Rethinking Development Finance

By Rt Hon Sir Malcolm Bruce MP, Chair of the International Development Committee

Rethinking Development Finance

The House of Commons International Development Select Committee (IDC) has recently launched a new inquiry into development finance, as part of a broader inquiry into the future of UK development cooperation. The Committee would welcome the views of Business Fights Poverty members on this subject. You can post your comments below, or submit your written evidence directly to the Committee by 3 June 2013.

In this first phase of the inquiry (running until autumn 2013), the Committee will be focusing on issues relating to the amount of official development aid spent by the UK; the range of available financial instruments and finance providers; the leveraging effects of aid; and how best to monitor and influence the outcomes of aid.

The Committee’s inquiry is set within the context of significant changes in the aid landscape. A new geography of global poverty is emerging, with an increasing proportion of those living in extreme poverty being located in Middle Income Countries (MICs). These countries are less in need of traditional grants, but are instead seeking support to facilitate private sector development and economic growth. Lower MICs are still many times poorer than the UK but the aid relationship needs to develop much more as a partnership to develop economic capacity and to reduce poverty. DFID has a key role in encouraging and sustaining private investment. The challenge now is assessing which donor actions best support growth and investment.

But growth alone is not enough. MICs also need support in order to develop inclusive policies to address inequality, reduce marginalisation, to promote civil society and to facilitate knowledge transfer. Donors and partner countries need to work together to deliver global public goods to address climate change, natural disasters and violent conflict.

How to deliver this support is the new inquiry’s central concern. Financial flows to and from developing countries are changing. New donors, the proposed BRICS bank, the proliferation of private foundations and philanthropists, and new and innovative financing and delivery methods are contributing to a sea change in development finance. In its inquiry, the Committee will explore whether DFID has the right mix of financial instruments to be effective in this new context. It will assess the potential role of different finance providers, how to encourage more investment and how to maximise the development impact of that investment.

The Committee will consider the case for a UK development bank to offer concessional loans and is interested in the experience of other national donors in this respect, and what lessons can be learned from their approaches. The experiences of France and Japan for example, both of which are looking for more cooperation with the UK, are of interest.

The Committee also plans to examine how DFID can best achieve a balance between bilateral and multilateral aid and how it should monitor and influence expenditure by multilateral institutions, particularly in countries where it does not have bilateral programmes.

Other issues relating to the future of development cooperation will be addressed in subsequent phases of the inquiry. The next phase will cover policy coherence – the impact of non-aid policies and instruments including trade, migration and climate on development, and how effective cross-Government work on these is. Finally, the Committee will consider what UK development cooperation should look like in the future so as to propose a ‘road map’ for future UK development assistance.

We look forward to hearing your views.

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One Response

  1. this is exactly what we require for Nyeri county in Kenya. This is because with people starting at the grass root it will be possible to register good growth if all energies are directed at a well thought out starting point.we have the green revolution in mind and of course i am writing about it for i we want professional advice too 

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