DEVELOPMENT

Finance Impact

Unlock Financial Opportunities

PREPARED BY: MD. SHANIAT HOSSAIN

What is

DEVELOPMENT

The systematic use of scientific and technical knowledge to meet specific objectives or requirements

An extension of the theoretical or practical aspects of a concept, design, discovery, or invention.

The process of adding improvements to a parcel of land, such as grading, subdivisions, drainage, access, roads, utilities.

FINANCING What is

Development

It is the act of providing funds for development purposes and the whole range of management activities that guide the allocation and use of those funds.

Financing for development is focused on new stakeholders in the financing of development cooperation and to support poor countries' financing of development and poverty reduction a necessity when official development assistance is no longer sufficient.

It reduces capital flight and increase taxation of international companies in the countries where they operate.

Financing For Development

APPROACHNeed to focus both on more financing and on effective financing. It's more money and smarter money to reach the SDGs. And that development needs to be economically, socially and environmentally sustainable.

The challenges of mobilizing the financing resources needed to help meet the SDGs.

Developing new approaches and intervene public- private solutions that mobilize al types of finance(public, private, domestic and international) all for development.

Calling for unprecedented levels of cooperation, partnership and coordination among the MDBs, UN, private sector, civil society academic organization and governments.

FINANCING Source

of

Developmentfor

Sources of Finance

INTERNATIONAL INSTITUTIONS

Aims to stabilise the international monetary system and help when monetary flow from trade causes problems

Provides help and advice as well as funds to countries experiencing balance of payments problemsIMF gets its funds from its 184 member states

Focusing on providing funds for projects

Aimed at alleviating poverty, inequality and promoting development

Currently has 184 members

Grants Concessional Loans

Loans

Equity Investments Guarantees

TYPES OF FINANCING FROM THE WORLD BANK

Aiming to bridge the gap between the funds currently pledged and those needed to meet the Millennium Development Goals (MDGs)

Uses the long term commitments of donor countries as security for raising further funds on international capital markets

Aims to raise an extra $50 billion per year between now and 2015

INTERNATIONAL FINANCE FACILITY (IFF)

Policies to attract investment

Has been criticised as being a means by which MNCs can exploit poorer countries

Policies need to focus on having the right conditions in place such as Infrastructure, Security, Peace, Local laws and regulation, Government corruption, Tax regime

FOREIGN DIRECT INVESTMENT (FDI)

To help developing countries improve tax systems to generate tax revenue more efficiently

International taxes on pollution, air transport, arms, rent on deep sea mineral extraction – funds raised used to help fund development

Aims to reduce short term speculative trades and stabilise currency flows

Issues of how far such taxes could raise sufficient funds and whether they would distort markets too much

TAX MEASURES

PUBLIC SECTORThe Role

of

The process through which countries raise and spend their own funds to provide for their people is the long-term path to sustainable development finance.

It is not only provides governments with the funds needed to alleviate poverty and deliver public services, but is also a critical step on the path out of aid dependence.It does not necessarily mean new taxes or higher tax rates. Governments often see their revenues rise though improved audits or simplified filing processes.

Tax RevenueIncome Tax

VATImport DutyExcise Duty

Sources of Public Revenue

Non Tax Revenue

FeesCharges

FinesSocial Security

Repayments from Domestic

DOMESTIC RESOURCE MOBILIZATION

Improving good governance and fighting corruption, better tax policies, administration and public expenditure efficiency

Change technology and practice to improve collaboration and cooperation

Conditions can be achieved by good governance and savers will feel confident to save, investors to invest, and both will be served by accountable governments providing public goods

Reduce red tape impediments to doing business and create a new era of public private can collaboration.

WAYS OF DOMESTIC PUBLIC RESOURCES

Raising the revenue fairly and equitably Ensure that when revenue is spent it leads to improve service such as school, education, health etc.

Improving the investment climate and reduce red tape impediments to doing business.

Introduce new rules of law in place, take incentive for foreign investor and try to reduce illicit financial flow 

CONTINUED….

