainable Development Goal 13 – Climate Action and the Paris Alignment at project and portfolio level. Alongside our European DFI partners, we have an exclusion list which defines sectors that we do not finance. 

OFQ: Please explain your governance structure and decision-making process. 

SG: OeEB AG is a wholly-owned subsidiary of OeKB and our parent company supports us based on a service level agreement. OeKB and OeEB operate with a public mandate from the Republic of Austria. Before signing a loan agreement or private equity investment, project applications go through multiple internal and external approval committees, including representatives of several ministries. The approval committees assess the expected development impact, economic sustainability and the fulfilment of environment and social standards. 

OFQ: The challenges in development finance are enormous. Where can we find the billions and trillions that are needed and what role can small actors like OeEB or the OPEC Fund play? How can we scale up our impact? 

SG: While donor countries have maintained public funding at a steady or reduced level, development finance for private sector projects provided by DFIs has grown significantly in recent years. Donors and DFIs share the goal to mobilize more private capital for development finance. OeEB has successfully set up a third-party fund as a pilot together with an Austrian private bank in 2019 which mobilized €75 million from private investors for impactful investments in developing countries. Another third-party fund is being set up together with an Austrian partner in 2024 which will focus on climate investments. 

For scaling up the mobilized capital the use of blended finance (concessional finance along with DFI investment and commercial investment) has become an important solution to meet the “Billions to Trillions” agenda. In case of blended finance, it is important how to mobilize commercially sustainable investments and to use only a minimum of concessionality. 

To keep investments flowing, certain elements of the EU’s regulatory requirements should be broadened, e.g. recognizing existing international standards, promoting the compatibility between the EU taxonomy and other national green taxonomies. It is important to enable European DFIs and private impact investors to fully contribute to the mobilization of capital especially in the Least Developed Countries and Low- and Middle-Income Countries where investments are most urgently needed. 

OFQ: On the one hand we need to earn money to satisfy our shareholders and investors. On the other hand we have distinct development mandates. Often this would mean taking more risk or even a hit. How can we reconcile these two conflicting demands? 

SG: The economic viability of a project is essential to ensure that, for instance, loans can be repaid. But based on our mandate, creating lasting impact in our target countries is key. OeEB’s mandate compels us to do business in a profit-oriented, but not profit-maximizing manner. 

OFQ: Everybody is talking about cooperation and joining forces. But isn’t competition healthy in development too? And perhaps there is also a case for specialization and being complementary? 

SG: Cooperation is essential for exchanging know-how, reaching scale, sharing risk, mobilizing funds, saving cost and increasing efficiency. And, yes, competition in private markets is healthy and market players stay ambitious, for instance, in view of the quality of project implementation, costs, efficiencies etc. Joining forces is key to meeting the huge challenges the world is facing today. Each DFI has its specialization with areas of expertise and focus. This specialization creates both room for cooperation but also competition. 

OFQ: In this context, what are the future plans for cooperation between OeEB and the OPEC Fund? 

SG: OeEB and the OPEC Fund have been working together since our establishment in 2008 and we have cofinanced several projects. We value the long-standing, constructive and open partnership. 

Sabine Gaber 

Sabine Gaber has been a member of the OeEB Executive Board since January 1, 2018. She joined the bank in 2009 and helped build the financing and investment business as managing director as well as other strategic and operational core banking topics as a board member. During her 27-year career in banking, she has been responsible for the structuring of global projects in international commercial banks. Ms. Gaber studied international business administration at the University of Vienna and at UCLA in Los Angeles. 

OeEB in brief 

The organization was founded in 2008 as the development bank of the Republic of Austria. With a public mandate the bank works to achieve better living conditions in developing countries. 

Funding model 

OeEB sources its funds from the capital market mainly via OeKB AG 

Loans 

OeEB provides loans at near-market conditions for project finance, corporate finance, public-private partnerships, debt funds, financial intermediary business (MSMEs, microfinance). Loans are collateralized via guarantees from the Austrian Ministry of Finance. 

Investments and profit 

OeEB executes investments in private equity funds on behalf of the Austrian Ministry of Finance. Its profit is used for technical assistance, for investment in private equity funds (e.g. climate impact funds) and for reserves in line with regulatory requirements. 

OeEB Portfolio 2023: 

Committed portfolio: €1.727 billion in 198 projects 

Loans: €1.589 billion 

Equity participations: €138 million