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CGD research explores how international financial institutions such as the International Monetary Fund, World Bank, multilateral development banks, and other international development agencies can become more responsive to the needs of developing countries. The Center’s work concerns itself with the future of these institutions, all of which are facing shifts in demand for their traditional services, the emergence of new institutions, and reform of their leadership selection processes.
I heartily applaud the release of the G-20 Principles for Innovative Financial Inclusion (click and scroll down to see them). At a time of increased focus on financial sector regulation to reduce risk, it is crucial that we not lose sight of the fact that increasing access to appropriate financial services remains essential to reducing poverty and achieving sustained growth. To this end, last October CGD released Policy Principles for Expanding Financial Access, a report by a task force of independent experts on the issues of financial inclusion and regulation.
As one of the three co-chairs of that group, I take great satisfaction in noting the close relationship between the G-20’s nine principles and the ten principles proposed in the CGD report. The chart below extracts text from both sets of principles and uses arrows to identify the commonalities. All of the G-20 principles can be related to one or more CGD principles. Of particular importance are: (a) the call for cooperation both between government agencies and between the government and the private sector to improve financial inclusion;
(b) the need to improve financial infrastructure to allow for financial innovations to flourish;
(c) the desirability to promote competition and market-based incentives;
(d) the need to keep consumers of financial services appropriately informed about the products they demand and to prevent abuses through adequate legislation;
(e) the necessity to design a regulatory framework that takes into account the different risks and benefits of different products;
(f) the call for a flexible risk-based Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) system that do not act as an obstacle to financial access; and
(g) the imperative need to collect data to identify gaps in financial access, as well as to monitor and evaluate progress in innovations and initiatives to foster greater inclusion. While I could find no contradictions between the two sets of principles, there are a few differences. For example, one of the CGD principles makes reference to the careful non-distorsionary use of subsidies and taxes for the purpose of improving financial inclusion and calls for the need to clearly itemize these policies in the national budget. Though this is missing from the G-20 principles, I continue to think that it is a good idea. I like to think that the principles proposed in the CGD task force report made a substantive contribution to the G-20 principles, and that this reflects on the excellent work of the task force members. Of course, principles, while a good place to start, only matter if they are picked up and implemented in as policies, starting with the G-20 members themselves. Stay tuned.
A few weeks ago, I wrote with excitement about what the G8 and G20 might mean for global health. Disappointingly, yesterday’s G20 Toronto communiqué didn’t contain a word on global health, except a nebulous development agenda and action plan to be announced at the Seoul Summit in November 2010. But there is an opportunity for the G20 and others to build on the G8 global health commitments announced on June 26th in Muskoka.
1) Muskoka Initiative for Maternal and Child Health
Financial: $7.3 billion to accelerate progress towards MDGs 4 and 5 that aim to significantly reduce the number of maternal, newborn and under-five child deaths in developing countries. Canada leads with a pledge of $1.1 billion and other G8 members have contributed towards a grand total of $5 billion over 5 years. Non-G8 countries—Netherlands, Norway, New Zealand, South Korea, Spain, Switzerland—and the Gates and UN Foundations pledged another $2.3 billion.
Results and Accountability: The leaders pledged funding to “i) prevent 1.3 million deaths of children under five years of age; ii) prevent 64,000 maternal deaths; and iii) enable access to modern methods of family planning by an additional 12 million couples. These results will be achieved cumulatively between 2010-2015. We will track progress on delivering commitments through our accountability reporting, which, in 2011, will focus on health and food security.”
How it will get to the results:“The Initiative is focused on achieving significant progress on health system strengthening in developing countries facing high burdens of maternal and under-five child mortality and an unmet need for family planning. Improving maternal and under-five child health requires comprehensive, high impact and integrated interventions at the community level, across the continuum of care, i.e., pre-pregnancy, pregnancy, childbirth, infancy, and early childhood.”
