Final Project for Financing for Development MOOC, World Bank Course. This digital artifact is designed to explain something important I learned during the course and propose a financing solution. I have focused on how to remittances, which are private funds, can be mobilized to support the sustainable development goals.

1. Finance for Development:
Final Project – Digital Artifact
Remittances: Can Private Funds
Support Public Endeavours?

2. Financing the SDGs
• There are 17 Sustainable Development Goals
(SDG) and 169 targets
• Together, they represent an ambitious and
aspirational vision of what the world could be
like in 2030
• A socially and economically inclusive and
equitable world that is environmentally
sustainable
• A world we want to live in

3. Financing for Development …
The work on financing for
development focuses on:
How will we pay for all the work
that needs to be done to
transform the world we live in to
the one we want to live in?

4. What Do We Need Money For?
• Education so everyone can get a job
• Health care so everyone is healthy
• Infrastructure to provide everyone services like
transportation, water and sanitation systems,
electricity, internet – and of course schools and
health facilities
• Environmental protection and remediation
• And other good things that people need

5. Is there enough money?
• Achieving the SDGs is expected to cost above $3Achieving the SDGs is expected to cost above $3
trillion a year (the amounts are not precisetrillion a year (the amounts are not precise
because it is difficult to collect and aggregate thebecause it is difficult to collect and aggregate the
information)information)
• There is enough money overall but it is not allThere is enough money overall but it is not all
allocated in ways that contribute to achieving ourallocated in ways that contribute to achieving our
global development objectivesglobal development objectives
• So financing for development is about leveragingSo financing for development is about leveraging
more and using what we have bettermore and using what we have better

6. Where will the money come from?
• The biggest proportion of
the money will come from
mobilizing domestic
resources – for example
through taxes
• But for the poorest, least
developed countries in
particular, domestic
resources will not be
enough and foreign funds
need to be mobilized

7. Annually foreign funds totalling about
US$1.7 trillion flow to developing countries:
• The largest source of foreign funds is profit
oriented funds of about US$997 billion flowing to
developing countries (although not that much
goes to the poorest countries):
– Foreign Direct Investment (FDI)
– Portfolio Equity
– Private Debt
– Public Debt
– Short term Debt

8. Social impact funds make up the rest of the
foreign funds flowing to developing
countries:
• Funds that are not profit oriented (social impact)
flows total some US$670 billion annually,
including:
– Official Development Assistance (ODA)
– Other Official Funds (OOF)
– Development Finance Institutions (DFI)
– South-South Cooperation
– Philantropic Foundations
– NGOs
– Remittances

9. Total Value of Resources Flowing to
Developing Countries Looks Like This:

10. One of the biggest is remittances
• As the chart shows, remittances are one of the
largest sources of funds flowing into developing
countries
• These are funds sent from emigrants back to
their families in their home countries
• They total over US$300 billion annually

11. What are remittances used for
• These are private funds – the owner earned
them and is giving them to friends or family to
help them meet needs
• The UN reckons that most remittances are used
for immediate consumption – food, school fees,
health care, improvements to housing
• Some are used to start micro-enterprises
• Some are used for investments, often in the
form of buildings

12. Can these funds be captured for
the SDGs?
• Various ideas have been advanced on
how these funds can be captured by the
public sector for investment in the SDGs:
– Lower the costs of transferring money so
more reaches the poor in developing
countries (who will use it for e.g. health)
– Sell the diaspora (those living overseas and
sending money home) development bonds
– Taxes, for example on financial transactions

13. Let’s examine each of these ideas
for their potential to raise money
for the SDGs:
–Lowering costs
–Diverting funds to diaspora bonds
–Financial Transaction Taxes

14. Lowering costs
• Lowering the cost of transfers will help more
money get to the intended beneficiaries
– Lowering it from +10% to 7.68% is believed to have
saved migrants and their families US$60 billion since
2009
– However, especially in light of anti-money laundering
regulations, there are costs involved that will need to
be covered
– Already many banks are moving away from providing
transfers to developing countries

15. Will lowering costs raise funds for
the SDGs?
• There will be a limit on how low these
costs can go while still ensuring sufficient
funds to cover financial intermediaries’
costs
• While lowering the cost of transmitting
funds is getting more funds to developing
countries, these are private funds, not
public funds

16. What are Diaspora Bonds?
• Diaspora bonds are a form of government debt
• The idea is that nationals living abroad (the
diaspora) retain emotional ties to the country
and will be willing to invest
• Some bonds are sold only to the diaspora, some
are open to all but nationals receive a
preferential rate
• For countries with large diaspora populations,
especially if they have difficulties raising money
on the international market or attracting
investment, they can be an attractive source of
financing.

17. Will Diaspora Bonds Raise
Money for the SDGs?
• India and Israel have successfully issued
diaspora bonds
• Other countries like Kenya and Ethiopia have
issued diaspora bonds with limited success
• Part of the problem has been a lack of
awareness
• It also may be difficult to convince people who
have fled due to war, poor economic
circumstances, or mismanagement to buy a
product sold by their former home country

18. What might work?
• Strong information campaigns to raise
awareness
• Giving diaspora communities a say in how any
funds raised will be used
• Regional bonds issued by an institution like the
African Development Bank

19. Will it work?
• The diaspora may buy development bonds to
support infrastructure in their home countries
– However, this is not a substitute for meeting the
immediate needs of their families which is likely to
remain their priority
– There may be a need to introduce social safety nets
and better public services to free up more money
– Diasporas will need to be assured that the money will
be well used – which will be a challenge in some of
the poorest countries with low capacity

20. What are Financial Transaction
Taxes?
• Financial transaction tax (FTT) are one of the
methods that have been proposed to raise money
for the SDGs.
• FTT involve a small (0.05%) tax on the exchange of
financial instruments, such as securities, bonds,
shares and derivatives
• FTT could include a tax on remittances, which would
allow governments to capture some of the savings
generated by lowering transaction costs

21. Will it Work
• It would be relatively easy to collect at FTT
of 0.05%
• Money transfer organizations could collect
them and remit them to the governments
in the sending countries
• These governments could allocate these
funds to support the SDGs
• However, this would require the
agreement of these countries

22. Generating Public Funds from
Remittances
• It is likely that most remittances will
continue to be used for immediate needs
• However, given the volume of remittance
flows capturing even a small portion of
these funds could help to fund the SDGs
• Given the need to improve governance
and social safety nets to sell a lot of
diaspora bonds, a FTT on remittances
might be the fastest way to generate funds

23. Conclusion
• Remittances have been growing rapidly over the
last ten years: this is likely to continue
• The transaction costs on remittances have
declined since 2009: this trend is also likely to
continue up to a limit
• Some of these funds may be diverted to
development bonds
• Some may be collected via a FTT
• While it is unlikely that the public sector can
capture most of this money it is still worth doing.

24. Thank You!