Tag: Financing

New social contract

Significant but insufficient progress in financial support for developing countries

By José Antonio Ocampo, Professor at Columbia University and former UN Under-Secretary-General for Economic and Social Affairs and Finance Minister of Colombia

Recent events and particularly last week’s meeting of the Bretton Woods institutions have generated significant advances in international financial co-operation, particularly in support of developing countries. The latter is crucial, as a large number of low and middle-income countries continue to be severely affected by the COVID-19 crisis while the economic recovery underway is very uneven, as underscored by the IMF in its World Economic Outlook.

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Development Matters
Development finance, SDGs

Public development banks: gateways to transformative SDG financing

By Maria Alejandra Riaño, Research Fellow, Governance Programme, Institut du Développement Durable et des Relations Internationales IDDRI

Public development banks around the world can play a vital role in minimising economic decline, supporting recovery and financing structural transformation. To fulfil this role, they need to fully capture the interconnected and transversal nature of the 2030 Agenda and align their practices, operations and investments accordingly. It is not just a matter of marginally adjusting strategies and processes – public development banks need to deeply reshape behaviours and investment practices.

Scaling up public development banks’ alignment with the 2030 Agenda

Public development banks have certain advantages that position them at the forefront of the vast network of actors responding to the socio-economic impacts of the COVID-19 crisis and seeking to chart a course towards a transformative recovery. Public development banks have become an essential and complementary voice for traditional co-operation and commercial investors due to their detailed knowledge of the specific context in each region or country, and unmatched flexibility in the design of concessional loan programmes.

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Development Matters
Development finance, Policy, SDGs

Mind the SDG gap: don’t forget sustainable domestic financing

By Sebastian Nieto Parra, Head of Latin America and the Caribbean Unit, OECD Development Centre, Mario Pezzini, former Director of the OECD Development Centre and special Advisor to the OECD Secretary General on Development, and Joseph Stead, Senior Policy Analyst, OECD Centre for Tax Policy and Administration

closing-gapThe “Decade of Delivery” for the 2030 Sustainable Development Goals (SDGs) calls for finding sustainable ways to finance development. Closing the financing gap by 2030 will require between USD5 and USD7 trillion annually, and between USD2.5 and USD3 trillion of that amount for developing countries alone. There are several approaches to financing the SDGs in low-income countries. External private financing and official development assistance both have a role to play but these are not the only options. We must take an in depth-look at all options, including taxes, local financing through domestic private banks or national development banks, and local public-private partnerships. Due to the colossal amount needed to finance the SDGs, they must all be taken into consideration. But some can be particularly costly. Experiences of public-private partnerships in developing and emerging economies for example, have often resulted in high fiscal costs and a high rate of renegotiations after only a few years of operation.
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SDGs

The role of philanthropy for the SDGs is not what you expect

By Benjamin Bellegy, Executive Director, Worldwide Initiatives for Grantmaker Support (WINGS); Michael Mapstone, Director of International, Charities Aid Foundation (CAF); and Lorenzo Pavone, Deputy Head of Networks, Partnerships and Gender Unit, OECD Development Centre

philanthropy-SDGsWhat will philanthropy do to get the world closer to the Sustainable Development Goals (SDGs) by 2030?

When doctors see symptoms that are associated with common ailments, they are told to think that a typical disease, not an exotic one, is the cause. If a child arrives to a clinic with a fever, doctors first look for a common infection that could explain the symptoms, not Kawasaki. The general thinking is that the most likely explanation is often the correct one. When you hear hooves, for example, think that a regular horse is nearby, not a zebra. What does this have to do with philanthropy and development?

To many, philanthropy is a welcome source of funding for development programmes across the world. The size of philanthropic funds heading to developing countries is anything but trivial and has increased markedly over time: Recent OECD estimates show that philanthropy for development between 2013 and 2015 was around USD 8 billion a year, most of it directed towards health and reproductive health programmes, but also sectors like education and agriculture. The Foundation Center finds similar results for US foundations, estimating international giving at an average of USD 7.5 billion for the same period. Moreover, measures of generosity are increasing on a global scale, particularly in Africa according to the World Giving Index; with the expansion of the global middle class, the possibility for domestic philanthropy to play an even larger role in development is becoming even more salient. These sizable private resources are tackling social issues that other private international flows, like private investment, often can’t reach or aren’t interested in doing so. Because of all this, many are beginning to see philanthropy as a key financing source that could help close the SDG funding gap, estimated at USD 2.5 trillion up until 2030. Continue reading “The role of philanthropy for the SDGs is not what you expect”

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Development finance, Private Sector

Getting private resources on board for sustainable development

By Royston Braganza, CEO, Grameen Capital India

To learn more about this topic, check out the Global Outlook on Financing for Sustainable Development 2019

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GOOOOAAAAAALLLLLL! The frenzied celebration that reverberates across the globe, every time a goal is scored, reflects the seemingly universal passion for football – be it the FIFA World Cup, the Champions League or any other national or local leagues. The game cuts across generations, blurs political boundaries and traverses ethnic divisions. Sadly, some other things do too – hunger, refugee crises, poverty and global warming, to name a few. And yet, everywhere I look, shining examples exist of H.O.P.E.

