Financialization in development projects and new modes of governance

Abstract

In the process of achieving the United Nations Sustainable Development Goals (SDGs), many mechanisms have been created to secure the increased involvement of international private funds. The growing financialization of development requires that one understands the impact of power relationships between all stakeholders, illustrated in this chapter by the example of Development Impact Bonds (DIBs). What does the governance of such mechanisms look like? What are the implications of DIBs for the design and implementation of development programs? Through a review of the literature published by actors involved in the promotion and application of DIBs, I examine their contribution to the growing financialization of development programs. DIBs and the actors supporting them promise to solve so-called traditional issues in development projects by focusing on financial returns and a balance of power centered on the financial actors involved. Here I argue that DIBs and the narratives behind them seem to push a trajectory of governance that revolves more and more around financial motivations (supporting the dominant role of financial investors and the market in development governance). It is marking an evolution in the way stakeholders involved in such programs interact. In the design of this governance, the idea of the DIB system is based on the enforcement of an investor’s viewpoint, reformulating the notion of poverty as a problem to be invested in and bringing to the forefront the question of how to organize the repayment of funds that have been advanced, along with a return on investment for the investor.