Will innovative financing replace ODA?

A voluntary group of development leaders and representatives convened Dec. 17 in New York to tackle new financing mechanisms that could help developing countries reduce aid dependency. What are the major takeaways?

Heidi Hautala, Finland’s minister for international development and host of the high-level meeting, told Devex that taxation and financial flows were among the most interesting points on the table. These were identified as areas that can help governments boost revenue. Illicit financial activities and tax evasion are major issues that need to be addressed as well.

But how are such measures translated to policy? France, for example, taps its “air ticket levy” to fund its relief programs. The United States and the European Union, meanwhile, have been working toward streamlining their financial flows in an effort to curb illicit transactions.

Hautala, however, is hoping to involve more of the major development stakeholders, such as the World Bank, in the pursuit of innovative development financing.

The group aims to take on the challenge of looking for more development financing sources aside from official development assistance. Nonetheless, the minister stressed that ODA remains “very crucial and instrumental” for the group and even for Finland’s development programs.

“This is not something that should replace the ODA but it is something that’s needed to boost development financing. It’s not an attempt to deny and evade the commitments on ODA so I hope that those skeptical voices in our meeting got some clarification,” Hautala explained.

Conversations are brought to the U.N. context, not only because the U.N. Development Program was one of the coordinators of the meeting, but also because the group aims to contribute “intellectual ingredients” to the post-2015 development agenda discussions and help bring answers to questions about the means of implementation.

As the outgoing head, the Finnish development minister hopes to see her advocacy continued beyond the end of her term in March 2013. The presidency of the Leading Group on Innovative Financing for Development will soon open, but it continuously accepts membership applications.

Apart from innovative financing, representatives from 63 countries, the United Nations, the European Commission and nongovernmental organizations convened to explore ways to strengthen each country’s leadership and ownership of their own development.

Read more:

• Is it time to rethink the ODA concept?
• The future of Finnish development cooperation: A conversation with Heidi Hautala

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