Holistic approach. Governments, corporations, capital markets, non-governmental organisations need to find integrated solutions. One exceptional example is the catalytic potential of using corporate social responsibility/philanthropic capital to de-risk investment from capital markets. The financial sector can help guide companies to look towards a sustainable future. Grameen Foundation’s Growth Guarantees programme, for example, did precisely that by bringing together donors, international and local banks, microfinance institutions, and poor, vulnerable women borrowers.
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Africa, Development finance

Financing African SMEs: can more of the same help bridge the gap?

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By Rodrigo Deiana, Junior Policy Analyst, and Arthur Minsat, Head of Unit for Europe, Middle East and Africa (acting), OECD Development Centre

The topic discussed here builds on the success of the 2017 Africa Forum

Africa-SMEsAfrican firms don’t have it easy. Among the many constraints faced by formal companies, access to finance consistently ranks as a top issue. Almost 20% of formal African companies cite access to finance as a constraint to their business.1 Overall, African micro, small and medium enterprises (SMEs) face a financing shortfall of about USD 190 billion from the traditional banking sector.2 African firms are 19% less likely to have a bank loan, compared to other regions of the world. Within Africa, small enterprises are 30% less likely to obtain bank loans than large ones and medium-sized enterprises are 13% less likely.3

To bridge this gap, governments and market players need to strengthen existing credit channels as well as expand new financing mechanisms.

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Africa, Building resilience

What’s standing in the way of South Africa’s entrepreneurs?

By Talitha Bertelsmann-Scott, Head : Economic Diplomacy Programme, and the entire Economic Diplomacy Programme team, South African Institute of International Affairs (SAIIA)

Explore the 2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa for more on this subject.

Sout-Africa-EntreIndustrialisation is a key driver of sustainable development. It creates jobs, adds value and promotes trade through greater integration into global value chains. At the same time, entrepreneurship and small and medium enterprises (SMEs) are critical to every economy by creating jobs and innovative goods, promoting a competitive environment and economic growth, and facilitating income distribution. The South African government recognises the need for entrepreneurship and SMEs’ engagement with industrialisation efforts to address some of the key socio-economic challenges in the country, particularly poverty, inequality and unemployment. However, South African entrepreneurs 1 still face a number of constraints that hinder greater participation in industrialisation efforts. So, what are the roadblocks standing in the way of entrepreneurs? Continue reading “What’s standing in the way of South Africa’s entrepreneurs?”

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Asia, Building resilience, Development finance

Broadening financing options for infrastructure in Emerging Asia

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By Kensuke Tanaka, Head of Asia Desk, and Prasiwi Ibrahim, Economist at Asia Desk, OECD Development Centre 

Learn more about the OECD International Economic Forum on Asia

Agreeing on the need for new infrastructure is one thing; finding a sustainable way to finance it is another. According to the ADB, an estimated USD 26 trillion (or USD 1.7 trillion per year) will need to be invested in infrastructure in its developing member countries1  between 2016 and 2030 if these economies are to maintain their growth momentum, eradicate poverty and respond to climate change2  .Given the scale of investment needed, countries in the region will not have sufficient funds to meet demand. Indeed, financing infrastructure investment has been a considerable challenge for the region. Political factors can further complicate financing when they lead to the inefficient allocation of public funds. How best to finance infrastructure is, therefore, a key concern for policy makers in the region.

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Development Matters
Development finance, SDGs

Financing the SDGs in cities: Innovative new approaches

By Gail Hurley, Policy Specialist on Development Finance, Bureau for Programme and Policy Support, United Nations Development Programme

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Mumbai is among a growing number of cities exploring green bonds as an option for financing sustainable urban development.

 “Cities are major drivers of the global economy. Today, cities occupy only 2% of total land but account for 70% of GDP.” (Habitat III, 2016)

Many of the investments needed to achieve the Sustainable Development Goals (SDGs) will take place at the sub-national level and be led by local authorities, especially in urban areas. Massive public and private investments will be needed to improve access to sustainable urban services and infrastructure, to improve cities’ resilience to climate change and shocks, and to prepare them to host 2.5 billion new residents over the next three decades, particularly in developing countries.  If city authorities can meet these challenges head-on, the sustainable development dividends could be immense. This reality underscores the need to recognise and strengthen the capacities of local authorities as major actors in promoting sustainable development.
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Development finance

Maximising bang for the buck: Risks, returns, and what it really means to use ODA to leverage private funds

By Paddy Carter, Research Fellow, Overseas Development Institute

shutterstock_249974521The idea of using official development assistance (ODA) to leverage private finance is a staple of the financing for development circuit and features heavily in most donors’ strategies. Experienced financiers both from official sector development finance institutions (DFIs) and private investors are, however, still feeling their way into this field’s unfamiliar territory. DFIs for the most part emphasise the importance of providing finance on non-concessional terms to avoid distorting markets and crowding-out other sources of finance. Though some standard elements of their business could fall under the rubric of blended finance, such as grant-funded technical assistance, for the most part DFIs and development banks have treated explicit subsidies to private enterprises as dangerous medicine to be prescribed rarely. Now the pressure is mounting to find more creative ways to leverage private finance using ODA. But how?

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