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Bridging Gaps in Development Finance
Tuesday, April 30, 2013
10:45 – 11:45 am
Oakhurst
Why is this important?
• Create opportunity, build wealth and alleviate poverty
• Create sustainable partnerships to build communities
and companies
• Strength and opportunity in emerging markets
2
GDP Trend and Projection (% change from prior period)
-5
0
5
10
151
99
8
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Pe
rce
nt
Ch
ange
Advanced Economies
Emerging and Developing Countries
Developing Asia
Middle East and north Africa
Sub-Saharan Africa
Source: World Economic Forecast, IMF, 2013
Trading places? Advanced & Emerging
$42 Trillion
Source: IMF Database, 2013.
Emerging market and developing economies
Advanced economies
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Yr 2006 Yr 2007 Yr 2008 Yr 2009 Yr 2010 Yr 2011 Yr 2012 Yr 2013
Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP
GD
P (
Cu
rre
nt
Bill
ion
$$
)
Socio-economic conditions Gross domestic product (PPP) per capita 2008-2012
Emerging and developing economies
Advanced economies
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2008 2009 2010 2011 2012
Gro
ss d
om
est
ic p
rod
uct
(P
PP
) p
er
cap
ita
5.7X
Source: World Economic Forecast, IMF, 2013.
Capital Investment
Emerging market and developing economies
Advanced economies
-
5
10
15
20
25
30
35
Yr 2006 Yr 2007 Yr 2008 Yr 2009 Yr 2010 Yr 2011 Yr 2012 Yr 2013
Investment
Inve
stm
en
t as
a %
of
GD
P
Approach to Building a New Platform
New Platform
Technology Project conception &
design Tender Procurement
Assistance
Guarantees/I
nsurance
Project
Financing
Outcomes-
based Financing
Public Private
Partnerships
International Trade
Development
International Aid
and TA
Community
Development
Economic
Development
Beta Site
Development
Human Capital
Social
Investing
New Directions: Building a Sustainable Development Platform
• Eytan Stibbe, Founding Partner, Vital Capital Fund
• Tally Zingher, Attorney and former Co-Founding
Managing Director, MENA Investment Network
• Anne Heyman, Philanthropist and Founder, Agahozo-
Shalom Youth Village
• Netanel Oded, Senior Economist, National Economic
Council, Israeli Prime Minister's Office
Discussion Questions
• What elements of each project suggest new approaches to building
a sustainable platform for development in emerging markets?
• How was the project organized/owned/financed?
• What was the role of local capacity in carrying out the project?
• What is the impact of the project on the local economy? How can
that be strengthened?
• What services are needed to strengthen project sustainability and
improve outcomes?
• Which types of financial services are available and needed?
Where do the tools fit in the development process?
Design Development Implementation Mgmt & Ops Sales &
Growth
Project
conception
& design Tender
Procurement
Assistance
Guarantees
Project
Financing Outcomes-
based
Financing
Public Private
Partnerships
International
Trade
Development
Assistance
International
Aid and TA
Design Development Implementation Mgmt & Ops Sales &
Growth
Israeli
Advisory
Team
Host Advisory
Team
Israeli
Developer
Host
Developer
Israeli
Financial
Institutions
Host Financial
Institutions
International
Development Finance
Agency
Israeli
Company
Host Company Host Market
Limited
Limited capital, poor
liquidity
Limited
Limited Limited Long lead time
How is the development process financed?
Source: IMF WEO.
Increase in private capital flows to developing economies
Private financial flows (net) into emerging and developing economies
-400
-200
0
200
400
600
800
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Other Private Flows
Private Portfolio Flows
Direct Investment
US$ billions
Source: OECD/DAC and IMF WEO
Private capital flows to developing countries outweigh official
development assistance
-100
0
100
200
300
400
500
600
700
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
US$ billions
Private capital flows
ODA
Source: WDI.
