31
Aug

A man withdraws money from an Orange Money cashier in Abidjan. About $104bn of African incomes currently flow outside the formal banking system annually. (Issouf Sanogo, AFP)

Making the world a better place – noble in theory, but expensive in practice and ambitious to sustain.

Financing the United Nations’ sustainable development goals (SDGs), for example, will require more than the combined GDP of Africa’s 30 biggest economies in additional funds every year. A big ask – so where should the money come from? Given that the funding needed is nearly 20 times last year’s official international aid flows, it’s safe to say that more aid from international donors cannot continue to be the primary focus.

So what if we tapped into the considerable resources of the developing countries themselves? Often overlooked, these countries’ tax revenues, natural resource revenues, private domestic savings, pension funds, private equity markets, stock markets, and remittances, taken together, are significantly larger than aid flows – and are growing rapidly. If harnessed to finance development, these resources could enormously accelerate the rate at which the SDGs are achieved.

Take sub-Saharan Africa. As a conservative estimate, at least 20-30% of the $2.6-trillion funding gap will be needed in this region alone. This is a massive amount – but our estimates show that sub-Saharan Africa can get part of the way there, and unlock approximately $90-billion for development per year, with just four actions: lowering the cost of remittances and using them as collateral for loans, banking more of the unbanked, and unlocking pension funds for investment in private equity. Taken together the four suggestions illustrate a broader point: what if the way we fund development propelled development itself? Read more…

Published on 26 Aug. in the Mail and Guardian. Yana Watson Kakar is the global managing partner of Dalberg, Matthew MacDevette is a Dalberg consultant and James Mwangi is executive director of the Dalberg Group. Follow @DalbergTweet on Twitter.

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