What is innovative financing?

2009-02-27 10:33:04

The concept of development and, more specifically, Official Development Assistance (ODA) are relatively recent. They were invented in the United States immediately after the Second World War and later were taken up by many other countries. Since the 1970s, debates about measuring this assistance have hinged on rich countries’ adherence to the goal of spending 0.7% of their Gross National Income on development. Keeping this promise has been deferred again and again by the majority of donors, who cannot find the resources to meet this goal.

It was in this context that innovative development financing mechanisms emerged at the beginning of the twenty-first century.

These new sources of development financing are closely linked to global public goods, and complement conventional official development assistance (ODA). But must importantly, they are stable and predictable.

They stem from the criticism levelled at a world where trade is growing as rapidly as inequality is. These financing mechanisms were also conceived from the outset as a way to correct the negative effects of globalisation.

They use various mechanisms, ranging from government taxes to public-private partnerships, and focus on several areas of public action, such as health and the environment. They have gradually carved out a role for themselves on the international stage.

Today, the notion of innovative development financing mechanisms designates resources that are provided in addition to Official Development Assistance (ODA) and are more predictable. These dual characteristics of additionality and predictability have been enshrined in the policy declarations made in 2004, 2005, 2006 and 2008, as well as in the reports on this subject (Report by the General Secretary of the United Nations, Quadripartite Report, Landau Report in France).

The Leading Group has undertaken work to map the various innovative development financing mechanisms, even though it will be difficult to compile a complete list.

Leading Group on Innovative Financing for Development