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Sida cooperates with H&M and ILO in Bangladesh to provide vocational training for employees and managers in the textile industry, which includes occupational health and rights issues. H&M and Sida cooperate through the network Swedish Leadership for Sustainable Development.

Photo: GMB Akash

Approaches and methods

Our work with financing for development

Updated: 28 July 2015

Eradicating world poverty and creating sustainable development requires more money than what development cooperation can contribute. Sida has been commissioned by the Swedish government to find new potential actors who can work together for sustainable global development.

After 2015, new global development goals will replace the current UN Millennium Development Goals. Estimates show that it is possible to eradicate extreme poverty by 2030 with available means. But for this to happen, and for the new development goals to be financed, the UN estimates that there is a need for around 30 000 billion SEK annually until 2030 - an amount that far exceeds all global aid money. This is why it has become necessary to identify other sources of funding - and coordinate these. This new approach is called financing for development.

Sida has been commissioned by the Swedish government to develop new innovative forms of development financing, and in 2014 a new four-year program was set up for this purpose. The objective is to find more potential actors who can collaborate for global development and mobilize more resources in order to help accelerate the pace of poverty reduction in the world. Sida is seeking partnerships with new stakeholders, such as pension institutions, corporations and philanthropists.

This does not mean that Sida will finance other activities, but seeks collaboration where our interests coincide. The new collaborations cannot be market disruptive or violate EU regulations on state aid. The starting point for Sida is always traditional development assistance, ODA (Official Development Assistance).

Nine subprojects

Our program for development financing includes nine projects:

Partnership with the United States Agency for International Development, USAID
The long term goal of our partnership with USAID is to solve development challenges by using scientifically proven products or models. The framework of the project includes four Challenge Funds, where entrepreneurs and other actors can apply for funds for innovative solutions.

Power Africa
The project Power Africa was initiated by USAID and aims to double the number of people with access to electricity in sub-Saharan Africa in ten years. The project is expected to contribute to the reduction of poverty as economic growth increases when more people have access to electricity.

Swedish Leadership for Sustainable Development
Swedish Leadership for Sustainable Development is a network made up of some twenty leading companies with a Swedish connection that work for good leadership in sustainable development and with an ambition to contribute to poverty reduction. Within the network, coordinated by Sida, the members exchange experiences and initiate new projects.

Guarantee project
Sida has a government guarantee ceiling of 10 billion SEK to reduce the risks for private banks lending to projects aimed at poverty reduction. The guarantee project aims to review and modify the procedures and systems used for Sida's loan and guarantee operations in order to better adapt it to different forms of development cooperation.

Institutional capital for infrastructure in poor countries
Through this initiative, Sida works together with other donors and institutional investors to stimulate pension funds and insurance companies to contribute to long-term development by investing in sustainable infrastructure in Africa. Sida's flexible guarantee instrument is put to good use in this process.

Results based financial approaches
The project is focused on making development cooperation more efficient by paying after results have been achieved, rather than paying in advance. The cooperation partner will thus have greater flexibility in selecting methods, but also assumes greater responsibility and a certain risk. With this model Sida hopes to contribute to the efficiency of systems and institutions in the partner countries.

Innovative financing
The focus of this project is to map out Sida's current knowledge and capacity in the area of ​​innovative financing, to identify the various forms of innovative financing solutions used in the market and examine whether they are suitable for development cooperation.

EU blending
An increasing proportion of the EU aid budget is used for 'blending', where grants are combined with loans. The grant element is important since it allows for investments where costs would otherwise be unsustainable for the borrowers. With this project Sida aims to influence the EU blending mechanisms to focus more on environment, gender equality and social issues.

Social security systems
The project aims to identify methods and models for strengthening public and private social security systems and raise awareness of these. Collective solutions such as pensions and various types of insurance can increase social security and eventually reduce poverty. Social protection systems have a strong link to sustainable economic growth, since they can contribute to increased tax revenues as well as capital accumulation in, for example, funds.

Page owner: Communication Unit

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