APPROACH

Domestic Resource MobilizationFor Country 

By increasing the TAX- GDP ratio

Increasing Public expenditure efficiency

Decreasing energy subsidies

Improving the infrastructure with the existing resource for better efficiency

OFFICIAL DEVELOPMENT ASSISANCE

THE ROLEOF

ODA is the key measure used in practically all aid targets and assessments of aid performance.

The DAC defines ODA as “those flows to countries and territories on the DAC List of ODA Recipients and to multilateral institutions which are provided by official agencies, including state and local governments, or by their executive agencies.

The each transaction of which is administered with the promotion of the economic development and welfare of developing countries as its main objective is concessional in character and conveys a grant element of at least 25 per cent.

OFFICIAL DEVELOPMENT SSISANCE

COVERAGE

Military aid: No military equipment or services are reportable as ODA. Anti-terrorism activities are also excluded. However, the cost of using donors’ armed forces to deliver humanitarian aid is eligible.

Peacekeeping: Most peacekeeping expenditures are excluded in line with the exclusion of military costs. However, some closely-defined developmentally relevant activities within peacekeeping operations are included.

Nuclear energy: Reportable as ODA, provided it is for civilian purposes.Cultural programs: Eligible as ODA if they build the cultural capacities of recipient countries, but one-off tours by donor country artists or sportsmen, and activities to promote the donors’ image, are excluded.

Graph

INTERNATIONAL DEVELOPMENT ASSOCIATION

THE ROLEOF

The International Development Association (or "IDA") is the World Bank’s fund for the poorest countries. Since its inception in 1960, it has been a core part of global development finance, providing half a trillion dollars, in constant 2015 prices, for investments in 112 countries.

It provides long -term loans at zero interest to the poorest of the developing country.

IDA’s goal is to reduce the disparities across and within countries, to bring more people into the mainstream.

It helps build the human capital, policies, institutions and physical infrastructure needed to bring about equitable and sustainable growth.

INTERNATIONAL DEVELOPMENT ASSOCIATION

FinancingFY16 Top 10 Borrowers

$ million

Ethiopia 1,862

Vietnam 1,670

Bangladesh 1,557

Pakistan 1,460

Nigeria 1,075

India 1,025

Tanzania    864

Kenya    646

Congo, Dem. Rep.    600

Ghana    500

Source: http://ida.worldbank.org

IDA Lending by Sector % of total 

Infrastructure 36

Social Services 28

Public Admin. and Law 17

Agriculture 10

Industry and Trade  5

Finance   3

INTERNATIONAL DEVELOPMENT ASSOCIATION

GRAPH

Source : World Bank

PRIVATE SECTORThe Role

of

BLENDED FINANCEBlended finance is defined as the complementary use of grants (or grant-equivalent instruments) and non-grant financing from private and/or public sources to provide financing on terms that would make projects financially viable and/or financially sustainable.

It has three key characteristics:Leverage: Use of development finance and philanthropic funds to attract private capital into deals. Impact: Investments that drive social, environmental and economic progress. Returns: Financial returns for private investors in line with market expectations, based on real and perceived risks.

Instruments Blend Finance

Example of

Blended Finance

BLENDED FINANCETHE ROLE

OF

Returns are seen as too low for the level of real or perceived risks.

Markets do not function efficiently, with local financial markets in developing economies particularly weak.

Private investors have knowledge and capability gaps, which impede their understanding of the investment opportunities in often unfamiliar territories.

Investors have limited mandates and incentives to invest in sectors or markets with high development impact .

Local and global investment climates are challenging, including poor regulatory and legal frameworks.

BLENDED FINANCEAPPROACHES

OF

Technical Assistance(Technical/OperationalExpertise)Technical Assistance addresses risks in new, uncertain and fragmented markets for investors. Costs and risks associated with exposure to new markets, technical uncertainty,and the inability to build a pipeline can be reduced through this mechanism.

Risk Underwriting(Capital Preservation)Risk Underwriting reduces specific risks associated with a transaction. This mechanism provides direct compensation or assumes losses for specific negative events.

Market Incentives(Results-basedFinancing/PriceGuarantees)Market Incentives address critical sectors that do not support market fundamentals. This helps new and distressed markets that require either scale to be commercially viable or reduced volatility, by providing fixed pricing for products.

