Mexico Sustainable and Inclusive Finance Development Policy Loan

The Sustainable and Inclusive Finance Development Policy Loan (DPL) for US1 billion dollars supports key components of Mexico’s Sustainable Finance Mobilization Strategy (Estrategia de Movilización de Financiamiento Sostenible, EMFS) and the National Financial Inclusion Policy (Política Nacional de Inclusion Financiera, PNIF) to improve the policy framework for sustainable finance and access to finance for micro, small, and medium enterprises (MSMEs). As an upper-middle-income country and a member of the Organization for Economic Co-operation and Development (OECD), Mexico has made significant strides in economic sophistication, export expansion, and foreign direct investment (FDI) growth in recent decades. Nevertheless, the country´s potential to evolve into a more sustainable and productive economy and to alleviate poverty and income disparities is constrained by limited credit availability and underdeveloped private securities markets. Moreover, the execution of Mexico's revised Nationally Determined Contributions (NDCs) highlights the need for greater volumes of private sector capital to fund Mexico's transition to a more sustainable economy. This DPL establishes institutional building blocks for mobilizing substantial private sector finance for sustainable and inclusive objectives and is consistent with Graduation Discussion Commitments. It reflects broad policy consensus among policy makers, the financial sector, and the private sector regarding the importance of developing a framework conducive to leveraging private sector opportunities into sustainable finance. In accordance with the World Bank’s Graduation Discussion Income commitments, the proposed operation supports the creation of institutions and policy frameworks for sustainable finance and economic inclusion in areas such as disclosure and reporting standards, taxonomies, sustainable and inclusive capital markets regulation, greening National Development Finance Institutions and MSMEs access to...