Article is an extract from Mahmoud Mohieldin’s video for the Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs)
It gives me great pleasure to be with you in this important discussion on finance for development and how can we link finance for development to the sustainable development goals the others agenda is very comprehensive very demanding and for you not to remember it easily it’s basically four plus three four plus three.
The four things are basically public finance private finance external funding and domestic funding these are the four finance related sources of finance add to this the other three very important to consider one is public debt management the second one is matters related to trade and finally they are issues related to science technology and innovation and I’m going to focus today on the four sources of finance.
If you happen to be living in a developing economy today you may need to think of all of the sources of finance none of them can substitute the other because the demands of the very ambitious agenda of the sustainable development goals are huge and you may have come across already some estimates of the gaps or funding some estimates put that kind of a big figure of around four trillion dollars others as recently made by colleagues from the IMF to estimate the gap to be around two point six trillion dollars this is only to cover the gaps of funding for education health and three sub sectors of infrastructure basically energy and transport in addition to water.
Unfortunately in many of the low income countries the public revenue to GDP is much less than what is required to fund the SDGs and activities one of the thing that we need to re think of how to do a better job and revenue mobilization from the local level to the national level how can we reform the tax legal frameworks how can we reform tax collection how can we do a better job in public spending and we can look to an example of a country like Georgia that manage to have very significant improvement in tax collection using of digital means and using as well better identification and the better spending that with substantive reforms in the tax department and the managed too very well in this area it within a very short period of time.
How can we leverage the private sector how can we prevent crowding out the private sector in order to do a good job in financing basic infrastructure social development like education and health this may require huge investments and in public private partnership frameworks in the legal arrangement. You need also distinguish between the business side of the private sector and the financial side of the business sector.
The business sector has a very important role as well to play beyond funding from the business commission for sustainable development and the outline among themselves for areas of work under the SDGs and with that comes something like twelve trillion dollars of investment opportunities on annual basis that could create hundreds of millions of jobs from the date that this report he should until twenty the thirty how can we encourage the private sector to be active and positive participants in development how can we prevent crowding out and with a kind of an approach that we called the cascade.
So if your government comes to the bank asking us to have for instance at an airport or a terminal and to be developed one of the things that will be asking the government to do is basically to provide us with a simple answer can the private sector do it so if the answer is yes of course will give the opportunity to the private sector without crowding it out if the answer is no the no here could be attributed to some issues related to regulations or red tape or some sort of competition policy so will be more than happy to according to coordinate and work with governments in order to improve the business environment there to encourage more domestic and foreign private sector to participate.
Then the answer perhaps could be even with all of these reforms there could be a major losses or the project might not be feasible so the World Bank through a variety of financial instruments can provide grants or guarantees in order to make the project feasible or viable if all of these attempts fail in this case we will fund the concerned government based on the rules adopted by the bank and the rules here are basically to protect the environment to take the social development seriously and to make sure that there is the rule of law and good governance for the project what we call easy.
So many of you might be involved there are where of the advances of technology and the its impact on finance and they think it’s being tackled as well in this rich course. So what so called fintech it’s about using technology and innovation in order to improve the access to finance in order to lower the transaction costs and to enhance the efficiency of the financial sector but those were developing the financial technology applications and ways of doing business discovered as the regulators did that fintech requires regtech that is basically more sophistication of the regulators using technology in order to be better supervisors and regulators of this new of innovation and development in the financial sector.
But again the fintech people and the regulators discovered as well which is a kind of a common sense that they cannot really do the job better without having a sophistication in government though so the government itself needs to have its own drastic by that we mean more use of technology more use of digitalization having some good understanding of the role of technology in society and development from the very identification of the people and we have a good program and that of the bank could ID for the Identification for Development that is using digitalization order to identify the people and the rights met in under share social support and in development but fintech requires regtech requires Gulf tech.
But I know what all of them required is what they call slug tech that this society itself which is basically where all of the things need to start from and act needs as well to be very much aware of the implications of technology and how can the use technology better in order to have better access to finance better access to knowledge better access to markets and to protect their own rights.
So and that all comes naturally on nicely under the finance for development and very much linked as well to the future agenda of the sustainable development goals. It’s not enough just to talk about finance we need to have good understanding of the data and the evidence in order to guide the public the financiers and the private financiers and the private sector for up to touch eve the required goals and targets and the other thing that had been very much missing in the discussion
I’m happy that is being now infacite is the role of society at large in order to implement these issues how to localize all of these kind of global goals in order to have an impact on the economy and the community at large how can we mobilize all of these kind of resources supported with good evidence with good efficient institutions and effective policies in order to make a difference at the community level where all really matters when it comes to the impact of the SDGs.
I hope that this program and this particular popular course will be useful and it would be a good introduction to you in the variety of knowledge sources that you need to be to have a good command of in order to participate actively in achieving the sustainable development goals.