When Aid Recedes, Strategy Has to Get Sharper
(06)
Overview
Development-finance institutions are being asked to find new trading partners and commercial revenue as donor support contracts. Most of them are reaching for the same playbook that worked when capital was abundant. Here's why that playbook will fail, and the strategic discipline that replaces it.
Year
2026
Industry
Development Finance / Operating Model
Challenge
The funding environment for multilateral and development institutions has changed faster than the strategy work inside them. Aid commitments from major donor governments are flattening or declining in real terms. Replenishment cycles arrive with harder questions and smaller numbers. The assumption that animated a generation of institutional strategy, that capital would be there if the mission was clear, no longer holds at the scale it once did. The response is familiar: find new revenue. Build commercial trading partnerships. Expand the client base beyond traditional sovereign and concessional counterparties. The language varies, resource mobilization, blended finance, private-sector window, but the move is the same. The institution needs to earn more like a bank while remaining itself in what it stands for. This is harder than the institutional response usually acknowledges. The instinct is to commission a transformation program. A target operating model is drafted. A new business unit is stood up. A strategic plan is presented to the board, with revenue projections that close the funding gap. The institution gets busy. Eighteen months later, the trajectory is disappointing. Pipeline is thinner than projected. Partnerships are slow to materialize. The team has been reorganized, the platform built, and the revenue has not arrived at the pace the plan assumed. The strategy was endorsed. The execution happened. The number didn't show up. The pattern mirrors the new-business launch failures I have seen in investment banking, and the underlying cause is the same. The strategy was built on the institution's view of what it could offer, not on a rigorous view of what the new counterparties actually need, what capabilities the institution would have to demonstrate to earn their business, and what infrastructure and processes would have to exist for the partnership to be commercially viable. The financial case was assembled. The strategic foundation underneath it was thin. This is the gap Customer Value Management addresses, and institutions under real resource pressure cannot afford to skip it. The work is unfashionable because it is slow and produces fewer slides than a target operating model. But when the funding environment will not forgive a missed strategic bet — when there are not multiple replenishment cycles in which to recover, the discipline of getting the strategy right before committing to execution is no longer optional. CVM asks five questions, in order, before the strategic plan is finalized: What do prospective trading partners, new client segments, private-sector counterparties, commercial-capable sovereigns, actually need? Not what the institution's mandate says it should provide. What problem are they trying to solve, and what does "good" look like in their language? What capabilities would the institution have to demonstrate, repeatedly and at acceptable cost, to meet those needs? What the institution must be able to do, not what it can describe in a brochure. What infrastructure, systems, data, governance, partnerships, is required to support those capabilities? A hard look at what the institution actually has, what it would have to build, and what it would have to source. What processes, end-to-end, across origination, structuring, execution, monitoring, and reporting, need to exist for the capabilities to deliver value to the counterparty? What is the approach to implementation that converts all of this into a real commercial offering inside the institution's actual governance and mandate environment? Underneath, the five questions answer one: what does it take to win these partnerships, not just to declare an interest in them? The answer is the thesis. The financials follow.
Impact
Productivity is the aspiration this article is about. At the strategy layer in a resource-constrained environment, productivity means something specific: value captured per strategic bet, in a world where the institution cannot afford many bets and cannot afford to lose any of them. The contrast with a more abundant funding era is sharp. When replenishment was larger and donor commitments more predictable, institutions could launch three or four parallel initiatives and recover from the ones that underperformed. That margin has narrowed. The strategic bets a development-finance institution makes in 2026 have to be the right bets, scoped against the right counterparty needs, with the right capabilities planned for. The cost of getting one wrong is now higher than the cost of taking longer to get it right. Consider an institution evaluating an expansion of its private-sector lending into a new regional market, with the goal of building commercial trade-finance volumes. The conventional approach commissions a strategy: market sizing, competitor scan, target client list, projected origination, capability gaps mapped at a high level, an implementation plan and a financial case. Twelve weeks of work. The board approves. Execution begins. The CVM-driven approach takes longer at the front end and shorter overall. The counterparty need is mapped specifically. Which corporate treasuries in which sub-segments of which markets, with what current trade-finance providers, what gaps in those providers' offering, and what it would actually take for them to consider an additional or alternative banking relationship. The work is done by talking to potential counterparties, not by inferring need from market data. The capabilities that would matter are named honestly. Underwriting in the relevant sectors and geographies. Documentation and settlement competence at competitive turnaround. Relationship management at the right seniority. Risk frameworks that can hold the exposure without ad-hoc exceptions. Some of these the institution has. Some in part. Some it does not have and would have to build or partner for. The case is honest about which is which. The infrastructure question is answered the same way. The trade-finance platform, the counterparty data, the FX and settlement rails, the reporting a commercial counterparty would expect. Some of this can be sourced, some has to be built, some has to be governed differently than the institution's traditional offering allows. The process design is sketched front-to-back. What does origination look like in the new model? Who owns the client relationship at each stage? How does credit decision-making integrate with existing risk governance? What happens when a counterparty's needs evolve faster than the institution's approval cycles? The implementation approach sequences these against real governance and mandate constraints. Where the risk gates are. What can run in parallel and what cannot. What dependencies exist with existing operations, and where the new commercial offering would need to be ring-fenced. What comes out is a strategic blueprint with the financials attached — not a financial plan with a strategy bolted on. The board conversation it enables is different. Not "can we afford this bet?" but "is this the bet that wins, given what it would actually take?" In a constrained-funding environment, that second conversation is the only one that matters. The institutions that compress this work and rush to a financial case will launch more initiatives and underperform on most of them. The institutions that invest the additional time at the strategy layer will launch fewer initiatives and capture materially more value per initiative. The math is not subtle, and it is more punishing in 2026 than a decade ago, because there are fewer bets and less room to recover from the wrong ones. Across the institutions I have worked with and observed, the pattern is consistent. The strategic phase is where launches are won or lost. The execution phase delivers what the strategic phase set up. A clean execution of the wrong concept is still a failed launch. The work that determines whether the institution ends up where it intended is upstream, in the discipline that defines what the institution is actually trying to win and what it would take to win it. This is the work I have spent most of my career doing, at the intersection of strategy, operating model, regulatory environment, and commercial execution in investment banking. The same discipline applies to development-finance institutions under commercial pressure. The grammar is different. The discipline is the same. The funding environment has changed. The strategic discipline available to respond has not, but the willingness to apply it must.