Finance Initiative Research Articles

AFI Innovative Regulatory Approaches Toolkit

Countries and economies around the world are seeking ways to foster their digital finance and financial technology (‘FinTech’) ecosystems to better support financial inclusion and sustainable development. At the core of such efforts are supporting the development of new products and services, bringing more competition and consumer choice into their financial systems and increasing savings and investment to support both individual and community development. At the same time, the potential of innovation must also be balanced against potential risks, in particular financial stability, consumer protection and market integrity concerns. In order to support these objectives, regulators are developing new regulatory approaches, including innovation hubs and regulatory sandboxes (which we collectively term, ‘innovation facilities’) as well as new policy frameworks and the use of technology for regulatory and supervisory purposes (‘RegTech’ and ‘SupTech’). Innovation facilities are created to offer direct and indirect support to novel digital finance and fintech initiatives in a controlled environment. They are underpinned by foundational infrastructure, including mobile and other communications systems especially internet access, digital identification systems (in particular sovereign systems), frameworks to encourage simplified and widespread opening of financial and mobile money accounts, and interoperable electronic payment systems. All of the above enable a range of e-government services as well as an environment for wider commercial development, supporting financial inclusion and progress towards the UN Sustainable Development Goals (AFI 2018). Such foundational infrastructure works best in the context of appropriate balanced and proportional regulatory approaches to innovation, digital finance and FinTech. This includes the general efficiency of the legal system, human capital development, support for research and development, access to information, and availability of financing. More narrowly, it also depends on the use of technology by regulators and supervisorsthemselves (RegTech and SupTech) in order to better achieve regulatory objectives, enhance competition and efficiency (AFI 2020a). This Toolkit provides a structured approach to the implementation considerations of innovative regulatory approaches including innovation facilities for authorities with jurisdiction over financial products and services (which we term ‘Regulators’). It aggregates a variety of resources and case studies to provide guidance for Regulators seeking to answer the following questions: 1. What are innovation facilities? 2. What are the pre-requisites for effective innovation facilities? 3. When should Regulators consider implementing an innovation facility? 4. How to implement an innovation hub? 5. How to implement a regulatory sandbox? 6. How to steer efforts towards regional cooperation in innovation facilities? This Toolkit aims to complement existing guidance on innovative facilities by the Alliance for Financial Inclusion and other stakeholders through providing additional practical evaluation tools. In using this Toolkit, regulators from the AFI network and beyond are invited to employ the attached workbook, which provides self-assessments and exercises to help guide their decision-making process.

Momentum for policy change: alternative explanations for the increased interest in results-based financing in Uganda

ABSTRACT Background Results-based financing initiatives have been implemented in many countries as stand-alone projects but with little integration into national health systems. Results-based financing became more prominent in Uganda’s health policy agenda in 2014–2015 in the context of the policy imperative to finance universal health coverage. Objective To explore plausible explanations for the increased policy interest in the scale-up of results-based financing in Uganda. Methods In this qualitative study, information was collected through key informant interviews, consultative meetings (2014 and 2015) and document reviews about agenda-setting processes. The conceptual framework for the analysis was derived from the work of Sabatier, Kingdon and Stone. Results Four alternative policy arguments can explain the scale-up of results-based financing in Uganda. They are: 1) external funding opportunities tied to results-based financing create incentives for adopting policies and plans; 2) increased expertise by Ministry of Health officials in the implementation of results-based financing schemes helps frame capacity accumulation arguments; 3) the national ownership argument is supported by increased desire for alignment and fit between results-based financing structures and legitimate institutions that manage the health system; and 4) the health systems argument is backed by evidence of the levers and constraints needed for sustainable performance. Shortages in medicines and workforce are key examples. Overall, the external funding argument was the most compelling. Conclusion The different explanations illustrate the strengths and the vulnerability of the results-based financing policy agenda in Uganda. In the short term, donor aid has been the main factor shifting the policy agenda in favour of results-based financing. The high cost of results-based financing is likely to slow implementation. If results-based financing is to find a good fit within the Ugandan health system, and other similar settings, then policy and action are needed to improve system readiness.

