Financial services promoted to the poor despite their failure to address the causes of poverty

Anni Piiroinen

First came microcredit, then financial inclusion. Now new technologies are used to extend financial services everywhere. However, data collection by fintech companies raises significant ethical questions.

 

The quest to bring financial services to everyone has gathered force during the last decade. A new goal in international development is universal financial inclusion, in other words extending services to the 1.7 billion people that currently remain ”financially excluded”.

 

Financial inclusion requires giving access to diverse financial services to people who have been largely ignored by formal financial institutions. These services include saving, borrowing, transferring money and insurance.

 

Expectations about the potential impacts of financial inclusion are high. Many claim that it supports central development goals, such as economic growth, poverty reduction, income equality, gender equality, welfare and empowerment for the poor.

 

Proponents of financial inclusion see it as a necessary element of sustainable development, and it has been featured in the United Nations Sustainable Development Goals (SDGs) as a way to reduce poverty and hunger.

 

“Financial inclusion as a story, a solution and a project is everywhere. In every sphere of development there is an argument that financial inclusion is the missing piece that will make things fall into place,” says Sally Brooks, a researcher at the University of York.

 

Financial inclusion has been promoted by a range of actors, including the World Bank, the Bill and Melinda Gates Foundation, the Better Than Cash Alliance, the MasterCard Foundation and several private corporations. More than 90 developing countries have joined the Alliance for Financial Inclusion, which strives to help their members implement policies that support financial inclusion. The diverse group of proponents has also been joined by fintech companies providing financial technologies.

 

Many donor countries have also embrace the notion of financial inclusion, including Finland. Finnfund has invested in several foreign financial actors committed to supporting financial inclusion. Finnpartnership has also channeled funding to Finnish companies supporting and utilizing fintech systems in developing countries.

 

“Fintech and financial inclusion are current fads in development programmes. As expected, the Finnish government and the Finnish companies it supports join this bandwagon,” says Bonn Juego, a postdoctoral researcher of International Development at the University of Jyväskylä.

 

Roots in microloans

 

The idea of pro-poor financial services in itself is not new. Muhammad Yunus popularized the idea of microloans after experimenting with them in Bangladesh in the 1970s. Yunus’s now-famous idea was to offer small loans to poor people, especially women, to invest in their businesses.

 

This way people could increase their income and also create employment for others. At the same time, official microcredit lenders would enable people to avoid traditional loan sharks and their high interest rates.

 

The idea of microcredit became very popular over decades that followed, as Milford Bateman describes in their book Why Doesn’t Microfinance Work? In the 1990s important development actors such as USAID and the World Bank called for a new kind of microfinance, which would be provided by microfinance institutions (MFIs) functioning as traditional profit-seeking companies.

 

Microcredit was thus tansformed from a small, NGO-led project relying on public development funding into a commercially sustainable system.

 

“Microfinance went from being an NGO-led project to a business. These businesses became more and more business-like to the point where they became ready for incorporation into global markets,” Brooks recalls.

 

Microfinance was increasingly incorporated into mainstream financial markets. In an article titled The Financialization of Micro-Credit, Rob Aitken describes how microborrowers and their surrounding networkd were brought into the sphere of mainstream financial markets so that they became attractive investment opportunities for profit-seeking investors.

 

New financial actors and techniques like microfinance investment vehicles (MIVs) and the securitization of microcredit connected profit-seeking investoors to poor microborrowers in an unprecedented way, all in the name of development.

 

Propelled by these changes, microcredit soared to new heights in the early 2000s. Lending was growing rapidly, from USD 12.2 billion in 2004 to USD 25.6 billion in 2006, as Philip Mader points out in The Political Economy of Finance.

 

New microfinance investment funds were set up and MIVs were expanding their portfolios. 2005 was officially declared The International Year of Microcredit by the UN, and in 2006 Yunus and Grameen Bank were awarded Nobel Peace Prize “for their efforts to create economic and social development from below”.