“This Initiative includes elements such as: antenatal care; attended childbirth; post-partum care; sexual and reproductive health care and services, including voluntary family planning; health education; treatment and prevention of diseases including infectious diseases; prevention of mother-to-child transmission of HIV; immunizations; basic nutrition and relevant actions in the field of safe drinking water and sanitation”
My quick take-aways:
In essence, the Gates Foundation is the lead donor for this initiative, contributing $1.5 billion in new money. (Although Melinda Gates technically announced this pledge at the Women Deliver Conference earlier in June 2010, in advance of the G8 Summit.) Perhaps, a less-obvious positive outcome of this peculiar G8 and non-G8 joint pledge will be that the Gates Foundation may be held accountable for the money it puts forward for maternal and child health in the same way that we try to hold G8 members to their promises. Maybe?
The G8 members are clearly marketing the total pledged amount as a catalyst, perhaps a strong message to the G20 members and other countries to contribute to the Muskoka initiative and to boost momentum to the UN-led process to develop a Joint Action Plan to Improve the Health of Women and Children
While new money is always good news, even if it doesn’t meet global health advocates’ expectations, the lack of new ideas on how to spend money more effectively is disappointing. While every known intervention for maternal and child health (e.g. skilled birth attendance, emergency obstetric care, etc.) is listed in the Annex 1 of the Declaration, there isn’t a single mention of a commitment to support the best ideas for ways in which new money can be spent to incentivize countries to implement these known interventions (they aren’t new) for higher impact. Buried in Annex 1 of the Declaration:“7. Mechanisms: We are not creating new funding mechanisms. Each donor is free to choose the mechanisms they consider most effective, including multilateral agencies, civil society partners, and direct bilateral support to developing country partners.”
An incomplete commitment: The Muskoka communiqué makes no reference to the provision of safe abortion services as part of a comprehensive approach to maternal and child health. Making maternal health a comprehensive program isn’t a believable commitment when safe abortion is not provided when and where it is legal. We surely have learnt from the days of the Global Gag Rule to know that such policies have a chilling effect on family planning and other maternal health programs, and ultimately on what may be classified as maternal health success between 2010-2015—lower mortality and morbidity.
2) HIV/AIDS and Other Global Health:
This very carefully worded language “outs” the G8 on its previous commitments to HIV/AIDS (that it still hasn’t fulfilled). The communiqué did not announce additional resources for HIV/AIDS. “We reaffirm our commitment to come as close as possible to universal access to prevention, treatment, care and support with respect to HIV/AIDS. We will support country-led efforts to achieve this objective by making the third voluntary replenishment conference of the Global Fundto Fight AIDS, TB and Malaria in October 2010 a success. We encourage other national and private sector donors to provide financial support for the Global Fund. We commit to promote integration of HIV and sexual and reproductive health, rights and services within the broader context of strengthening health systems. G8 donors also remain steadfast in their support for polio eradication and remain committed to a polio-free world. We continue to support the control or elimination of high-burden Neglected Tropical Diseases (NTDs).”
My quick take-away:
It is clear that global funding for health is being reallocated to address a broader set of global health priorities, but it is also clear that G8 donors aren’t coming clean with their rationale and plan for getting “as close as possible to universal access to prevention, treatment, care and support for HIV/AIDS” AND for delivering on their new maternal and child health pledges by 2015.
On the G8
Good news on the money, but new ideas to incentivize more effective use of aid on Maternal and Child Health are vague.
The G8 seems to be adding new issues to a growing list of commitments that are forgotten by the time the next summit comes around and the hosting donor wants another high-compassion signature global health initiative.
On the G20
It seems like the G20 has a lot of work to do so that it does not take a back seat on global development in its efforts to stabilize economic growth.
As the TBD development agenda for Seoul takes shape, perhaps G20 countries with the highest maternal mortality ratios (think: India, South Africa,) can mobilize local resources AND new ideas to improve maternal and child health outcomes. While scaling up what we know and evaluating how these interventions can be combined for greater impact, we also need to find and share new solutions. For example, India certainly has a good (and evaluated) idea to share from one of its government programs—Janani Suraksha Yojana (JSY), a conditional cash transfer scheme to incentivize women to give birth in a health facility, minimizing emergency obstetrical and neonatal complications. Like India, other emerging market countries are generating ideas to solve problems, an issue that is not captured in the G20 communiqué. As I wrap up this post, I’m delighted to quote from Pete Singer’s (CEO of the Grand Challenges, Canada) interesting article about why some G20 countries, whose own economies are powered by innovation, need to be involved in the final push to reduce maternal and child mortality.