Re-Contextualising and Re-Defining Public-Private Partnerships

The fact that there is limited agreement on the exact nature of Public-Private Partnerships (PPPs) has led to variations in the way the concept has been defined or even understood. This paper looks at the several reasons for the multitude of meanings given to the concept. Also, PPPs have continued to evolve over the years and after four decades of infrastructure PPPs in its present form, there is now an empirical and therefore better understanding of what PPPs are capable of delivering and what is truly beyond the concept. Based on this knowledge, the paper advises on how the concept should shape up in the future. Keywords: public-private partnerships, PPP, Private Finance Initiative, infrastructure

Grenfell’s provenance: Private finance initiatives and the slow violence of an historic event

Grenfell’s provenance: Private finance initiatives and the slow violence of an historic event

‘With Whom We Talk?’ Drawing Regions in 21st Century Africa

"The African continent inherited borders drawn by foreign actors for centuries, with a limited influence exerted by its internal political structures. This impacted its development across decades, acting as a contributing factor to economic, social and political conflicts, some of them resulting in further divisions in time: new states emerged, while the federal structures developed within some states remain unstable. In this paper, the author investigates the current regional groupings of states established in different African frameworks in an attempt to answer the question “how external actors influence and legitimize the development of regions” in 21st century. From a functionalist perspective, it explores the motives for the formation of a wide range of regional integration and cooperation organizations. The case study of G5 Sahel, an institutionalized regional arrangement focused on security and development of its member states, is analyzed as an arrangement emerged with support from France and the European Union. The case study analysis trails the cooperation with these two foreign actors with the G5 Sahel member states in the five years, focused on evolution, financing and joint initiatives – including to what extent these contributed to consolidation of the regional borders. Keywords: region-building, G5 Sahel, regional cooperation, European Union, development cooperation "

Exploring Private Finance Initiative Implementation Issues in Malaysia Construction Projects: A Way Forward

Private Finance Initiative (PFI) was introduced in 2006 aimed at achieving value for money. Nevertheless, most of the PFI projects in Malaysia are currently facing difficulties in meeting the expectation. Therefore, a brainstorming workshop involving 69 PFI practitioners from diverse backgrounds was conducted to investigate the implementation issues at the operational level and strategies towards achieving the project goals. The results showed that skills and knowledge, procedures and implementation, challenges in project management, and conflict on documentation were among the issues debated among workshop participants. “Loopholes” were identified to facilitate the improvement of the PFI project implementation in Malaysia. Keywords: Operational Performance; Private Finance Initiative (PFI); Issues; Strategies. eISSN: 2398-4287© 2020. The Authors. Published for AMER ABRA cE-Bsby e-International Publishing House, Ltd., UK. This is an open access article under the CC BYNC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer–review under responsibility of AMER (Association of Malaysian Environment-Behaviour Researchers), ABRA (Association of Behavioural Researchers on Asians) and cE-Bs (Centre for Environment-Behaviour Studies), Faculty of Architecture, Planning & Surveying, Universiti Teknologi MARA, Malaysia. DOI: https://doi.org/10.21834/ebpj.v5iSI3.2531

Greening the Financial System in USA, Canada and Brazil: A Panel Data Analysis

Each country designs its own scheme to achieve green financing and, in general, credit is considered to be a fundamental source of greening financial systems. The novelty of this study resides in that we examined green financing initiatives in USA, Canada and Brazil by focusing on major components of the financial systems before, during and after the 2008 world financial crisis. By means of panel data analysis conducted on observations ranging across the period 1970–2018, we investigated variables such as domestic credit from banks, domestic credit from the financial sector, GDP, N2O emissions, CO2 emissions and the value added from agriculture, forest and fishing activities. According to our findings, domestic credit from banks was insufficient to achieve green financing. Namely, in order to increase economic growth while reducing global warming and climate change, the financial sector should assume a bigger role in funding green investments. Moreover, our results showed that domestic credit from the financial sector contributed to green financing, while CO2 emissions remained a challenge in capping global warming at the 1.5 °C level. Our empirical study supports the idea that economic growth together with policies targeting climate change and global warming can contribute to green financing. Over and above that, governments should strive to design sustainable fiscal and monetary policies that promote green financing.

Climate Change: EU taxonomy and forward looking analysis in the context of emerging climate related and environmental risks

Climate change is causing substantial structural adjustments to the global economy. Several sectors, such as coal and steel, are undergoing severe problems related to the inevitable transition to a low-carbon economy, while others such as renewables and new environmental adaptation technologies are benefiting substantially. In this context, regulators are beginning to intervene on the legislation, while investors, customers and civil society are looking for alternatives to mitigate, adapt and make these issues more transparent. This article aims to analyze the impact that these changes will inevitably have on banks' balance sheets, introducing new risks but also opportunities. The final purpose is to help banks integrate climate risks into their organizational framework and to provide guidance on the implementation of the recommendations published by the Task Force on Climate-related Financial Disclosures (TCFD) within the broader Financial Stability Board (FSB) objectives and the UN Environment Finance Initiative (UNEP FI). Starting from a long-term perspective, the work suggests considering climate risk as a financial risk, overcoming traditional approaches that focus on reputational risk. This change implies the integration of climate change risk into the logic of Risk Management (Credit, Market and Operational risks) and a consequent sharing of responsibilities with the structures of Corporate Social Responsibility (CSR). The TCFD recommendations urge banks to use forward looking scenario analyzes, including stress tests, to evaluate and disseminate the "actual and potential impacts" of climate-related risks and opportunities, suggesting in particular to consider the consequences in terms of two categories of risk: physical and transition risk