Credit extension to private sector lags in developing regions
Domestic credit to private sector, % of GDP
0
20
40
60
80
100
120
140
160
180
OECD East Asia Euro area Sub-SaharanAfrica
MENA South Asia LatinAmerica
Percent
Official development assistance (ODA) has increased dramatically
since 2001
Sources: OECD/DAC.
0
20
40
60
80
100
120
140
160
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
US$ billions
Total ODA
Source: OECD/DAC.
ODA to Africa continues to increase
ODA by region
0
10
20
30
40
50
60
1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
Africa
Developing Asia
Latin America
Middle East
Source: UNCTAD.
FDI rising amid global economic uncertainty
FDI inflows, global and by group of economies
0
500
1,000
1,500
2,000
2,500
1995 1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
Transition economies
Developing economies
Developed economies
World total
Source: UNCTAD.
Investment levels less volatile in developing regions
Inward FDI flows, by region
0
100
200
300
400
500
600
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
US$ billions
Th
ou
sa
nd
s
Euro Area
Developing Asia
Latin America
SSA
North America
Source: Emerging Markets Private Equity Association.
Distribution of emerging market private equity investment by
region
2012
0
2
4
6
8
10
12
14
16
Emerging Asia Central andEastern Europe
Latin America MENA Sub-SaharanAfrica
US$ billions
Th
ou
sa
nd
s
Source: World Bank Global Financial Development database.
Developing regions are still underbanked
Bank accounts per 1,000 people, 2011
0
100
200
300
400
500
600
700
800
900
1,000
Euro Area Highincome
LatinAmerica
DevelopingMENA
Middleincome
DevelopingAsia
Sub-SaharanAfrica
Source: Center for Global Development Social Impact report and UNCTAD.
Social Impact Investments and FDI flows by location
Percent total, 2010
0% 10% 20% 30% 40% 50% 60%
Developed economies
Eastern Asia
Americas
Transistion economies
Other Asia
Africa
South and Southeastern Asia
Other Countries
Social Impact Investments
FDI flows
Source: MIX Market microfinance database.
Lending by microfinance institutions (MFIs) on the rise
0
200
400
600
800
1,000
1,200
1,400
1,600
0
10
20
30
40
50
60
70
80
90
100
1995 1997 1999 2001 2003 2005 2007 2009 2011
Number of institutions
US$ billions
Bil
lio
ns
Value of MFI loans (LHS) Total # MFIs (RHS)
Source: MIX Market microfinance database.
Total microfinance loan values rising, but differ by region
0
5
10
15
20
25
30
35
40
45
1995 1997 1999 2001 2003 2005 2007 2009 2011
US$ billions
East Asia
Latin America
South Asia
Africa
Worldwide Paradigm Shift
From:
To:
Paradigm Shift has Implications for Economic Development
Policy and Impact
• Democratization of Development: Citizens increasingly intolerant of Economic
Development policies that transfer wealth from middle class in wealthy countries to “elites”
in poor countries
• Need for:
• Skills/knowledge
• Entrepreneurship
• Market-, results- and data-driven
• Key role of non-state actors (private sector, academia)
• Engagement of local community
• Sustainable development
• Challenges, risks and limitations of new paradigm: Instability, security, limited
financing, public goods
Paradigm shift bears opportunity for small economies with limited state budgets to have impact “above their weight”.
Building Blocks of Economic Development Under new Paradigm
An Opportunity for innovation
Finance
Human
Capital
Technology Infrastructure
Finance
Old: gov’t funded bank
training, direct aid, budget
support
New: micro-payments,
impact investing, social
finance, crowdfunding…
Technology
Old: transplant of existing
products
New: know-how transfer,
Bottom-of-the Pyramid,
design for development…
Human Capital
Old: peace corps, development
agency staff, non-profit
organizations, capacity-building
New: student engagement,
human capital exchange, know-
how transfer, CSR…
Old: large project construction
New: resource management,
mobile payments – still heavily
state dependent
Infrastructure
Source: Arial, font size 7.
