Innovative financing

Innovative financing refers to a range of non-traditional mechanisms to raise additional funds for development aid through "innovative" projects such as micro-contributions, taxes, public-private partnerships and market-based financial transactions.

As of the beginning of 2010, most of the existing innovative financing mechanisms were allocated for the health care sector in developing countries. Innovative financing mechanisms have already raised US$2 billion over the past 3 years.

The concept "innovative financing for development" was first mentioned and introduced at the International Conference on Financing for Development in 2002. The Conference led to what is now called the Monterrey Consensus where signatories acknowledged "…the value of exploring innovative sources of finance provided that those sources do not unduly burden developing countries." Innovative financing mechanisms were born out of a need to reach the Millennium Development Goals (MDGs) that 192 United Nations member states and at least 23 international organizations agreed to achieve by the year 2015. They include reducing extreme poverty, reducing child mortality rates, improving maternal health and combating HIV/AIDS, Malaria and other diseases such as Tuberculosis. So far, most donor states have failed to meet their 0.7% commitment from the Monterrey Consensus of their Gross National Income (GNI) dedicated to Official Development Assistance. Furthermore, in most developing countries the budget allocated for the social, and especially the Health sector, has been insufficient as it fails to meet the 15% Gross National Product (GNP) requirement dedicated to the Health Sector stated in the Abuja declaration of African leaders in 2001.

Innovative financing mechanisms emerged at the beginning of the twenty-first century as alternative mechanisms to help bridge the development financing gap.

Innovative financing mechanisms can be assessed regarding the following principles:

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