Even though Official Development Assistance (ODA) only represents a miniscule share of global savings, its leverage effect in raising financing through the intermediary of local financial institutions, regional bodies and mixed mechanisms combining grants and loans makes it a key contributor to development funding.
Official Development Assistance (ODA) accounts for a significant share of public international financing. Originally envisioned as a means to cover a domestic savings deficit, it currently plays three important roles in development financing: a temporary substitution for insufficient or absent domestic resources or private international transfers; an aid for reform and institutional strengthening; and a means to facilitate private transfer.
The appropriate monitoring, evaluation and review of the “efficacy” or “impact” of ODA through these three roles requires reforming both monitoring measures of the development finance perimeter and the mobilization (leveraging) of private sector investments.
Some local actors receive insufficient attention from the international community. This is the case of local financial institutions, which mobilize private savings and finance the foundations of the real economy. This is also true for regional bodies that bear the burden of providing a large share of the infrastructure and services.
- European examples of financial blending suggest that grant-loan blends can have a significant leverage effect. Provided they can be replicated on a large scale, such “blends” could potentially raise up to 80 billion Euros in final investments per year by mobilizing merely 4% of current ODA volumes.