Human Capital for Economic Development in the New Paradigm
• Human capital needs training and exposure:
• Learn to ask the right questions
• Analytical skills and theoretical context
• Desire to apply skills and ingenuity to understanding developing world
• Ability to adapt technologies to solve developing-world needs
• Experience a sense of the possibility of making transformational change
• Companies need people who can lead them to the developing world and who
approach emerging markets with a sustainable development mindset
• Consider new alignments, relationships and transfers between poor in wealthy
countries and wealthy in poor countries
• Links to diaspora communities
Human Capital for Econ Development – Starting with Academia
Create Human Capital to support Economic Development in the new paradigm.
• Support applied, development-related research in engineering, business, medicine, agriculture, etc. through hands-on research or internships in the field during graduate degree studies
• Support via tuition, equipment, travel
• Emphasis on: • entrepreneurial ideas involving novel
business models • advanced technology • opportunities for ongoing engagement
in sustainable or economic development
Expected Benefits: Process:
• Fundamental theory and practice lay foundations for sound approach to development by knowledgeable, critical-thinking, innovative actors
• Incentivize students to take risks in new areas
• Especially useful for small countries lacking large development budgets that have entrepreneurial, creative and adventurous citizens
• Impact amplified by integration into global network of inspired actors
• Prepare domestic industry to engage in emerging markets
• Create new mechanisms for financing innovation in developing countries
• Low cost, high impact
29
ABOUT THE ASYV: COMPREHENSIVE YOUTH VILLAGE FOR
RWANDAN ORPHANS
Agahozo-Shalom Youth Village (ASYV.org) is a
residential community and 4-year high school for
500 vulnerable orphans aged 15-22 in Rwanda
(about one hour east of the capital city, Kigali)
ASYV recognizes that, with the right place to heal
and the tools to flourish, these orphans can
invigorate themselves and their communities, and
assist Rwanda achieve a new level of social and
economic success
The project’s solid track record has garnered
prominent national and international attention;
President Paul Kagame of Rwanda attended the
first graduation in January 2013
To sustain the project beyond fundraising and
corporate partners, ASYV is working to generate
significant revenues by establishing enterprises
that utilize available land, access to a trained
workforce, and exceptional local business and
government connections
JC (Village Director) with New Students
Volunteers (Cousins)
Chickens!
Cows!
A New Boys Family
English Class Under the Mango Tree
Smiling New Students
First Day of School: The Liquidnet Family High School fits all
500 students!
Rehearsing for “We Stood Up”
Mara Reunites with her Family
(Joan of Arc)
40
SOCIOECONOMIC IMPACT: Four distinct groups benefit from grid-
connected solar in Rwanda
Private-sector New sustainable and steady power supply able to fuel the
country’s robust economic growth and quickly bridge the current generation gap that leads to daily “blackouts”
Government of Rwanda Rapid, sustainable, inexpensively deployed power that
effectively mitigates shortages
Millions of dollars in savings over burning -- and subsidizing -- polluting diesel generators
Investors
Low-risk, high-profile project backed by financial sovereign guarantee of the Rwandan Government
Sustainable income generation for orphanage educating and housing Rwanda’s vulnerable youth
1 2
4 3
Money benefits programs in formal education, health, professional skills, and entrepreneurship
Revenue stream provides foundation for replicating the youth village concept, a systemic solution for orphans around the world.
Healthy financial internal rate-of-return in addition to socioeconomic impacts
Sculpted returns to ensure equity investment is paid back as soon as possible
Job creation and training for an estimated four hundred Rwandans during construction, and thirty full-time employees during the twenty-five year O&M phase
Proof-of-concept project that will catalyze new investment in the energy sector
Based on average electricity usage rates in Africa, this project will provide an estimated 100,000 new households with electricity
Agahozo-Shalom Youth Village