 

Wave of criticism against microcredit

 

However, during the 2000s, microcredit was met with heacy criticism from individuals like Thomas W. Dichter, who wrote an article titled Hype and Hope: The Worrisome State of the Microcredit Movement. People who had followed the phenomenon at grassroots level were reporting that microloans were failing to lift people out of poverty.

 

Among other reasons, microcredit was failing because it was difficult to expand businesses due to the lack of demand and because loans were used to pay for everyday expenses instead of entrepreneurial activity, It was especially hard for the poorest to benefit from loans, and they could even be worse off due to high interest rates.

 

In 2011, an extensive review of existing microfinance evaluations titled What is the evidence of the impact of microfinance on the well-being of poor people? looked at existing research on microcredit and found no robust evidence of its development impacts, suggesting that the “microfinance phenomenon” had essentially been built “on foundations of sand”.

 

At the same time the downsides of commercialised microcredit were becoming increasingly clear. In 2007, the initial public offering (IPO) of Banco Compartamos, Mexico’s largest microfinance bank revealed the inequality and exploitation that characterised parts of the industry.

 

The bank had been charging extremely high interest rates from customers (sometimes over 100 percent) while reaping high profits and generously rewarding its directors and senior managers. Through its IPO the bank raised an astonishing 473,9 million dollars.

 

Another setback came in 2010 when dozens of heavily indebted farmers committed suicide in the Indian state of Andhra Pradesh, once known as the Mecca of microfinance. The reputation of microfinance institutions was tarnished and they began to appear no different from traditional loan sharks exploiting the poor to get rich.

 

Financial inclusion: microfinance rebooted

 

The growing critique did not put an end to the growth of microfinance. The strength of the microfinance agenda was proved in the aftermath of the Global Financial Crisis when neither the mounting critiques nor the greatest financial crisis since the 1930s could deter the position of microfinance. Instead, financial inclusion became a new central paradigm of international development.

 

“Just as there was quite a momentum in terms of findings that were showing how deeply flawed the microfinance model was, it reinvented itself as financial inclusion,” Brooks explains.

 

She continues to be puzzled by the way evidence against microfinance has been ignored and by the tendency in international development to forget its history.

 

“It makes you question the role of evidence in an era of supposedly evidence-based policy.”

 

Not only did the project to expand financial services survive, but its reincarnation as financial inclusion has thrived and expanded in scope. The goal is no longer to only offer credit but to promote wholesale financial inclusion.

 

In Contesting Financial Inclusion, Mader explains that the demands placed on the poor are now much higher than with microcredit originally: they should use diverse financial services, improve their financial skills and constantly assess risks around them.

 

Financial inclusion has also encouraged new actors to join the project. In addition to MFIs, the proponents of the new paradigm include large banks, technology firms and mobile network operators, for whom financial inclusion opens up new markets and business opportunities.

 

These actors form complex networks with development institutions, states and investors. What we have here is thus a project of entirely different scope than a decade ago.

 

Setting up digital rails

 

A lot of the current hype around financial inclusion concerns new financial technologies provided by fintech companies. These technologies have been key to getting financial services to new populations.

 

According to Brooks, who has been researching the rise of fintech in international development, we are currently witnessing the setting up of a new infrastructure for digital payments, or what Bill Gates has called the “digital rails”. These rails include mobile payment systems, which allow people to send money to each other through mobile phones.

 

Of course, these payment systems only work if people actually use them. Part of the project of financial inclusion has been to encourage people to use digital payments instead of cash. For instance, the UN- based Better Than Cash Alliance strives to promote the use of digital payment systems as part of financial inclusion.

 

“Cash is being framed as this kind of dark money,” Brooks describes.

 

The stakes of moving from cash to digital payments are high, especially for the companies that are able to control payment systems. When people have no choice by to use digital payment systems, there is a possibility to charge rents for using them.

 

“It may be very small rents but it is a lot of transactions. There is a lot of money to be made,” Brooks points out.