Can artificial intelligence, RegTech and CharityTech provide effective solutions for anti-money laundering and counter-terror financing initiatives in charitable fundraising

PurposeArtificial intelligence has had a major impact on organisations from Banking through to Law Firms. The rate at which technology has developed in terms of tasks that are complex, technical and time-consuming has been astounding. The purpose of this paper is to explore the solutions that AI, RegTech and CharityTech provide to charities in navigating the vast amount of anti-money laundering and counter-terror finance legislation in the UK; so that they comply with the requirements and mitigate the potential risk they face but also develop a more coherent and streamlined set of actions.Design/methodology/approachThe subject is approached through the analysis of data, literature and, domestic and international regulation. The first part of the paper explores the current obligations and risks charities face, these are then, in the second part, set against the examination of potential technological solutions as of August 2020.FindingsIt is suggested that charities underestimate the importance of the nature and size of the threat posed to them, this is significant, as demonstrated, given the growing size and impact of the sector. Technological solutions are suggested to combat the issues charities face.Originality/valueThe study is original because it is the first to create the notion of CharityTech and to specifically explore what technological advances can assist charities in meeting the regulatory compliance challenge.

Finance for nature: A global estimate of public biodiversity investments

Parties to the United Nations Convention on Biological Diversity (CBD) will meet at the 15th Conference of Parties (COP 15) to carve out a post-2020 framework for global biodiversity conservation. Finance will be among the priority concerns. No global estimates of public biodiversity investments are in the peer reviewed literature. The methodology developed by the Biodiversity Finance Initiative (BIOFIN) provides a means for countries to account systematically for their biodiversity expenditures. Importantly, budget lines that intentionally, but secondarily, affect biodiversity outcomes are assigned a percentage at which they can be attributed to biodiversity. A sample of thirty countries facilitated the construction of a panel to predict public biodiversity investments at a global level. Here we show that global public biodiversity investments have increased steadily to an average of US$121 billion invested annually from 2008–2017, or 0.19–0.25% of global GDP. Our data not only indicate an increasing trend in total biodiversity investment, but also an increase in the percentage of total public domestic investment dedicated to biodiversity.

Do socially motivated self‐help groups perform better? Exploring determinants of micro‐credit groups’ performance in Eastern India

AbstractGroup‐based micro‐credit initiatives, as part of the broader social and solidarity‐based finance initiatives, have gained prominence over the past decade, especially in developing economies like India. Lending to the poor, especially women, through micro‐credit groups, are significantly associated with the utilization of commons. Apart from their financial operations, self‐help groups promote social empowerment activities and collective action following a dual bottom‐line approach. However, the causal role of the group's motivation towards pursuing social objectives has not been explored in the past. The present study, therefore, investigates the interlinkages between the group's intrinsic motivation and efficiency using an innovative two‐stage double bootstrapped DEA‐based methodology. Results from the study affirm that apart from traditional factors like maturity, accessibility and group management, the motivation of the group is a crucial determinant of social efficiency. Additionally, the group's loan‐to‐savings ratio and receipt of cash payments significantly affect its long‐term financial sustainability. Micro‐credit groups cannot contribute sustainably as a viable alternative to traditional means of access to credit if it merely offers innovative forms of financing and consumption. They need to be socially aligned to serve the community better and contribute to the group's overall performance and galvanize community‐based resource management.

Ranking buffel: Comparative risk and mitigation costs of key environmental and socio-cultural threats in central Australia.

