News

May 29, 2018

CWY is preparing for the upcoming transformation in development funding

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OTTAWA, ON (May 29, 2018) – G7 finance and international development ministers, including Canadian Minister of International Development and La Francophonie, Marie-Claude Bibeau, will be meeting in Whistler, B.C. on May 31, 2018. The theme of the meeting will be “investing in growth that works for everyone.” According to Min. Bibeau, the hunt for new ways to get more private investment cash into developing countries will be a key part of the talks.  Canada is one of the donor countries, spearheading the use of innovative finance instruments to tackle global development challenges as demonstrated on May 25, with Minister Bibeau’s announcement of a new partnership to fund gender equality in developing countries and a call to action to the private sector, investors and philanthropists to contribute.

Did you know it will take $5-7 trillion to achieve the Sustainable Development Goals (SDGs) set by the United Nations to end poverty globally? In the meantime, official development assistance (ODA) peaked in recent years at $150 billion. A majority of donor countries, including Canada, have failed to reach the internationally agreed upon official development assistance target of .7% of donors’ national income. This must be discussed at the G7 meeting this week because government participation, through increased ODA is a key part of blended finance approaches and an important step towards achieving results in development.

This is why this G7 meeting is so important. Governments, multi-lateral agencies, and INGOs’ ability to mobilize a variety of financing sources will be central to reducing financial risk and increasing development impact while continuing to focus on meeting ODA target commitments.

Many countries are now looking at blended finance, which is broadly defined as the use of traditional development finance to attract and channel private capital towards investments for development impact in developing countries. It has grown as a mechanism for private investors to enter developing country markets with a greatly decreased risk. By blending development finance with private capital, investors can support social impact while obtaining risk adjusted market rate of returns on investment, and project implementers are able to focus on the delivery.

The majority of African youth are “not in employment, education, or training (NEET)”, due largely to the lack of formal job employment opportunities, limited skills, and mismatch between skill and labour force demands.  Young women are disproportionally affected by youth unemployment. Canada World Youth, inline with the SDGs as well as Canada’s Feminist International Assistance Policy (FIAP), has been looking at how to address the high unemployment among the Global Youth bulge – more specifically in sub-Saharan Africa. Building on its track record of successfully delivering programming for youth, Canada World Youth is exploring blended financing, through Development Impact Bonds (DIBs), as a potential innovative solution to finance youth livelihoods activities and advance the economic empowerment of women. “We are awaiting the results of a feasibility study to answer some of our programmatic questions as DIBs have the potential to provide upfront capital to address youth livelihoods at scale, especially for young women and girls, as well as provide a rigorous performance management and oversight system to maximize efficiency and impact”, says Rita S. Karakas, President and Chief Executive Officer of Canada World Youth.

What are Development Impact Bonds?

Development Impact Bonds (DIBs) are a subset of result-based financing also referred to as performance-based financing or pay-by-success. Results-based financing ties funding to specific performance or results that are typically agreed upon in advance and takes the form of contracts or deals, including development impact bonds. DIBs are contracts in which private investors pay upfront for the costs of implementing an intervention that takes place in a developing country and is measured by clear, predetermined metrics. If the intervention succeeds in achieving the predetermined goals, the outcome payer will pay the investor(s) back.  A bond-issuing organization raises funds from private-sector investors, charities or foundations. These funds are distributed to service providers/project implementers to cover their operating costs. If the measurable outcomes agreed upfront are achieved, the outcome payor pays the inventors or the bond-issuing institution. The outcome payer in DIBs is often an aid agency, government or other philanthropic funders.

CWY is monitoring this new financial instrument carefully and is looking forward to the results of its feasibility study.  With over 46 years of developing and implementing programs for youth in 69 countries around the globe, CWY has acquired extensive expertise in monitoring and evaluation, managing large multi-year development budgets, developing and delivering youth livelihood training and support services, and bringing together stakeholders in a consortium model. Everything needed to move forward.

We will closely monitor the G7 meeting in Whistler. Financial innovative solutions are desperately needed so that our global community can achieve the SDGs and eradicate poverty for good.

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About Canada World Youth

Canada World Youth is dedicated to enriching the lives of youth aged up to 35 who want to become informed and active global citizens. CWY offers international transformative learning experiences focused on building knowledge, leadership and skills through participation in sustainable community-driven projects. For more than 40 years, 38,000 youth and 12,000 host families have participated in CWY programs, in Canada and abroad.

CWY is registered with the Canada Revenue Agency as a charitable organization (#118973999RR0001).

Source : Mary McGee, Communications Officer, Canada World Youth, 514 931-3526 # 336, mmcgee@cwy-jcm.org.

Interviews and information (photos available):

Mary McGee
1 800 605-3526 #336
514 931-3526 # 336
mmcgee@cwy-jcm.org