A sense of insecurity

The growing push for using securitisation markets for development finance is fraught with multiple dangers ahead. Rick Rowden sounds a warning.

The international development finance club has been increasingly experimenting with various types of “blended finance” mechanisms in recent years. The aim is to entice the huge resources of private finance to invest in development by reducing the risks they face. The claimed mission is to help developing countries meet the internationally-agreed Sustainable Development Goals (SDGs) by 2030. Unfortunately, the effort relies on scaling up the use of some of the same financial innovation mechanisms that got global finance into trouble in the lead up to the 2008 crash. Given this track record, the prospects don’t look good.

The latest push in this direction came in October 2018 with the release of the report from the so-called Eminent Persons Group advising the G20 on finance. The report, Making the Global Financial System Work For All had a noble ambition you would think. It called for two major overhauls of the international development financing system:

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