“As a global community, we can no longer tolerate the unconscionable loss of women and children’s lives in the developing world. Both scaling the known and innovating to tackle the unknown are needed to build a better future for women and children — a future that starts today.”
The G-8 and G-20 summits held in Canada last week yielded few headlines on development issues, but there was plenty of rhetoric about global interdependence and poverty reduction and a handful of promising, if mostly modest, development initiatives just below the media’s radar.
As expected, the G-20 declaration focused on when and how to unwind stimulus programs that helped to avert a global economic collapse, and on strengthening regulation of the financial sector to avoid a repeat of the 2008–09 financial crisis.
“These are important issues for the global economy, including for developing countries. But it’s striking that developing countries’ voices are mostly absent from the G-20 declaration, even though several big emerging markets are G-20 members,” said CGD senior fellow Liliana Rojas-Suarez. “This is still largely a conversation between the United States and Europe.”
For example, she said, the challenges that Asia and Latin America face because of an upsurge of capital from the high-income countries is strikingly absent from the G-20 declaration. How to handle risks from these flows is the focus of a recent statement by the Latin America Shadow Financial Regulatory Committee, which Rojas-Suarez chairs.
There was no progress on trade, beyond extending to 2013 a previous commitment to restrain from protectionism. There was much hand-waving about completing the stalled Doha Round, which is supposed to address trade and development, but no new commitments. There was also no mention of reforming preference programs to boost market access for low-income countries, a proposal championed by CGD senior fellow Kim Elliott and others.
Nonetheless, there were several substantive new initiatives, including some that have a striking resemblance to CGD policy proposals:
Principles for Innovative Financial Inclusion: The nine principles set forth by the G-20 are designed to extend financial services—e.g., loans, savings and insurance—to the approximately 2 billion people who are currently excluded, while nonetheless still ensuring financial stability. The principles are very similar to those put forth last year in a CGD working group report, Principles for Expanding Financial Access, led by Rojas-Suarez.)
Pull Mechanisms for Ag Innovation: The G-20 committed to explore “the potential of innovative, results based mechanisms such as advance market commitments to harness the creativity and resources of the private sector in achieving breakthrough innovations in food security and agriculture development in poor countries.” A progress report is expected at the Seoul Summit later this year. Canada has been leading in this area and is supporting CGD research on policy options; see Kimberly Elliott’s new working paper, Pulling Agricultural Innovation and the Market Together.)
SME Finance Challenge: Despite the continuing buzz about microcredit, small and medium-sized enterprises (SMEs), the main job growth engine in most countries, often lack access to finance. The SME Finance Challenge, the first competition launched by the G-20, includes a search (organized by Ashoka) for innovative models for boost finance for SMEs, and a pledge to come up with the money to support the winning proposals, to be announced at the next summit in Seoul. (Read an analysis of this by CGD research fellow Ben Leo).
Two important development-related pieces of news emerged not at the G-20 but the day before, at the G-8 Summit north of Toronto. It’s an odd anachronism that this club of the world’s large rich democracies continues as a forum for announcing development commitments even though the intended beneficiaries are not at the table! In any event, G-8 Summit included two announcements of note:
Muskoka Initiative for Maternal and Child Health: Named for the scenic region north of Toronto where the G-8 gathered, this Canadian-led effort aims to significantly reduce the number of maternal, newborn, and under-five child deaths in developing countries. CGD senior program associate Nandini Oomman welcomed the focus and pledges of some $7.3 billion from a variety of bilateral and philanthropic donors, but noted that there is so far no commitment to ensuring that the money is spent well. Instead, an annex to the G-8 communiqué explains: “Each donor is free to choose the mechanisms they consider most effective, including multilateral agencies, civil society partners, and direct bilateral support to developing country partners.”
