The aim was to review the existing innovative development finance mechanisms based on evidence from key players involved in implementing certain forms of financing, and discuss opportunities that have not yet been explored, in particular the estimated potential for innovation and “replicability” of mechanisms applied to some of the most underfunded areas.
It was expected that each speaker provide input that will contribute to an assessment of what has worked well or less well.
Discussion on the opportunities these lessons offer in terms of:
The adoption of the 2030 Agenda and the Sustainable Development Goals (SDGs) have, among other things, raised the question of how the activities that contribute to these objectives will be financed. While the scale of the funding required is dizzying (the United Nations has indicated that several thousand billion dollars a year will be needed to achieve the SDGs (UNCTAD, 2014)), the key issue is working out how to direct the significant resources available worldwide towards financing these goals. Given that Official Development Assistance (ODA) is far from sufficient to finance the SDGs in full, an innovative approach needs to be taken, in order to implement mechanisms that can be used to direct the resources available towards sustainable development – hence the term “Innovative financing”.
Hidden behind this phrase is a set of financial practices and mechanisms designed to raise funds to support development, in addition to the assistance traditionally mobilised, and optimise their impact. Innovative financing is also supposed to be characterised by its predictability, stability and sustainability.
Used in its various accepted meanings, the term “innovative” financing is not intended to be misleading. In practice, there is a wide range of so-called “innovative” financing mechanisms. Some of the oldest are designed to increase the resources available to support development policies or a related purpose. Others, which are more complex and more recent, associate additional funding with the notion of outcomes. The Dalberg report (2014) estimates the amount of innovative financing for development mobilised between 2001 and 2013 at US$100 billion, with an annual increase in volume of 11%. Understanding innovative financing means making a distinction between several different categories.
The first category consists of mechanisms viewed as innovative because of their capacity for mobilising additional resources to support development policies. Most of the time, these are financial mechanisms that are adapted to address specific situations or applied to particular purposes. Within this category, there are two distinct groups.
A second category of innovative financing consists of mechanisms whose primary objective is to achieve outcomes. Again, there are two distinct groups within this category.
Development impact bonds and social impact bonds are a specific and relatively new type of these mechanisms. They aim to finance service public costs by a private provider. In fine, the public ordering institution reimburses and remunerates investors according to the outcome obtained. The return on investment is thus depending on the achievement of pre-defined objectives that are measured by an independent institution. These “bonds” are also contracts (they are not bond securities). One of the strengths of this kind of mechanisms is that investors have an interest at least equal to that of the public ordering institution in ensuring the achievement of the objectives.
A third category is composed by mechanisms whose innovation is in the financing modalities:
These mechanisms seek to reconcile market imperatives and public benefit. They are particularly well aligned with the spirit of the Addis Ababa Action Agenda on development finance (United Nations, 2015) and the SDGs.
Another aspect of the topic is technological innovation to support development finance. The digitisation of the economy and current practices, particularly in banking, offer new opportunities to raise funds, for example, the ability to make a donation via text message and wider access to traditional financing mechanisms in the economy. This is one of the aspects this workshop is aiming to cover.
 Dalberg (2014) “did not include bonds to fund infrastructure or public private partnerships (PPPs) that focus on infrastructure investment. In addition, [it] only considered mechanisms where resources were deployed in developing countries”.
 See in particular, Benn et al. (2015). A case study on the guarantees applied to city financing has been carried out by Iddri (Criqui and Vaillé, 2017)
 See in particular Benn et al. (2017), OECD (2018)
 To a certain extent, public-private partnerships can be viewed as a simple form of innovative financing
 See Panizza (2015), among others
Digitisation has various other consequences on how economies are financed (the “blockchain” revolution, for example) but it is not possible to cover everything in one event.
Chapters of the book Financing Sustainable Development: Addressing Vulnerabilities, Boussichas, M. and Guillaumont (Eds.), P. (Economica), 2015 :
Benn, J., Sangaré C. and Hos T. (2017), « Amounts Mobilised from the Private Sector by Official Development Finance Interventions: Guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies, credit lines », OECD Development Co-operation Working Papers, No. 36, OECD Publishing, Paris. http://dx.doi.org/10.1787/8135abde-en
Clarke, D., de Janvry, A., Sadoulet, E., Skoufias, E. (eds.) (2015), Disaster Risk Financing and Insurance: Issues and Results, Ferdi, 105 p
Criqui, L. and Vaillé, J. (2017), « Les garanties pour le financement des villes en développement : un outil prometteur pour les bailleurs ? », Iddri Issue Brief n°04/17, Juillet 2017
Dalberg (2014), Innovative Financing for Development: Scalable Business Models that Produce Economic, Social, and Environmental Outcomes, AFD, City, GDI, Dalberg
Mathonnat, J. and Pélissier, A. (2017), « How a results-based financing approach can contribute to the health SDGs: policy-oriented lessons from what we do know and do not yet know », Iddri Case study
UNCTAD (2014), World Investment Report: Investing in the SDGs, an action plan, Nations unies, New-York et Genève
United Nations (2015), Addis Ababa Action Agenda of the Third International Conference on Financing for Development (Addis Ababa Action Agenda). Nations unies, New York. http://www.un.org/esa/ffd/wp-content/uploads/2015/08/AAAA_Outcome.pdf
OECD (2018), Making Blended Finance Work for the Sustainable Development Goals, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264288768-en
09:00 Introductory remarks – Cyrille Pierre (French Ministry of Foreign Affairs) and Patrick Guillaumont (Ferdi)
09:05 Keynote – Mariam Jashi, President of Leading Group on Innovative Financing for Development
09.20 1st session: Innovative financing to generate additional resources.
09.20 New tax bases
09.50 Blending mechanisms and guarantees for development
10:30 Coffee break
10:40 2nd session: Innovative financing to generate results
10.40 Impact Investment, Output-based payments and Thematic bonds,
11.45 Debate with the floor
12:00 3rd session: Innovation through financing modalities
12.00 Innovative management of debt, Climate finance and other mechanisms and aspects of innovative financing
12.30 Debate with the floor
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