Changed fire regimes and the introduction of rabbits, cats, foxes, and large exotic herbivores have driven widespread ecological catastrophe in Australian arid and semi‐arid zones, which encompass over two‐thirds of the continent. These threats have caused the highest global mammal extinction rates in the last 200 years, as well as significantly undermining social, economic, and cultural practices of Aboriginal peoples of this region. However, a new and potentially more serious threat is emerging. Buffel grass (Cenchrus ciliaris L.) is a globally significant invader now widespread across central Australia, but the threat this ecological transformer species poses to biodiversity, ecosystem function, and culture has received relatively little attention. Our analyses suggest threats from buffel grass in arid and semi‐arid areas of Australia are at least equivalent in magnitude to those posed by invasive animals and possibly higher, because unlike these more recognized threats, buffel has yet to occupy its potential distribution. Buffel infestation also increases the intensity and frequency of wildfires that affect biodiversity, cultural pursuits, and productivity. We compare the logistical and financial challenges of creating and maintaining areas free of buffel for the protection of biodiversity and cultural values, with the creation and maintenance of refuges from introduced mammals or from large‐scale fire in natural habitats. The scale and expense of projected buffel management costs highlight the urgent policy, research, and financing initiatives essential to safeguard threatened species, ecosystems, and cultural values of Aboriginal people in central Australia.

Promoting a private finance initiative and regenerating public facilities by local platforms: a case in Japan

Promoting a private finance initiative and regenerating public facilities by local platforms: a case in Japan

VALUE FOR MONEY IN PUBLIC-PRIVATE PARTNERSHIP PROJECTS IN THE FIELD OF STREET LIGHTING IN THE REPUBLIC OF SERBIA

Public administration reform, better known as the New Public Management - NPM, which began in the mid-1970s, had a key impact on the development of modern public administration. The NPM emphasizes the economic values of public administration, to the detriment of its other values. Public Private Partnership- PPP is one of the basic elements of NPM doctrine. PPP is a partnership between the public and private sector that aims to provide a service traditionally provided by the public sector. An integral part of every PPP is the Value for Money methodology. The “Value for money”- VfM method emerged in this process of public administration reform, first in the UK. The document of the British Government Private Finance Initiative (PFI) from the year 1992, presented the basis for the creation of a new so-called “Venture”, which at that time was called a joint venture, and which is today known as PPP. PPP is a relatively new institute that has existed in the Republic of Serbia since 2011. In this paper, we will deal with the application of the VfM methodology in PPP projects related to street lighting in the Republic of Serbia, and try to give answer about social and economic justification of PPP and potential economic savings that can be achieved in the public sector through the implementation of PPP. At the present time, when there is more and more talk about the need for environmental protection, sustainable development and energy efficiency, PPP projects can have an increasing importance in this area. For this reason, we have limited the application of VfM methods in PPP projects in the Republic of Serbia only to street lighting projects which provide the mentioned goals.

A Qualitative Analysis of Public Private Partnership (PPP) Project Contracts in the Roads Sector. A Contextual Elucidation of Uganda National Roads Authority (UNRA)

Public Private Partnership Projects continue to gain momentum across the world. Governments in developing countries now find PPP projects as an alternative to conventional financing and providing public infrastructure. Guided by the principal agency theory, this study examines different types of PPP Project contracts in the roads sector with specific focus on the Uganda National Roads Authority (UNRA). Contracting out of projects in the roads sector has led to increased costs of road construction in Uganda. The main objectives of this study are to examine the relevance of the principal-agency theory to the adoption of PPP project contracts by UNRA and establish the types of PPP Project contracts suitable for adoption by UNRA. Data was collected through literature survey and interviews. Study findings revealed that Principal-Agency theory is relevant to adoption of PPP project contracts and that UNRA intends to use mainly management PPP contract. It is concluded that principal-agent relationship is very crucial if the execution of PPP Project contracts is to be a success and that there is a very high chance that UNRA is planning to also adopt the use of Build, Own and Transfer (BOT) PPP Project contract in the roads sector. The study recommends that UNRA should ensure a cordial relationship with private parties and not rely solely on management PPP contracts. The organisation should explore other PPP project contracts such as Private Finance Initiative, Leasing, Design Build, Build Operate and Transfer, and then Design Build and Finance. The choice of contracts should always be based on affordability and value for money.

Ban, Boom, and Echo! Entrepreneurship and Initial Coin Offerings

Regulatory spillovers occur when regulation in one country affects either the expected regulatory approach and/or entrepreneurial finance markets in other countries. Drawing on institutional theory, we investigate the global implications of a regulatory spillover on entrepreneurship. We argue that regulatory spillovers have both short- and long-term effects on the number and quality of entrepreneurial finance initiatives such as Initial Coin Offerings (ICOs). Based on a large-scale sample of ICOs in 108 countries, we find that a regulatory ban of ICOs in one country causes a short-term increase in the number of low-rated ICOs in other countries and a long-term drop in the number of ICOs, especially low-rated, which increases the average ICO rating. That is, a restrictive regulation triggered a process of increased market selection.