 

Digital technologies are also used to estimate the creditworthiness of people with no history of using formal financial services. In their article The digital revolution in financial inclusion: International development in the fintech era, Brooks and Daniela Gabor show how fintech companies record data about the behaviour of potential financial service users. Companies are creating so- called digital footprints, which can be used to determine the creditworthiness of people.

 

Furthermore, fintech companies can also use data to “nudge” people to act in financially responsible ways. In other words, digital technologies become techniques of governing behaviour.

 

Efforts to collect data and to use it to shape behaviour raise difficult questions about ethics, especially since there are opportunities for private fintech companies to profit from them. Yet their implications have barely been discussed.

 

“We should at least stop and say, if monetisation of digital footprints is going to be profitable in the future, who is going to be paying for that and how come?” Brooks says.

 

She asks us to pay more attention to who is controlling the collection of data and profiting from it. If large, foreign- owned, multinational financial companies such as Visa and MasterCard, both of whom are members of the Better Than Cash Alliance, play a central role, how does the local society benefit from selling its data, besides through expanding financial servicesø In an article titled Left to Other Peoples’ Devices? A Political Economy Perspective on the Big Data Revolution in Development, Laura Mann asks us to think harder about how local people and societies could reap economic and political benefits from selling their data.

 

Financial inclusion fails to address the structures of poverty

 

Even though financial inclusion is promoted as a solution to major development challenges, today its proponents speak less than before about the ability of financial services to reduce poverty. According to Mader, there has been a shift to emphasising the role of financial services as tools to better manage the money people currently have.

 

“[T]he new mission of financial inclusion actors is not to raise poor people’s income anymore but rather to provide the financial tools that will supposedly help them to manage their money,” researcher Vincent Guermond and economist Ndongo Samba Sylla explain in their article When monetary coloniality meets 21st century finance: development in the franc zone.

 

And yet, expectations are high. Financial services are claimed to help people to better adjust to unexpected expenses, to cope with sporadic income streams and to invest in entrepreneurial projects and education.

 

The actual impacts seem to be considerably less impressive. A recent Gallup Global Financial Health Study stated that the use of financial services does not clearly correlate with people’s economic security or their ability to control their financial situation. In Kenya 82 percent already have some sort of an account, but only nine percent of the people in the study were financially secure.

 

The macro impacts on economic growth and equality remain equally questionable. Mader has pointed out that existing research about the connection between economic growth and the financial sector, which has been often cited to support financial inclusion, actually says nothing about expanding financial services to the poor but focuses on the financial sector in general.

 

Even though financial services can certainly bring some benefits to people by making it easier to transfer money and by providing more options to manage their money, the hype around the development impacts of financial inclusion seems exaggerated to say the least.

 

In the end, it is also important to look at what financial inclusion is not about. Gabor and Brooks point out that the financial inclusion paradigm targets individual behaviour of marginalised people, but “envisages no material change in the (changing) structures that generate marginality”. The economic and social structures producing inequality and poverty are left untouched.

 

The article was originally published in Finnish by Kepa (now Fingo) on the 3rd of October 2018. Link to the original article: “Köyhät halutaan rahoituspalvelujen piiriin – köyhyyden syitä ne eivät kuitenkaan poista”.

 

 

Reinventing REDD+

Sabaheta Ramcilovic-Suominen

One policy that attracted a record popularity, international talks and criticism in policy fora and scientific debates is the “Reducing Emissions from Deforestation and Forest Degradation” (REDD+). As the title indicates, the policy aims at reducing global carbon emissions via limiting deforestation in localities in the ‘Global South’. In addition, the policy suggests that the polluters in the ‘Global North’ will “offset” their carbon emissions by purchasing the so called ‘carbon credits’, the profit from which will be paid as a compensation to those restraining from deforesting.

