Stocktaking and Toolbox of Innovative Development Finance in the German Financial Development Cooperation for KfW

2019-10-31 - 2020-04-30

Objectives  On behalf of the German Federal Government, and primarily the Federal Ministry for Economic Cooperation and Development (BMZ), KfW Development Bank finances and supports projects that mainly involve public sector players in developing countries – from their conception and execution to monitoring their success, in order to help partner countries fight poverty, maintain peace, protect both the environment and the climate and shape globalisation. LFS Advisory was contracted by KfW – as part of a Consortium including NIRAS, and Convergence – to analyse German and international Financial Cooperation (FC) experiences in the area of innovative development finance and generate concrete proposals on how to further develop FC instruments and approaches in order to a) mobilize private funding for sustainable and effective development funding of the SDGs, b) strengthen local financial systems/capital markets and c) promote public finance towards debt sustainability in the partner countries..   Scope  The overall study programme comprised the following components: (1) Stocktaking of innovative development finance trends, strategies, coordination mechanism and experience exchange platforms, taking into account experiences of other donors, the existing FC approaches and instruments, possible Technical Cooperation (TC) links and international development trends, as well as the general framework conditions in different regions, (2) Review of international and German development cooperation experiences in the field of innovative development finance, creation of a FC toolbox to mobilize private capital, strengthen local markets and maintain debt sustainability, as well as derive policy recommendations. FC experiences refer to concrete project/program examples and context as bad and good practice, the utilized instruments and approaches, as well as lessons learnt and cost-benefit considerations. (3) Proposals for the further development of FC approaches and instruments, which are suitable for addressing partner needs and mobilizing additional private capital, strengthening local markets as well as minimizing the risk of over-indebtedness.
Organising and moderating a Local Currency Workshop at the OECD Private Finance for Sustainable Development Conference in Paris (January 2020), sponsored/hosted by BMZ & KfW, attended by senior management of IFIs, global/regional banks and other development actors Preparing a comprehensive Stocktaking Report: Review of InnoFin international trends & experience (literature review; expert interviews) & Review of German FC strategies & experiences (literature review; internal survey, external expert interviews) – including detailed/actionable Recommendations (Summary of findings on KfW InnoFin use in international comparison, recommended emerging areas for engagement in InnoFin for German FC, identification of most relevant Innofins to be included in toolbox) Organising and moderating a InnoFin Lab at KfW HQ in Frankfurt (March 2020), attended by a large number of officers and managers of BMZ & KfW, focused on innovative development finance trends in the areas of Local Currency, Guarantees, Insurance, and Result-Based Finance – with thematic breakout sessions following the presentations, to discuss applicability and strategy for KfW Preparing a Toolbox for internal use (Knowledge Management) and external use: drafting of fact sheets, preparation of toolbox with variation for internal KfW audience, preparation of content of flyer