PRIVATE PHILANTHROPY

THE ROLEOF

Philanthropic foundations play an important role in sustainable development is not only in mobilizing financial resources, but also as development actors in their own right. Until recently, however, governments and foundations have often followed parallel paths without engaging in genuine complementary partnerships.

It will require a paradigm shift in how governments approach foundations, embracing them as catalytic partners rather than solely considering them as financiers.

The distinctive role of foundations in the development arena, and acknowledging the innovative practices emerging from the philanthropic sector, the OECD Development Centre launched the OECD Global Network of Foundations Working for Development (netFWD) to serve as a platform for co-operation and exchange, and as bridge between foundations and policy makers.

PRIVATE PHILANTHROPY

THE ROLEOF

Philanthropy’s financial contribution to development has nearly multiplied by ten over a decade.

Philanthropy’s non-financial contribution to development includes testing innovative approaches and leveraging resources from others.

INNOVATIVE FINANCING

CONTINUED….

Multilateral Debt for climate swaps initiative

Unlock funds to finance climate change adaption and mitigate projects

Remittances represent a key external financial flow

Unlocking value from Diaspora flows

Encouraging private voluntary contributions through matching funds

WORLD BANK facilitate the insurance of the bond by providing technical advice

Generate additional development funds by tapping new funding sources (that is, by looking beyond conventional mechanisms such as budget outlays from established donors and bonds from traditional international financial institutions) or by engaging new partners such as emerging donors and actors in the private sector).

Enhance the efficiency of financial flows, by reducing delivery time and/or costs, especially for emergency needs and in crisis situations.

Make financial flows more results-oriented, by explicitly linking funding flows to measurable performance on the ground.

CONTINUED….

FRAGILE OR CONFLICT

Conflict, natural disasters, fragility, and humanitarian emergencies deprive millions of children around the world of their right to education.

FRAGILE OR CONFLICT During conflict, schools are often destroyed or become unsafe. Students are forced out of school, making them more vulnerable and at risk of violence, forced labor, and permanent displacement, without a guarantee that they can go back to school when they arrive at a safer destination.

Ensuring that children have access to education during conflict and crises protects their rights, instills a sense of normalcy, and fosters resilience, inclusion and tolerance, supporting the long-term processes of rebuilding and peace-building.

THE CHALLENGE

THE CHALLENGE

Citizen security is a growing concern in middle-income countries, closely linked to rising inequality

Poverty will increasingly be concentrated in countries affected by fragility, with almost half the world’s poor expected to live in these situations by 2030.

By 2030, the share of global poor living in fragile and conflict-affected situations is projected to reach 46 percent.

Domestic expenditure on education as a share of total public expenditure increased globally in low- and middle-income countries, on average, by 0.42 percentage points (from 16.12% to 16.54%), while the average increase in GPE partner developing countries was 1.46 percentage points.

SOLUTIONS

SOLUTIONSRedefining fragility and monitoring the global, regional, and country fragility risks.

Developing an operational framework for effective support in countries affected by fragility and conflict

Invest in the enabling environment for technology adoption.

Developing innovative financing solutions, including with private sector involvement, for situations of fragility, conflict, and violence.

Establishing strong partnerships for sustainable peace and development with humanitarian, security, diplomatic, and development actors.

Developing innovative financing solutions, including with private sector involvement and promoting fragility risk reduction in Bank operations and ensuring operational and financial rapid response to protracted and recurring crises.

RESOURCEShttps://www.slideshare.net/MarAye/development-finance-impact-project-mma-55693528

http://www.globalpartnership.org/multimedia/infographic/education-cannot-wait-conflict-and-crises-endhttps://www.youtube.com/watch?v=KFBGNiFl5p4

http://www.worldbank.org/en/results/2016/08/19/tackling-fragility-conflict-and-violence-with-development-solutions

http://www3.weforum.org/docs/WEF_Blended_Finance_A_Primer_Development_Finance_Philanthropic_Funders_report_2015.pdf

THANK YOU