It is important to highlight that the countries in the ‘Global North’ within this policy instrument do not restrain from consuming and importing the tropical wood from the ‘Global South’. This means the profit from timber and other industries thriving on deforestation is ensured, suggesting therefore that these large-scale profitable industries are not likely to be affected, but that the reductions of emissions will need to come from addressing other sources of deforestation. The large-scale profitable industries will also not be affected because of the uncertain and low payments for carbon at the global market, rendering REDD+ payments uncompetitive compared to the large-scale industries driving deforestation. For example, rubber, palm oil, or any other kind of tree and agricultural plantation, produced mainly for consumers in the ‘Global North’ and other rich countries, is much more profitable than the payments REDD+ would generate by selling the carbon in today carbon treading markets. The same holds for timber industry producing timber for the rich countries, which are generating profits way larger than selling carbon would generate via REDD+ payments.

The governments in the ‘Global South’ realized the lack of financial incentives of REDD+, soon after the policy kicked off in 2010. Yet, no government has refused to participate in REDD+. Instead REDD is being reinvented. Thanks to the donor aid for ‘readying countries for REDD+’ financial incentives to engage in REDD+ are high. Public and private finance from 2006 to 2014 are at more than US $10 billion. The ‘readying for REDD+’ donor funding comes in handy for international development agencies, as well as for the national governments to continue the ‘development as usual’ practices. These actors do what they have been doing in the past few decades, but now with new funding and new justifications – the justification of tackling climate change.

Studying REDD+ pilot projects on the ground, I find that the government, along its international development partners, address small-scale forest activities practiced by the villagers, many of which are the key and often the only livelihoods to those villagers. An example is the practice of shifting cultivation, which is the only farming practice possible in the mountainous areas in the norther regions. The practice include burning vegetation – forest included – to farm crops for a few seasons and then shift to another forest patch; however returning to the old patch once the vegetation has recovered and soil regained nutritional value. REDD+ prgramme in Laos is placed exclusively in the northern part of the country, where the government have been trying to eradicate shifting cultivation, since its independence in 1975.

REDD+ pilot projects in Laos are implemented as traditional forest conservation projects, which include activities such as: i. forest and land allocation and demarcation (a strategy limiting local population from using and entering certain forest areas), and ii. setting and strictly implementing regulations to limit hunting, fishing, tree-felling and shifting cultivation to certain areas only. At the local level, REDD+ donor funding provides support not only for implementing those interventions, but also it provides a narrative needed to legitimize these interventions. Climate change is used as an additional problem to blame the communities’ way of life. Climate change is presented as a direct consequence of the way in which communities use the forest, as well as the primary reason for all the calamities happening to them – from draughts and flooding, to frosts and pests.

While the international community proudly presents the REDD+ as the most “cost efficient” way of reducing global carbon emissions, I argue that it might well be cost efficient for them, but not for the local farmers who are pushed further to the edge of their existence, without any certain benefits from REDD+ policy payments. The REDD+ payments – when and if achieved – are not only insufficient to address the large-scale industries, but also to generate income at the local level. REDD+ feasibility study in Laos find that administrative costs, costs for building institutions and technologies needed for REDD+ are already reaching over the REDD+ payments to be generated from the entire area planned to be under REDD+ programme in Laos. They suggest that the payments when split per household in those areas are around 1 USD per household per year, which is evidently insufficient to compensate individual farmers for the lost benefits. Instead, REDD+ funds are being set up, which as their predecessors – the timber extraction funds – will be used for the so-called ‘community development projects’. I wonder thus, what if anything makes REDD+ different from any other forest conservation programme, which has helped the nation states to protect forest and alienate communities from the forests? It appears as the only difference is in the discourse and justification – with REDD+ they are doing it in the name of fighting climate change.

