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ISSUES IN FINANCING DEVELOPMENT
Achieving SDGs by 2030
needs commitment to invest huge resources including money. Development
Committee Discussion Note on From Billions to Trillions: Transforming
Development Finance
3
underlines that the global community needs to move
the discussion from “Billions” in Official Development Assistance (ODA) to
“Trillions” in investments of all kinds: public and private, national and global, in
both capital and capacity. The most substantial development spending happens
at the national level in the form of public resources, while the largest potential
is from private sector business, finance and investment. “Billions to trillions” is
shorthand, according to the Development Committee, for the realization that
achieving the SDGs will require more than money. It needs a global change
of mind set, approaches and accountabilities to reflect and transform the new
reality of a developing world with highly varied country contexts. Globally,
major sources of financing development are private sector finance (around
USD 1178 billion comprising USD 778 billion of Foreign Direct Investment +
USD 400 billion remittances as per 2013 data), ODA (USD 135 billion) and
domestic resources. Flow of private sector finance can be ensured by improving
business climate, developing local capital markets and mitigating investment
risks. Domestic resources, the largest available source of funding for countries’
development plans, can be unlocked through effective fiscal measures.
POOR ACCESS TO FINANCE – STAGNANT SHARE OF
FORMAL AGENCIES
Mere 31.4 per cent of the rural households reported
borrowing from any source and 22.4 per cent in urban areas. That is, almost 70
per cent in rural areas and 78 per cent in urban areas remained without access
to finances. The situation looks further dim if we consider the fact that access to
institutional sources of credit is further low.
Hardly, 17 per cent of the rural households have borrowed from formal agencies.
In terms of shares in cash loans outstanding, 44 per cent still comes from informal
sources. Thus, the ground reality is one of low outreach of formal agencies,
limited access to credit and hence, limited access to economic opportunities for
many. Poor access to finance limits one’s pursuit of economic activities, acquiring
education and affording health care. Despite Public policy focus on expanding
the outreach of institutional agencies through several institutional interventions
and small borrower friendly policies, the formal agencies could not reach the
unreached to the desirable extent.
