financing for development

Facts on financing for development

Updated: 28 July 2015

Financing for development is focused on new stakeholders in the financing of development cooperation. This is one of the most important UN approaches to supporting poor countries' financing of development and poverty reduction ­- a necessity when official development assistance is no longer sufficient.

The world is moving forward in many different areas, but to achieve the Global Goals for Sustainable Development, which define a sustainable world free from extreme poverty, we must mobilize resources from many different sources other than traditional state aid.

The concept of "Financing for Development" was first adopted at a UN conference in Mexico in 2002. Today's development financing is primarily concerned with the financing of the Global Goals for Sustainable Development in low-income countries. When working with these goals, development financing plays a far more important role than in the previous work on the Millennium Development Goals.

New actors - both private and public

Financing for development is one of the most important UN approaches to support poor countries' financing of their development and the fight against poverty. The idea is to identify and coordinate new actors that can contribute to development both financially and with their expertise and competence. In order to reach the enormous sums that are required for a truly sustainable development, both private and public capital flows, other than official development assistance, must be involved. We need to engage actors such as banks, insurance companies and private donors while also working to develop tax systems in developing countries, which in many ways represent a huge potential resource.

Official development assistance (ODA) remains the basis for the financing of development cooperation with development financing as a supplement. Sweden is working for all rich countries to live up to the agreement to designate at least 0.7 per cent of their gross national income (GNI) to development cooperation. At present, only a few countries meet this goal, among them Sweden. When traditional aid is combined with development financing there is an increase in total resources and also the probability of eradicating poverty.

In several countries, including Germany, the UK and the Netherlands, financing for development is gradually being integrated into development cooperation. The supranational organization OECD as well as private and philanthropic actors have also begun working with development financing. Sida has been working with a series of projects in this area since 2014.

Possible to eradicate poverty

Estimates show that it is possible to eradicate extreme poverty by 2030 with available means. But for this to happen, and for the Global Goals to be financed, the UN estimates that around 30 000 billion SEK would be required annually until 2030 - an amount that far exceeds all global aid money. The hope is that development financing will be part of the solution to that problem.

The main areas of financing for development, according to the UN definition:

  1. Raising domestic financial resources, especially taxes.
  2. Leveraging international sources of finance - foreign direct investment and other private financial flows.
  3. International trade.
  4. Increasing international and technical cooperation.
  5. Resolving international system issues such as the sustainability of trade, the financial market and financial systems.
  6. Reducing capital flight and increase taxation of international companies in the countries where they operate.

Page owner: Communication Unit

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