Innovative Financing for Development

Developing countries need additional, cross-border capital channeled into their private sectors to generate employment and growth, reduce poverty, and meet the other Millennium Development Goals. Innovative financing mechanisms are necessary to make this happen. 'Innovative Financing for Development' is the first book on this subject that uses a market-based approach. It compiles pioneering methods of raising development finance including securitization of future flow receivables, diaspora bonds, and GDP-indexed bonds. It also highlights the role of shadow sovereign ratings in facilitating access to international capital markets. It argues that poor countries, especially those in Sub-Saharan Africa, can potentially raise tens of billions of dollars annually through these instruments. The chapters in the book focus on the structures of the various innovative financing mechanisms, their track records and potential for tapping international capital markets, the constraints limiting their use, and policy measures that governments and international institutions can implement to alleviate these constraints. In the run-up to the 'follow-up international conference on financing for development' to be held in Doha from November 28 to December 2, 2008, it seems particularly timely to collect in one book writings on the various market-based innovative methods of raising development finance. Although developing countries are well advised to use caution in incurring large foreign debt obligations, especially of short duration, there is little doubt that poor countries can benefit from cross-border capital whether channeled through the public or private sectors. The papers in this book focus on various recent innovations in international finance that allow developing countries to tap global capital markets in times of low risk appetite, thereby reducing their vulnerability to booms and busts in capital flows. Debt issues backed by future hard currency receivables and diaspora bonds fall into the category of mechanisms that are best described as foul-weather friends. By linking the rate on interest to a country's ability to pay, Gross Domestic Product (GDP)-indexed bonds reduce the cyclical vulnerabilities of developing countries. Furthermore, these innovative mechanisms perm lower-cost and longer-term borrowings in international capital markets. Not only do the papers included in this book describe the innovative financing mechanisms; they also quantify the mechanisms' potential size and then identify the constraints on their use. Finally, the papers recommend concrete measures that the World Bank and other regional development banks can implement to alleviate these constraints. Economists have analyzed the feasibility and potential of using various tax-based sources of development finance in the context of meeting the millennium development goals. This has given rise to a new discipline of global public finance. This book complements those efforts by focusing on market based mechanisms for raising development finance Developing Countries Need Additional, Cross-border Capital Channeled Into Their Private Sectors To Generate Employment And Growth, Reduce Poverty, And Meet The Other Millennium Development Goals. Innovative Financing Mechanisms Are Necessary To Make This Happen. Innovative Financing For Development Is The First Book On This Subject That Uses A Market-based Approach. It Compiles Pioneering Methods Of Raising Development Finance Including Securitization Of Future Flow Receivables, Diaspora Bonds, And Gdp-indexed Bonds. It Also Highlights The Role Of Shadow Sovereign Ratings In Facilitating Access To International Capital Markets. It Argues That Poor Countries, Especially Those In Sub-saharan Africa, Can Potentially Raise Tens Of Billions Of Dollars Annually Through These Instruments.--jacket. Innovative Financing For Development : Overview / Suhas Ketkar And Dilip Ratha -- Future-flow Securitization For Development Finance / Suhas Ketkar And Dilip Ratha -- Development Finance Via Diaspora Bonds / Suhas Ketkar And Dilip Ratha -- Gdp-indexed Bonds : Making It Happen / Stephany Griffith-jones And Krishnan Sharma -- Shadow Sovereign Ratings For Unrated Developing Countries / Dilip Ratha, Prabal De, And Sanket Mohapatra -- Beyond Aid : New Sources And Innovative Mechanisms For Financing Development In Sub-saharan Africa / Dilip Ratha, Sanket Mohapatra, And Sonia Plaza. Edited By Suhas Ketkar, Dilip Ratha. Includes Bibliographical References And Index. This book argues that poor countries need additional, cross-border capital channeled to the private sector for employment generation, growth, and poverty reduction. For that, innovative financing mechanisms are necessary. The volume brings together various market-based innovative methods of raising development finance including securitization of future flow receivables, diaspora bonds, and the role of shadow sovereign ratings in facilitating access to international capital markets