The private sector is a critical partner in improving the lives of people and communities around the world. The complexities of global challenges are driving the need for more flexibility to scale and maximize available tools to mobilize financing, catalyze investment, and pay-for-results in innovative ways to fund development outcomes.
Innovative finance is a way to combine available financial tools into a new package or use established financial tools with new customers, in a new market, or in a strategic way to solicit new investors. As USAID has embarked on engaging the private sector and new partners to support global development objectives, innovative finance is a critical tool that cannot be ignored. USAID has successfully used financial tools such as Development Impact Bonds (DIBs), advance market commitments, prizes, guarantee mechanisms and fixed-amount awards but this is only the tip of the innovative finance iceberg.
Innovative finance is not a tool only for economic growth activities. Innovative finance is a way to finance any development outcome in technical areas such as health, environment, democracy and governance and so on and therefore must be discussed in a way that non-finance professionals can easily understand.
Below are a series of resources that are designed to support USAID staff in leveraging innovative finance approaches in activity design and explore the range of financial tools that have application in the donor context. Additionally, they distill complex terminology around private sector driven financial tools into language that empowers USAID to easily incorporate innovative finance approaches into activity design.
