Decade Of Action... Or Lost Decade?

Photo: JonoEramus/stock.adobe.com

OPEC Fund Quarterly: Our organizations signed a Memorandum of Understanding in late March to collaborate on sustainable financial solutions. What are your goals? 

Preeti Sinha: This decade will be remembered in one of two ways – either as the decade of action where we delivered on the Sustainable Development Goals (SDGs) for the world’s least developed countries (LDCs), or the lost decade of development. What will make the difference is whether we can deliver sustainable finance at scale for the communities and geographies where the development needs are greatest. Our expectation is that we can leverage our core competencies to ensure that we can collectively deliver and accelerate SDG achievement for the LDCs, which we see as the frontier markets of today and the growth markets of tomorrow. 

OFQ: Where do you see complementary areas of work between our organizations and what are your priorities? 

PS: The UNCDF complements traditional grants and technical assistance with a capital mandate unique to the UN system that enables us to use financing capabilities and instruments, including loans, guarantees and blended finance across areas of technical expertise. As we look to the future of our collaboration, the capital financing of the OPEC Fund alongside the unique development hybrid nature of the UNCDF can collectively scale-up innovative finance instruments and projects with both commercial and development potential that will accelerate SDG achievement in the areas where development needs are greatest. 

OFQ: How did the COVID-19 pandemic influence your work and what will be the medium- and long-term impacts? 

PS: The worst impacts of COVID-19 were most likely to be experienced by the most vulnerable populations. When COVID-19 first emerged, the UNCDF had to quickly pivot in order to deploy its tools and services in favor of the markets we support, while also continuing to provide essential contributions to SDG achievement. 

We partnered with digital financial service providers and public sector organizations to tailor digital solutions that provided benefits and services to millions affected by the pandemic. We quickly repurposed our programs and launched an e-platform to deliver COVID-19 emergency grants to local levels of government – creating a financing platform that could provide liquidity in days or weeks versus months or longer. And we restructured loans to enable borrowers to withstand the harsh economic impacts of the COVID-19 pandemic. 

FQ: In your commitment to the delivery of the SDGs you are especially targeting SDG 1 – No Poverty. Can you report progress or have recent developments led to a reverse? 

PS: Despite all the challenges we were still able to advance the vision of the UNCDF, namely for LDCs to be able to access and leverage the development impact of capital to enable sustainable and inclusive economic growth and to accelerate achievement of the SDGs. In 2021, the UNCDF worked with partners to provide inclusive financial and other digital solutions to over 3 million people in 35 countries; supported scalable initiatives in 588 local governments in 42 countries to enhance their subnational financial systems, completed 390 localized strategic investments, and issued 10 new loans and guarantees in 4 countries, expanding our investment portfolio to 31 loans and guarantees. The UNCDF also disbursed a total of US$37 million in catalytic grants in support of local investments and inclusive finance and digital service provision, which together unlocked US$89 million in direct and catalytic financing. 

OFQ: What if we fail to deliver the SDGs by 2030? 

PS: The vision of a world where the SDGs will have not been achieved is, actually, a clear one: it will be a world where billions of people will continue to live in extreme poverty; where climate change results in more climate disasters that yield social, environmental and economic harm; where women and girls continue to experience the structural impediments that prevent them from having a fair opportunity at economic agency; and where entire communities will be left behind by the same global financial architecture that has traditionally underserved them. To the point, we know exactly what the world will look like if the SDGs are not achieved, which is precisely why success is the only option. 

It is also worth remembering that the SDGs have been ratified by every member country of the United Nations. This speaks to the power, potential and critical importance that the SDG agenda represents. 

OFQ: What role does the energy transition play in your work? 

PS: Energy transition is a major driver of our work. Our approach to energy has traditionally been to capitalize the clean energy value chain, as well as to scale the clean energy missing middle, i.e. the gap between idea and reality. For the UNCDF, success in these efforts means more than advancing clean energy and supporting climate mitigation. It means providing effective, affordable off-grid energy access in last mile markets to support economic growth, including for productive use. It also means advancing not just financial inclusion, but also financial health, since we leverage Pay-As-You-Go (or Pay-Go) systems to support access to energy as well as access to credit. 

OFQ: We see a surge of inflation in many economies. Does this also affect the countries where you work and what can be done about it? 

PS: Food and energy inflation, alongside supply constraints, are expected to drive a temporary increase in extreme poverty, adding to the 121 million additional people that fell into acute food insecurity last year. Ultimately, inflation will be particularly harsh towards those who have been traditionally underserved by the global financial architecture. The best thing we can do is to pursue our mission with a specific eye towards strengthening financing mechanisms and systems for structural transformation in LDC markets. 

OFQ: What role does the empowerment of women play in your work? How do you support equality in and with your projects? 

PS: For the UNCDF promoting women’s economic empowerment stands for creating equal economies, where every woman has equal access, equal agency and equal leadership within her community. We are committed to integrating a gender lens throughout our programs and operations. Our gender strategy is focused on catalyzing additional flows of private and public capital into investments that positively impact women. Our financial instruments – namely loans, guarantees, bonds, blended instruments and grants – sit at the center of this approach. Overall, the UNCDF’s investment instruments, products and vehicles support programs focused on gender equality and women’s economic empowerment. Programs can be UNCDF-initiated but are more often partner-driven or co-developed with partners, including the OPEC Fund. 

OFQ: Your development model is built on using capital as the fuel of development. Is this model still sustainable or does the world need new approaches to establish more equal societies and more sustainable growth? 

PS: The COVID-19 pandemic spurred the largest level of Official Development Assistance (ODA) in recorded history – over US$161 billion. While this is a substantial amount of funding, it is not enough to fill the SDG finance gap, which is in the trillions. The point is that without private capital, we will not be able to fund the finance solutions that can truly deliver sustainable development at global scale. 

But this is not a binary scenario either. In the development space, we often hear the term billions to trillions. This is in reference to the need for the billions in ODA to catalyze the trillions in commercial capital and private finance. Concessional capital in the form of ODA can play an essential role in de-risking investments and projects to make them more palatable for commercial finance. 

Blended finance is a signature tool of the UNCDF. If you look across all our priority areas the common thread is blended finance. In all these areas we are relying on our grant funding, our technical assistance, our expertise in innovative finance, as well as our on-balance sheet and off-balance sheet investment portfolios to play a catalytic role in unlocking private capital. 

Through our partnership with the OPEC Fund we will be able to deliver this value at precisely the right time to do so – when we still have time to ensure that this decade does meet the expectation of serving as the decade of action for the implementation of the SDGs. 

Factfile: UNCDF 

The UN Capital Development Fund (UNCDF) makes public and private finance work for people in the world’s 46 least developed countries. The UNCDF offers last mile finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. The UNCDF works through inclusive digital economies, local transformative finance and investment finance.  

Profile: Preeti Sinha 

Preeti Sinha was appointed Executive Secretary of the UN Capital Development Fund (UNCDF) in February 2021. She has a 30-year track record associated with raising and managing institutional public and private development capital, serving most recently as CEO of FFD Financing for Development Sàrl, a specialist development finance firm in Geneva. Ms. Sinha graduated from the Harvard Kennedy School of Government Executive Education program and holds a Master’s from the Yale School of Management, USA. She graduated with Honors from Dartmouth College, USA in Economics and Computer Science.