How to finance the future of development

Development has transformed over the last several decades. And it is clear that if we want even more effective results, we need to look with fresh eyes at longstanding challenges.

We also need to work with new partners who can help spark different approaches and combine resources and know-how to ignite new solutions. Combining the experience and development knowledge of civil society with private sector innovation holds great potential for the future of development.

Canada’s Prime Minister Stephen Harper first urged global leaders to make the health of mothers and children a development priority at the G-8 Summit in Muskoka in 2010. The Muskoka Initiative garnered global support and raised $7.3 billion from governments and international partners. Too many women and children continue to die of preventable causes. That is why our government pledged an additional $3.5 billion at the Saving Every Woman Every Child summit in Toronto last May. And, in recognition of the priority Canada places on immunization as a key component of maternal, newborn and child health, I will be attending GAVI’s Replenishment Conference in Berlin, hosted by the Government of Germany from January 26 to 27. In Berlin, I intend to reiterate Canada’s commitment to a full replenishment of GAVI to further the world’s collective goal of reducing maternal and child deaths.

And yet, to fully scale up health strategies in approximately 70 countries with the highest rates of maternal and child deaths, an additional US$30 billion per year is needed. It is clear that traditional ways of financing development will not be enough, and donor countries will not be able to achieve the goals we have set ourselves without broadening the scope of funding sources. Financial statistics bear this out. Foreign direct investment to the developing world now outpaces aid by five to one. And remittances are triple the size of official development assistance (ODA). We must explore our options for how best to harness and facilitate these development finance relationships.

As Canada’s Minister of International Development, I want to make Canada a global leader in providing more innovative approaches to development finance in all aspects of development, including global health. ODA remains a critical component of reducing poverty, but the private sector has resources, expertise and innovation to create new and more effective products, services and technologies to improve health at lower cost. However, private agents are not development experts. That is where local governments, civil society and donors can play a catalytic role. They have the development expertise the private sector needs.

Over the years, Canada has learned a great deal about how to leverage private sector funding toward global development challenges—especially in the area of global health. We began with a hugely successful public-private-civil society partnership: the Zinc Alliance for Child Health. This partnership involves a Canadian mining company, Teck Resources, the Government of Canada, and the Micronutrient Initiative, a global organization addressing under-nutrition. Together these partners work to ensure that zinc supplements and oral rehydration salts are available to treat diarrhea, which is one of the most common killers of children in developing countries. I was proud, on the margins of the Francophonie Summit in Dakar, to stand with the Prime Minister of Canada and announce a contribution of $150 million over five years to support the Micronutrient Initiative’s evidence-based nutrition interventions.

Canada is also proud to support the Business Platform for Nutrition Research, hosted by the Global Alliance for Improved Nutrition. This platform, which was launched in 2013, connects experts from the public sector, academia and leading multinational companies like PepsiCo. Stakeholders co-invest in research projects designed to drive the development of new market-based products and services to improve nutrition outcomes in low- and middle-income countries. I am confident that this platform will motivate further investment in private sector research and product development related to nutrition.

In fact, numerous opportunities exist for investors, intermediaries and businesses to come together for meaningful action in global health security. The Global Health Investment Fund is a great example of a public-private blended finance partnership that is tackling health challenges. It’s designed to provide financing for the development of drugs, vaccines, diagnostics and other interventions against diseases that disproportionately burden low- income countries. The Bill & Melinda Gates Foundation and Swedish SIDA provide loss protection. Grand Challenges Canada contributes a $10 million repayable grant. And pharmaceutical companies like Pfizer provide investment. JP Morgan has three roles: as structuring agent, placement agent, and investor.

The world continues to face unforeseen challenges; there will always be wild cards in global efforts to reduce poverty. But as these examples illustrate, when we combine private sector and official development assistance, we can dramatically accelerate development gains.

Public-private partnerships like these, combined with the potential of blended finance, open the door to diversifying financing for development initiatives. The time has come for us to test and scale up financial innovations and other blended finance partnerships to make even greater inroads into poverty reduction. This challenge is being addressed by the World Economic Forum/Organisation for Economic Cooperation and Development’s Re-Designing Development Finance Initiative. Under the leadership of a Steering Group, which I chair, it is already bringing together development and philanthropic actors with financial institutions and intermediaries, institutional investors, and corporate organizations around sustainable, scalable models that deliver risk-adjusted returns and accelerate economic progress. In 2015, we will bring concrete solutions to the World Economic Forum Annual Meeting in Davos in January, the World Economic Forum Summit on Africa inCapetown in June, and finally, the Third International Conference on Financing for Development in Addis Ababa in July.

Author: Christian Paradis, Minister of International Development and Minister for La Francophonie, Canada

Image: A maternity hospital in Abidjan. REUTERS/Luc Gnago