A New U.S. Approach to Advancing Development: President Obama took the occasion to release a statement outlining a new U.S. development strategy that appears to draw heavily on the still unreleased report from the Presidential Study Directive on U.S. Global Development Policy. Elements include being more selective, leveraging other public and private donors, supporting well-governed countries, better use of multilateral organizations, and more rigorous monitoring, evaluation, and analysis. CGD director for policy outreach Sarah Jane Staats offers “three cheers” for the president (finally) using his bully pulpit for development. “This puts to rest any fears that the review would not be turned into policy,” she writes. “It doesn’t mean implementing the policy directive will be easy, but it does mean we will see something concrete, and I hope sooner rather than later.”
No surprises on the G-20 front. Deficits and financial sector reform dominated the headlines coming out of last weekend’s Toronto Summit. Development appeared largely as an afterthought. Even though my heart and head are hopelessly hitched to development policy, I think the focus was about right. Ensuring robust recoveries in G-20 nations will do more to support growth in poor countries than endlessly rehashed debates about global aid flows. Leave that for the UN MDG Summit this September. That said, the G-20 did do something small worth highlighting. Tucked away unobtrusively in the communiqué, the G-20 formally launched an initiative that will identify new ways of catalyzing finance for small and medium enterprises (SMEs) in developing countries.
The basic concept is simple. Through the SME Finance Challenge, the G-20 is inviting investors, foundations, and NGOs to propose concrete ways of increasing companies’ access to growth and operating capital. The G-20 has teamed up with the Rockefeller Foundation and Ashoka Changemakers, who know how to run global prize competitions. A panel of five independent judges and three G-20 representatives will select the most promising proposals. The winners will attend the next G-20 Summit in Seoul to formally solicit funding, which is being mobilized now from the multilateral development banks and G-20 member governments. Canadian Prime Minister Harper kicked things off this weekend with a $20 million pledge. While the SME Finance Challenge may be modest in terms of ambition and funding, the G-20 deserves credit for pursuing a novel approach—letting the private sector lead on private sector issues.
If successful, this new G-20 Challenge may help to establish potent public-private partnerships. All the ingredients are there. In recent years, a number of private foundations and organizations have launched ambitious SME initiatives. One example is Goldman Sachs’s 10,000 Women initiative, which provides technical assistance and training to women entrepreneurs. At the same time, donors already have an exhaustive list of facilities focusing on regulatory systems, SME capacity, and access to capital. Despite this, partnerships between the two groups have been limited—especially on a strategic or globalized basis. In a forthcoming CGD working paper (draft here, PDF), I provide an overview of existing donor programs and offer a few ways that private foundations could establish partnerships with donor agencies in support of their organizational goals. The new G-20 SME Finance Challenge is another intriguing way to get that ball rolling. I’ll be very interested to see how it comes off when the G-20 gathers again this November in Seoul.
Leaders of the world’s largest and richest countries met over the weekend in Ontario, Canada. What did they accomplish? This week on the Wonkcast, I’m joined by two guests: CGD senior fellow Liliana Rojas-Suarez and director of policy outreach Sarah Jane Staats. We examine the statements released by the two groups—looking specifically at what they have to say about several key policy areas for global development.
Listen to the Wonkcast to hear our conversation. Among other topics, we discuss:
What President Obama’s G-8 announcement on his administration’s development strategy means for the U.S. aid reform agenda.
The significance of the G-20’s release of a set of principles for financial inclusion.
How the headline issues of financial stability and regulation might affect emerging countries.
What was said (and wasn’t said) in Toronto on expanding trade, especially for the world’s least developed countries.
What role an announced G-20 Working Group on development might play in the run-up to the next G-20 summit this fall in Seoul, South Korea.
As the International Development Association (IDA) pushes for more funding for the neediest and most vulnerable countries, visiting fellow Ben Leo examines whether IDA’s existing performance-based allocation system (PBA) gives the developing world its fair share of funds. He says the system already has several built-in biases toward the neediest, but some donors feel it is not enough.
In this short essay, senior fellow David Wheeler compares the world’s foreign assistance architecture to how the rest of the world operates in the digital age. He suggests that multilateral and bilateral transactions from one behemoth to another may be stuck in the past now that technology can and should create more person-to-person foreign aid programs.