Who will Finance the Modern Development Enterprise?

By Karl Hofmann, PSI President and CEO

Fiscal pressures in the US and Europe mean that genuine political courage is required more than ever to defend investments in development. There certainly are hopeful signs still — the US Senate recently overwhelmingly rejected a proposal by presidential hopeful Rand Paul to slash US development assistance by 50 percent. The UK has retained its ambitious .7 percent of GDP target for aid despite years of austerity. But few development practitioners feel as though there are days of plentiful public financing ahead. What does this mean for institutions that aspire to be Modern Development Enterprises? Raj Shah coined this phrase to describe USAID’s trajectory under his leadership, but to become one is a worthy objective for all of us working to channel public resources to address the causes and effects of extreme poverty, disease and misery. For PSI, we see four pathways to greater financial sustainability and longer term impact of our work:


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NEW PHILANTHROPISTS
We sense a palpable hunger on the part of entrepreneurs and the recipients of the vast inter-generational wealth transfer now underway, to find impactful social investment opportunities. This new generation of givers demands also to be shapers. This is not a simple check-writing generation, nor one thinking about bequests. The new philanthropists are co-creators, aiming to understand, influence and co-own the development outcomes they wish to finance. The Modern Development Enterprise will have offerings and approaches that speak to this new generation of philanthropists.

page_32-04CORPORATIONS
The era of corporate social responsibility is ceding to the era of shared value and joint profit-loss calculations. Corporations are not perfect but they are great at delivering value to consumers and to shareholders — if not, they cease to exist. The Modern Development Enterprise can find synergies with corporations in terms of scale, innovation and business operations. The modern corporation often looks with interest at the “marketplace” of development NGOs because it is the genuine base of the global pyramid where corporations will find their future growth.

page_32-05INNOVATIVE FINANCING
Much is written about impact investing, development impact bonds, social impact bonds and other forms of performance based financing. The reality is that rhetoric does not always match our aspirations, but the Modern Development Enterprise is working to unlock this source of funding, where measurable social return can partner with respectable financial return and yield new impact for all parties.

page_32-06THE GLOBAL SOUTH
Financial sustainability is on the lips of most donors these days. Our redoubled efforts to eliminate extreme poverty in the world — the underlying premise of the MDGs, the explicit policy of the USG, and the clarion call of the draft SDGs — demand that domestic resources in the developing world play a bigger role than they have up to now. Modern Development Enterprises will be in the position to offer cost-effective health and development solutions to their host country governments, and must be positioned to find funding from among those lower-income clients and consumers who are direct recipients of their services. Universal Health Coverage does not mean Universal Free Coverage. It means accessible and affordable coverage — health for all, without undue financial hardship. The Modern Development Enterprise will be a part of this evolution within host countries in the Global South. Modern Development Enterprises are working on all these fronts to increase their impact, enhance their relevance, and meet the development challenges of the 21st century.


Author
Karl Hofmann, President & CEO, PSI

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