 

A shorter version of this blog post has been published as a column in Karjalainen, 22.7.2018

Save the date: 5th Joint Nordic Development Research Conference in Copenhagen 27-28 June 2019

5th Joint Nordic Development Research Conference in Copenhagen 27-28 June 2019

(as part of 2nd cycle of conferences: 2019-2025)

Based on the successful completion of the 1st cycle of joint Nordic Development Research Conferences1 the Nordic Development Research Associations (NFU, FSDR and FAU) along with Swedish institutions (Nordic Africa Institute, Development Studies/Uppsala University and Global Studies/Gothenburg University) have agreed to enter a 2nd cycle.

To ensure that individual researchers, research groups/programs, networks and organisations can plan accordingly, we would like to announce that the 5th Joint Nordic Development Research Conference will take place in Copenhagen Thursday-Friday 27-28 June 2019!

We will be back with a call for workshops/panels and more soon, but for now tick the dates! We hope to see you in Copenhagen next summer. Please also consider to make arrangements to bring in scholars in your networks from the global South and inform these accordingly.

Best regards,
Randi Solhjell, NFU
Ilona Steiler, FSDR
Henning Melber, NAI & EADI
Elin Bjarnegaard, (interim SDSN)
Fredrik Söderbaum (Global Studies, Gothenburg)
Sören Jeppesen, FAU

Development Days 2019 – Call for Sessions

The Finnish Society for Development Research (FSDR) is pleased to announce that the topic, time and place for its international Development Days Conference are now set:

Repositioning global development: changing actors, geographies and ontologies

27.2-1.3.2019, House of Science and Letters (Tieteidentalo), Helsinki, Finland

Among some of the most pressing global problems today are: i) the widening social inequalities within and between countries; ii) environmental pollution, ecological crises and conflicts over land and other resources; iii) migration, and the rise of extremism and populism; and iv) technological change contributing to increased risks to personal security and safety. While these issues are of complex origins, they are linked to globalization and the dominant global development model, in which corporate and individualistic interests stand above social and environmental ones, and logics, values and interests of Western countries stand above those of other countries. The magnitude of the crises linked to these global problems have led some academics, and some politicians to rethink their political and economic strategies and agendas.

At the same time, recent years have witnessed simultaneous trends of weakening of established global economic and political leadership on the one hand, and the emergence of new economic powers on the other. This has led to the ascent of new actors in the global development arena, most notably China, India and Brazil. They and many others are rapidly emerging from what the conventional economic model had labelled as ‘disadvantaged’ parts of the world, and are increasingly playing a key role in development processes worldwide. The crossroads at which humanity stands today requires a shift in development logics and paradigm. In this conference, we will discuss alternative development strategies and the role of emerging actors in development across multiple scales. Contributions from various disciplines, including human geography, environmental politics, development studies, sociology and institutional economics are called upon to discuss themes and questions, such as:

1. To what extent do global power shifts entail possibilities for more democratic—or conversely, more authoritarian—global governance?

2. What are the potentials of development and cooperation programmes in which problems and solutions emerge from geographical, societal, and gender-based margins?

3. Can we expect more socially and environmentally just, equality-laden and economically viable futures in the context of shifting geographies of development?

We invite scholars and practitioners with an interest in these broader questions to contribute with sessions and workshops. Appreciated are contributions that address one or more of the following themes:

  • The emergence of new conceptual framings, which go beyond sustainability, economic growth and anthropocentric philosophy. For instance, thoughts and ideas based on, and inspired by, degrowth, radical ecological democracy, feminism and decolonization of development are valued.
  • Emerging and changing narratives, policies and practices, responding to changing conditions in global development.
  • Social, psychological, political and institutional transformations as prerequisites for development paradigm shift.
  • Finally, examples of emerging trends in South-South cooperation, in terms of actors, issues and impacts.

The conference will serve as a platform to share research findings and experiences, as well as to develop new ideas and strategies for shifting development narratives and agendas, for reconnecting actors from different scales, and critically examining and redefining the meanings and logics of development. We welcome development scholars from a plurality of disciplines and critical theories, as well as practitioners from a broad range of professional backgrounds to explore ways to engage in progressive debates of building bridges between actors, scales, movements and societies at multiple levels and beyond global-local binaries.

