New financing mechanisms in international cooperation

Media release, 18.01.2018

The UN estimates that additional funds of USD 2.5 trillion a year will be needed until 2030 to achieve its development goals. On 18 January 2018, a conference in Zürich demonstrated new financing mechanisms, such as ‘Social Impact Bonds’ (SIB).

If successful, mobilisation of private capital will help to achieve the UN Sustainable Development Goals (SDG). The conference organised in Zürich by the State Secretariat for Economic Affairs (SECO) and the Swiss Agency for Development and Cooperation (SDC) showed possible avenues, such as private investors pre-financing a development project as part of a SIB, and only being compensated once previously agreed results are achieved.

With a SIB, programmes are pre-financed by private investors who bear the risk. States, development agencies, international organisations and/or philanthropic foundations then pay the investors once agreed results have been achieved. If a project falls short of its objectives, investors receive a lower amount. If objectives are exceeded, investors can be rewarded. The results are verified by an independent agency. Such a mechanism motivates providers to find innovative solutions for achieving the development goals. SECO supports SIBs in Colombia with the objective of integrating poorer sections of the population into the employment market.

Partnerships and scalability
The project constitutes the first SIBs in a developing country. SECO broke new ground by entering into a partnership with the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) and the Colombian government. SECO will contribute CHF 3 million to successful employability outcomes under the SIBs. In addition, SECO will finance data infrastructure, workshops and management costs.

Other innovative financing mechanisms in international cooperation were also presented and discussed at the conference in Zürich, including humanitarian or development impact bonds in the health sector. Experts debated ethical questions, as well as how good examples can be scaled up significantly.

130 participants from a vast range of fields
Around 130 conference participants from Switzerland and abroad attended, including representatives of the World Bank, regional development banks and UN organisations, banks, foundations, non-governmental organisations and bilateral donor organisations, as well as consultancy firms and the academic field.

The conference was organised jointly by SECO, the SDC, the IDB and the UBS Optimus Foundation. It was opened by SECO Director Marie-Gabrielle Ineichen-Fleisch and UBS Group CEO Sergio P. Ermotti and closed by SDC Director Manuel Sager and Hubertus Kuelps, Global Head of UBS and Society.


Address for enquiries:

Liliana de Sá Kirchknopf, Head of the Department for Private Sector Development, SECO Economic Cooperation and Development, Tel: +41 58 462 19 31
Lorenz Jakob, Coordinator external relations and events, SECO, Tel: +41 58 468 60 56


Publisher:

Federal Department of Economic Affairs, Education and Research
Federal Department of Foreign Affairs