How can decentralised finance drive sustainable development? An interactive story produced by IIED's Human Settlements Group highlights successful examples from the global South.
An interactive story highlighting how decentralised finance can drive sustainable development
Most development finance is highly centralised. It flows internationally from donors to recipient governments and then through various intermediaries until a small fraction of the original sum reaches the intended beneficiaries – poor communities.
But this model does not work for reducing urban poverty. Too little finance reaches the poor and, too often, the money fails to address these people's priorities.
We need an alternative approach, in which finance flows directly to funds that low-income communities can access and influence – shaping how priorities are set and money is spent. Experiences from across the global South prove that this can work and show how to make it happen.
By clicking on the diagrams, readers can see the finance system instead devised by local savings groups to help to capitalise city-scale funds that invest in projects that local communities really need, and what a mainstreamed decentralised finance system, linking local initiatives to major international donors, would look like.
The web page also contains a bubble map that illustrates the impact made by the Asian Coalition for Community Action (ACCA) programme, showing how it blends USD $11 million of donor finance with savings from local groups and some state funding to provide small-scale loans and grants to address urban poverty and encourage pro-poor upgrading of informal settlements, often in partnership with local governments.
The interactive presentation on architecture of aid describes two powerful examples of international funds that have supported community-based organisations at scale – the Urban Poor Fund International and the Asian Coalition for Community Action.
To complement the presentation, we have compiled a resource of publications, blogs and articles that over the last 26 years have helped develop support for this approach and reported on what has been achieved.