We kindly invite you to submit your proposals for sessions by email to: sabaheta.ramcilovik-suominen@uef.fi, with the following subject of the message: “WG proposals for Dev Days 2019”. Proposals should not be longer than 500 words and should include the following information: 1. Title, 2. Chair/s of the session and their contact details, 3. Short description of aims, focus and content: and 4. Key questions to be addressed. The deadline for session proposals is 31.10.2018.

Conference Schedule:

  • 31.10. 2018: Deadline for session proposals
  • 15.11. 2018: Call for paper/presentation abstracts
  • 31.12.2018: Deadline for paper/presentation abstract submissions
  • 15.01.2019. Notifications of accepted papers /presentation abstracts (by WG Chairs)
  • 1.1.-20.2.2019: Registration for the conference open
  • 27.2. 2019: Pre-Conference Workshops for Master’s and PhD students
  • 28.2-1.3.2019. Development Days Conference.

How does “business as usual” fit development?

Lyydia Kilpi

The Finnish NGO Platform (Kepa)

Nearly 50 researchers, activists and other interested citizens gathered together on 7 June to discuss the current role of private sector in development discourse and practice in the seminar “Private-sector driven development: Views from Academia and Activists”, organised by the Finnish Society for Development research.

The trend is clear: the Sustainable Development Goals and the official development policies of European countries rely increasingly on leveraging private sector investments. Funds are allocated through development finance institutions (DFIs) and policy documents underline private sector development.

Matti Ylönen, a doctoral researcher at the University of Helsinki, described the shift as “new instrumentalism”. Traditional instrumentalism that considered aid as a lever to further Finnish interests is now coupled with an altruistic idea that Finnish companies can strengthen the private sector in the Global South and create jobs, which has intrinsic developmental value.

This resonates with Dr Bonn Juego’s (University of Jyväskylä) idea that the state’s role is reduced to creating an enabling environment for business and, on the other hand, the export-promoting orientation is a logical result of the stagnation of developed economies and the growth potential of many emerging ones. Dr Marikki Stocchetti confirmed that the recently published report by the Development Policy Committee (of which she is Secretary general) found that private sector instruments focused too much on Finnish companies and too little on strengthening the private sector of partner countries.

Dr Juego argued that in Finland’s relations with Asian countries, business interests had overtaken democratic values. He explained how under “authoritarian neoliberalism” unfree regimes adopt free market policies. Finland’s current export and development policies seem to enforce this trend at the cost of democratic institutions.

Aid has become more financialised, argued Ylönen. As more development finance is directed through funds and to private companies, the rules of private finance enter the sphere of development aid. Transparency is one of the obvious victims. Many researchers and civil society actors looking for information about the investments made by the Finnish DFI Finnfund have hit a wall of arguments leaning on business confidentiality, contracts and banking secrecy.

As aid financialises, it tends to become a part of the unsustainable global financial architecture. Tax havens and tax avoidance are some its building blocks. Finnwatch revealed in March how Finnfund had invested in a fund that had avoided taxes in Malaysia by exploiting shady deals with the tax authority of Luxembourg. Sonja Vartiala, the Executive Director of Finnwatch, highlighted that what is considered as “business as usual” in the financing world, isn’t good for development.

That brings us to the important question posed by Dr Stocchetti: When something goes wrong in one of Finnfund’s investments, who is responsible? The mechanisms of accountability aren’t clear.

Professor Barry Gills from the University of Helsinki referred to the Agua Zarca hydropower project in Honduras. Human rights risks related to the project, that led to the murder of activist Berta Cáceres, should have been identified and adequately addressed much earlier.  It is unclear what, if anything, has since changed in how Finnfund operates. Lack of transparency makes assessing this, or following the money, practically impossible.