Financing the Transition to Sustainability: SMART Reform Proposals

Financial markets are fundamental to a successful transition to sustainable market activity. Addressing unsustainable financial practices is vital to realizing the EU’s commitments on sustainability, as expressed for instance in the European Green Deal of December 2019. Yet, investments in unsustainable projects – routinely funded by large EU banks – have not been addressed sufficiently by EU financial regulators, in spite of the introduction of the EU Sustainable Finance Initiative (SFI) in 2018. The SFI lacks a systematic integration of sustainability factors in the actions proposed, limiting focus on selected environmental issues, especially climate change. It also relies too much on the existing incentive structures for private actors in financial markets. Such reliance is unlikely to deliver sufficient sustainable investments. On the other hand, the EU has made considerable progress regarding to prevent ‘greenwashing’ of financial products, and the development of consultative processes and expert groups speaks of a genuine commitment to deliver, which may be realized in the present EU Parliament and Commission. However, the legitimacy and effectiveness of this EU action needs to be assured, and there is a danger the SFI will not achieve its goals, due to limitations in the proposals under it. In this Report the SMART Project presents its analysis and reform proposals on regulation governing the funding of investments both in the EU and between the EU and third countries. The regulation discussed concentrates firstly on the banking system, including central banks and private banks but also private and public institutional investors, as much of the short-term and narrow pressure for maximization of returns to investors comes from the investment supply chains of financial markets and institutional investors. The SMART Project also proposes revision of the European Central Bank mandate and operations, guidelines for bank risk assessment, and regulation of banks. Secondly, the SMART Project proposes broadening and strengthening the SFI with proposals of amendments in the recent Taxonomy, Disclosure and Benchmarks Regulations to cover all economic activities and financial instruments and all market actors, both public and private, obliging them take into consideration sustainability in their investment decisions as well as benchmarks provided by index and benchmarks providers. In the final part of the Report the increased focus on foreign investments outside the EU is discussed.

A New Chinese Economic Order?

ABSTRACT China is incrementally developing a new, decentralized model of trade governance through a web of finance, trade, and investment initiatives involving memorandum of understanding, contracts, and trade and investment treaties, supported by an indigenous innovation policy that is transnational in its reach. In this way, China could create a vast, Sino-centric, legal order in which the Chinese state plays the nodal role. It is a hub and spokes model, with China at the hub. In this article, we first examine China’s export of an infrastructure-based development model, implemented through Chinese state-owned and private enterprise investments and commercial contracts (Part B), before turning to China’s development of a complementary web of free trade and investment agreements (Part C), and an indigenous innovation policy (Part D). The paper theorizes and empirically traces how these Chinese initiatives shape the evolving ecology of the transnational legal order for trade.

Dynamics of Organisational Capability of Japanese Construction Firm towards Open and Service Innovation through PPP/PFI arrangement

<p>This study examined the influence of Public–Private Partnership (PPP) — or, more specifically, Private Finance Initiative (PFI) — arrangements in relation to open and service innovation in construction firms in Japan. The expectation of the PPP/PFI procurement arrangement is that Japanese construction firms will provide a broader range of services (service innovation) through expanded cooperation with various other firms (open innovation) compared to the conventional procurement scheme.</p><p>Our in-depth case study of a Japanese construction company shows the dynamics of project-based firms' capability accumulation through a PPP/PFI arrangement. The study identified a model of capability development for construction firms towards service and open innovation. It consists of three organisational capabilities: technological capabilities, project capabilities and collaborative capabilities. The model can be seen as an ideal approach for understanding and comparing cases of long-term capability accumulation of project-based firms, especially regarding providing services that meet the public's needs.</p><p> </p><p>Keywords: Public–Private Partnership (PPP); Private Finance Initiative (PFI); Project Capability, Open innovation; Service innovation; Construction firm</p>

Blue economy meets international political economy: The emerging picture

ABSTRACT Blue economy like green economy tries to bring to forefront the role of economic players, both state and non-state market actors, thus making it important to examine the issue from the lens of international political economy. This article defines blue economy as economic practices that seek to achieve conservation, inclusive development and sustainable use of oceans and seas as commons through poly-centric, multi-level and multi-actor interventions. Blue economy initiatives analysed here include Sustainable Ocean Business Action Platform, World Bank PROBLUE and Sustainable Blue Economy Finance Initiative. The analysed initiatives are not yet designed to appreciate the complexity involving ocean-as-commons. Moreover, the stakeholders mobilised remain concentrated in limited developed countries, mostly from Europe. Even mobilisation of market players remains limited to large companies and boutique firms specific to sustainability. This review argues that blue economy narratives and initiatives need to recognise that ocean systems being complex require poly-centric, multi-level, incremental and learning-based approaches.