Institutions for Integrating SDGs into Digital Financing
Key recommendations of the Task Force for sustainable digital financing ecosystems planning, institutions and learning are:
Countries need robust, dynamic planning for financing needs associated with SDG priorities, related to specific economic sectors, public services and infrastructure. Planning approaches may be national or regional, such as the EU’s Green Deal Investment Plan and Just Transition Mechanism. Or they may draw on international frameworks, such as those linked to the climate-related Nationally Determined Contributions (NDCs), and the UN’s Integrated National Financing Frameworks for Sustainable Development.
Establish institutional mechanisms for incentivizing the development of SDG-aligned digital financing. Existing mechanisms range from SDG-focused digital finance incubation hubs, regulatory sandboxes to SDG-linked digital finance enterprise funds, incentives and partnerships. In particular, these arrangements can ease discovery, experimentation and adoption of SDG-related digital financing innovations by private sector actors. Advancing such approaches might require multi-stakeholder coordination across multiple regulatory domains, including telecom and data regulators, and fiscal and competition authorities. Examples include the UK FCA’s Green Fintech Challenge, IMF’s Anti-Corruption Challenge, GSMA’s Mobile for Development Innovation Funds.
Digitalization drives increasing returns to scale, which in turn requires access to larger markets. Building local demand and encouraging widespread adoption of digital financing by users and incumbent financial sector players may require either deepening of domestic markets or a regional approach. For example, the Central Bank of Kenya is working to foster a regional digital financing ecosystem.
Building Sustainable Digital Financing Ecosystems: Connecting the Dots
Source: UNCDF/UNDP
Adopt a framework for diagnosing, monitoring and learning how the nexus between digital financing and SDGs evolves. Assessments are already available, for example, on progress on the SDGs, some on SDG-aligned financing, and on financial market development, public financing, and digitalization. A measurement framework is needed to help financial and non-financial policymakers, regulators and market actors make sense of progress being made, and needed, in harnessing digital financing for the SDGs. Progressing along these lines, the UNCDF has developed the Inclusive Digital Economy Scorecard.
Overview of This Element
Element | Sustainable Digital Financing Ecosystems |
Recommendation | Develop national sustainable digital financing ecosystems that integrate SDG priorities and planning with the governance and market development of digital financing solutions. |
Next steps | Priority actions should include:
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Next Steps: building sustainability-aligned digital financing ecosystems requires that many existing, evolving parts are joined up. All countries have financing plans connected to national priorities that reflect the SDGs, as well as often SDG and climate-explicit planning processes. Digitalizing finance is also present in some form in all countries, but rarely connected to the SDGs save for important but limited aspects such as financial inclusion, tax collection and anti-money laundering. Key is to join up these two critical systems, and from that to strengthen them both, iteratively, all while overcoming barriers and addressing emerging risks.
Alliance for Financial Inclusion: Creating Enabling Fintech Ecosystems: The Role of Regulators (2020)
CGAP: Regulation for Inclusive Digital Finance (2019)
OECD: Regulatory Effectiveness in the Era of Digitalisation (2019)
UNCDF: Enabling Policy and Regulation: Leaving No One Behind in the Digital Era (2020)
Pathfinder Initiative: Sustainable Digital Finance Measurement Framework
Pathfinder Initiative: East Africa: Regional Digital Financing Ecosystem
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