What is an innovative development financing mechanism?

It is a mechanism for raising funds for development. The mechanisms are complementary to official development assistance. They are also predictable and stable. They are closely linked to the idea of global public goods and aimed at correcting the negative effects of globalisation.

Why do we want mechanisms to supplement official development assistance?

At the Millennium Summit in New York in 2000, the international community made a commitment to achieve the Millennium Development Goals by 2015. Official development assistance is still a critical element, but cannot meet this major challenge on its own. Therefore, new mechanisms must supplement conventional official development assistance.

Why do we want stable and predictable mechanisms?

Official development assistance is fundamental, but it is still volatile and unpredictable, despite the criteria for aid effectiveness set out in Accra. It is subject to the inevitable changes in domestic political and fiscal constraints. Predictable and sustainable financing is needed to meet development challenges. The new mechanisms were created to meet these objectives.

Which innovative development financing mechanisms already exist?

There are three major health-related innovative development financing mechanisms in existence today. UNITAID and the solidarity contribution on airline tickets, the IFFIm/GAVI and the Advance Market Commitment for pneumococcal vaccines.

UNITAID, which is primarily financed by a very small levy on airline tickets, is a drug purchase facility intended to make HIV/AIDS, malaria and tuberculosis treatments more affordable. It works in partnership with other organisations to purchase drugs, distribute them and negotiate large price reductions.

The IFFIm is a very large facility funded by government-guaranteed bonds issued on international capital markets. The funds raised are used to establish the most urgently needed immunization programmes in the poorest countries.

The Advance Market Commitment for pneumococcal vaccines is a pilot project based on a partnership contract between donors and pharmaceutical companies. It ensures that research on pneumococcal vaccines moves forward and that, once the research is completed, the vaccines will be sold at prices that the target population can afford.

How much money has been raised?

More than 1.7 billion dollars have already been raised. Nearly 1.2 billion dollars were raised in the first IFFIm bond issues and UNITAID has committed more than 500 million dollars.

UNITAID raises more than 300 million dollars per year and the IFFIm plans to raise 4 billion dollars over twenty years. In addition to these funds, 1.5 billion dollars have been put up under the Advance Market Commitment (AMC) for pneumococcal vaccines.

How long have these innovative development financing mechanisms been in existence?

The notion of innovative development financing mechanisms first became a topic for international debate at the Monterrey Summit in 2002. In 2006, the first mechanisms (IFFIm and UNITAID) were started up and the Leading Group on Solidarity Levies to Fund Development, or the Leading Group on Innovative Financing for Development since the Sixth plenary session held in May 2009, was created.

Is there any guarantee that this new type of assistance is really helpful?

The new funds are distinctive because of their nature, as well as the use made of them. The management of the funds is transparent and the primary objective is to make fully effective use of them. This means that programmes are usually selected on the basis of local requests and managed in partnership with the public sector, NGOs, international organisations and the private sector.

Why do we need innovative development financing mechanisms?

The issues relating to global health, unequal access to resources and climate change affect all of us. Therefore, it is critical to respond and funds raised for official development assistance have not be adequate for the task. The characteristics of innovative development financing mechanisms and the additional funds raised have enabled us to break through the limits on development financing.

What results have innovative development financing mechanisms already achieved?

UNITAID has committed more than 500 million dollars in 80 recipient countries, which are primarily low-income countries. In partnership with the Clinton Foundation, UNITAID has obtained a reduction in the price of second-line AIDS treatments, ranging from 25% to 50%, depending on the country’s income level, and a 40% reduction in the price of paediatric treatments.

The IFFIm disbursed 862 million dollars in 2007 to different immunisation and health system improvement programmes, such as the pentavalent vaccine initiative. This initiative should ultimately save the lives of more than 500 million children.

The Advance Market Commitment project is financed by commitments of nearly 1.5 billion dollars. Research on pneumococcal vaccines is expected to produce results soon.

Why have the projects been exclusively health-related?

Without health as a foundation, development is inconceivable. Health is not only a fundamental right; it is also a major vector for development. Action on health is urgent in view of the number of deaths that could be avoided. It would be hard to compromise on this point. Furthermore, there is a good match between health needs (adequate volumes of stable resources) and the resources provided (stable and predictable).

Who are the main players promoting innovative development financing mechanisms?

The primary promoters are the members of the Leading Group on Innovative Financing for Development. This unique forum is at the forefront of the growing movement driven by the urgency of fighting poverty, hunger and disease.

What can I do to promote innovative development financing mechanisms?

This website was designed to be a special platform for raising awareness of innovative development financing mechanisms. You can use the sharing tools available to spread the Leading Group’s message and promote its action in this area.