Report Card on Countries Readiness (Innovative Finance to Scale)
Innovative finance readiness reflects a country’s capacity to (1) plan for, (2) access, and (3) deliver innovative finance solutions to scale, as well as (4) monitor and report on impact. Over the past 12 years, ThBC.lab has been promoting the need for Low and Middle Income Countries (LMICs) to work on the fundamentals that will make innovative finance increase the flows of financial and nonfinancial capitals for development goals. We have identified three important pillars that will be used as a guide to develop a set of indicators.
It is widely recognized that direct access to the private funds will require a level of capacity by governments and other actors involved, in order to prepare national mechanisms to access, allocate, disburse, and report on innovative finance. These mechanisms must be compatible not only with the various requirements that are specific to the type of capital considered, but also with the country’s planning, budgeting, programming and monitoring procedures and systems. In addition, countries’ institutional mechanisms related to the private and blended funds will need to be compatible with their existing and future planning and budgeting systems, and be fully integrated with the countries’ national plans, policies, and sustainable development priorities.
The underlying benefit of going through a readiness process is entering a virtuous cycle of iterative learning, whereby investments are aimed to meet specific sector targets and development goals, and such goals are being shifted to ensure that these investments are not only long-term, but scalable. With the alarm on financing for development being rung, it is up to decision-makers to embrace a new vision on economic and development gains which go hand-in-hand with collective and collaborative action to finance needs and opportunities.
TheBC.lab understands innovative finance as a set of financial solutions and mechanisms that create scalable and effective ways of channelling both private money from the global financial markets and public resources towards solving pressing global problems. This concept incorporates two distinct facets: first, innovative financing is a complementary source of capital to development aid and public financial resources; and second, innovative financing is a way of making development more effective and efficient by linking financing to results, redistributing risk, improving the availability of working capital, and leveraging technology. Innovative finance is not a homogenous mass of initiatives, mechanisms or solutions, but it can be categorized on the basis of key technical attributes and goals.
In other words, developing countries will need to “get ready” to implement innovative finance to scale.