Financial Transparency Coalition

The global financial and economic crisis has accelerated vast transformations in the current landscape of development finance. While ODA budgets are increasingly under threat, public development finance is increasingly being used to leverage private financial resources. This is taking place at a time when the patterns in private flows are swiftly changing – including through the increasing prominence of capital flows from emerging economies, and the changing landscape in global finance in the wake of the global crisis.

This context has, in the last two years, triggered the emergence of a new and controversial trend where private finance and the private sector in general are increasingly prominent in public development finance and policies. This comes from the perception that private sector development and – in particular – deepening developing countries’ financial sectors is a key engine for “inclusive growth.” Moreover, public development finance is increasingly using private financial intermediaries to (allegedly) reach out to poor and small businesses, and to leverage additional financial resources from private investors and financial markets in general.

Several concerns have been flagged about this trend which has been depicted by some as the ultimate financialisation of development finance, following a general trend which the global crisis has not yet managed to reverse. These concerns range – among others – from the lack of clarity on how this new turn in development finance will support positive development outcomes; its strong bias towards promoting Northern private capital flows; the absence of appropriate public regulation to manage their negative social and environmental impacts, including tax evasion and their potential to trigger higher debt levels in developing countries; or the abuse of financial intermediaries and new financial actors by development finance institutions to support private investments in the South.

In its 2011-2013 strategic plan Eurodad identified the issue of responsibility and development effectiveness of North-South private flows, and specifically private flows which count on some type of public support or guarantee, as a priority for the network in the coming years. The biennial International Conference which took place on 19 and 20 May 2011 in Rome provided a first opportunity to discuss thoroughly the concerns outlined above and lay the ground for future Eurodad work and positioning in this area.

The conference, co-organised by Eurodad member CRBM, gathered 101 participants from 31 countries, including 24 from the South. The main aims of the conference were to share knowledge and build capacity in order to increase understanding of the trends described above; identify common ground to position Eurodad future work according to priorities identified in the Eurodad 2011-2013 strategic plan; seek views from Southern partners; and identify linkages with other issues including those in the Eurodad work programme or covered by other CSO networks in order to forge wider alliances.