Sustainable Digital Financing Ecosystems


Governments, businesses and citizens need to make investments and develop new capabilities. Work to build the foundations for digital financing needs to align with sustainable development priorities and opportunities.

People-Centric Digital Infrastructure, IDs and Data

Key recommendations of the Task Force for building digital infrastructure to support sustainable digital financing ecosystems are: 

Provide affordable, accessible and available digital infrastructure to ensure universal coverage and access to the digital world. Digital payment infrastructure is critical for citizens to participate in digital financing and perform cheap, fast, reliable financial transactions. In particular this should target those currently excluded through lack of any technical access options, amounting to some 750 million people. However many more, around 3.3 billion people in 2018, have technical access but do not use the internet. This is a matter of cost versus value to the user, their capabilities, social norms and cultural barriers, which disproportionately affect women’s access to and use of mobile technology. The promotion of digital and financial inclusion for women and other excluded groups should be a specific policy objective.

Undertake legal reforms to enable digitalization of financial system. These include principles defining the legal nature of digital assets, the rules governing making of digital payments, digital assets taxation regimes and private law governing relations between commercial parties. While pursuing digital inclusion and innovation, regulations also have to provide consumer protection and protect cyber security. The Alliance for Financial Inclusion facilitates peer-learning to strengthen regulatory oversight and has published a practical framework for inclusive digital financial transformation. Rules that enable open, interoperable digital finance rails, through open APIs, can minimize friction on financial flows, prevent market fragmentation, reduce rent-taking, and ease the development and scaling up of digital financing innovations. In developing markets, payment infrastructure such as cash-in-cash-out networks may also extend the reach of digital financing.

Universally-available, reliable, secure, private, unique digital IDs are critical to enabling people to access digital finance. Core to enabling people to realize value from the internet is their ability to validate and share their identity and their data when they need to, and to keep it private when they don’t. Robust ID systems are critical to preventing identity theft and fraud, reducing transaction costs and improving ease of use and quality of service. Currently more than a billion people lack this basic enabler. Much is being done and has been achieved on digital ID. For example, multilateral and philanthropic institutions continue to refine characteristics of ‘good digital ID’ to avoid risks such as exclusion, fragmentation, discrimination, repressive surveillance, and fraud.

Key institutions working on digital identity:

  • Bill & Melinda Gates Foundation
  • Center for Global Development
  • Omidyar Network
  • Open Society Foundations
  • Rockefeller Foundation
  • United Nations Development Programme
  • World Bank Group’s ID4D initiative
  • World Economic Forum

Financial institutions that are already trusted data custodians and veteran risk managers are investigating how to expand access to digital identities through technology. The High Level Panel on Digital Cooperation highlighted human-centric digital IDs as a means for people to regain control over their personal data and share the data dividend.

Finally, data to inform individual, private and public financing decisions and enable innovative digital financing business models must be available. For finance to address SDG challenges requires access to personal, financial, socio-economic, and environmental data. Sex disaggregated data is particularly important. Data sharing mechanisms that enable safe, equitable, transparent, individual-controlled access to personal data are key to building trust, developing healthy data markets and ensuring that digital financing solutions can be developed and used by all. Advancing such mechanisms might require more coordination among a broader set of national and international regulators. Digital financing requires access to data that goes beyond personal data. Access to relevant, high-quality, accessible, usable financial, socio-economic, and environmental data is critical. Open or common data pools, such as the World Bank Sovereign ESG Data Portal and open data standards can facilitate access to data.

Overview of this Element




Core Digital Foundations


Accelerated investment in citizen-centric digital foundations, that must include:

  • Universal, affordable, accessible connectivity
  • Universal, secure, private, portable digital IDs
  • Open interoperable payment and data networks that encourage innovation and reduce market concentration
  • Citizen-controlled, personal data, and access to decision-relevant SDG data

Next steps

Priority actions should include:

  1. Accelerate existing investment programs in digital infrastructure, particularly leveraging COVID-19 stimulus-related learning and investments.
  2. Converge on standards for a ‘good’ digital ID and relevant certification and safeguards.
  3. Extend data governance discussions to a broader set of regulators, including financial, telecom and data regulators, competition and tax authorities and key market players.
  4. Develop comprehensive data privacy and protection legal frameworks.
  5. Develop a country-based index that provides visibility on, and supports systematic planning for, citizen-centric, inclusive and open market qualities of digital foundations.
Institutions for Integrating SDGs into Digital Financing
Developing Capability

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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 financingExisting 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





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




Sustainable Digital Financing Ecosystems


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:

  1. Integrating SDG goals into financial inclusion, digital economy, and digital finance strategies and planning.
  2.  Build SDG-related guidance and incentives into fintech innovation hubs and communities.
  3. Strengthen awareness by central banks and financial regulators of the linkage between SDGs and digital financing, drawing SDGs into regulatory sandboxes.
  4. Establish a platform for financial players and private sector to discover, test, invest in and consume SDG-aligned digital financing innovations.
  5. Build and converge on a common framework for assessing the alignment of digital financing developments with SDG priorities.

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.


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