Professor Gills raised the need to address the “moral dichotomy” between “us” and “them”, noting its colonial history and its present day reproduction. He called for all of us to clarify our moral standards, and hold ourselves true to them also in regard to “others” —rather than to continue to reproduce the dichotomy that separates “us” from “them “ into distinct moral spheres, where we apply very different standards of conduct in regard to “others” in the Global South.

Dr Zerfu Hailu, Senior Advisor of FFD from Ethiopia, reminded about the diversity of private sector. The same applies to the public sphere. Dr Gutu Wayessa raised an important point from the audience: the role of civil society. The public sector is seen as representing the interests of the people, but in authoritarian countries this often isn’t the case. The official development agenda may serve the elite, rather than the poor. Importantly, Ylönen raised the questions of opportunity costs for private sector aid. Is channeling public development funding through the private sector the most efficient way to reach desired development goals?

While more resources have been directed to private sector instruments, such as Finnfund, funding cuts have hit traditional development actors and research institutions. Speakers called for more engaged research that critically assesses the drivers and implications of shifts in development policy and changes in the development paradigm.

Summer Days 2017 – looking at the theme of Private-sector driven development from the Nordic perspective

THE NEW PRIVATE TURN IN NORDIC DEVELOPMENT COOPERATION STRATEGY*
Bonn Juego

University of Jyväskylä

In the past 15 years, “the private turn” in international development cooperation framework has become more evident. This shift in foreign policy is essentially characterized by a change in strategy from the old state-to-state relations centered on the giving and receiving of aid to the new economic diplomacy focused on the development of private sector business activities.

 

The implications of this emergent phenomenon for both development theory and practice are however understudied in (Nordic) development research, and no comparative studies have been undertaken. Such study is important in terms of: (i) the past, present, and future of North-South development cooperation; (ii) feasible development strategies for both developed and developing countries; and (iii) the processes of development and democratization in what used to be known as the “Third World” with durable authoritarian political regimes.

 

At the heart of this foreign policy re-strategizing is the crucial role assigned to the private sector as the driving force of development cooperation to pursue market-based solutions such as the promotion of entrepreneurship and the expansion of business operations to address poverty and other developmental problems. To this end, Nordic donor countries have been investing their resources tremendously to the operations of private enterprise-oriented development institutions and policy instruments.

The government of Finland has formed Team Finland as a crucial institution to embody, coordinate and implement the country’s emergent framework for the internationalization of Finnish private enterprises. Sweden has the Swedfund and Swedpartnership to facilitate the programme for private sector development. Denmark has the Danish Trade Council, the Investment Fund for Developing Countries, and the Export Credit Agency in line with their new foreign policy priority on economic diplomacy that targets growth areas in today’s global economy. And Norway has Nordfund, the Norwegian Investment Fund for Developing Countries, as their anti-poverty development finance institution funding private sector development programme and other commercial activities for poor countries.

Historically, the role of the private sector in development cooperation has always been there since the United Nations’ First Development Decade of the 1960s. This began when developed countries committed to transfer one per cent (1%) of their gross domestic product (GDP) to achieve the five per cent (5%) GDP growth target for developing countries. The prescribed formula of one per cent of GDP as an indicator of a successful net positive transfer of real resources from developed to developing countries should have been 0.7% of official development assistance (ODA) from donor governments plus 0.3% flows from the private sector.

 

However, during the five consecutive development decades, private flows have prevailed over donor government’s ODA whereby resource flows from rich to poor countries are subject to private incentives, rather than to development needs. Importantly, between 80 and 90 per cent of donor countries’ development finance, notably the development assistance budget of Nordic governments, are actually invested in the World Bank Group, Regional/Multilateral Development Banks, and other international development finance institutions together with other finance capital from private lenders and commercial banks that are loaned to developing countries.

What can also be observed in Nordic foreign policy nowadays is the geographical re-focusing of development cooperation partnerships with the economic growth areas of Asia, particularly with “rising China” and the emerging economies of Southeast Asia. Take, for example, the “China Action Plan” in 2010 of the Ministry for Foreign Affairs of Finland which identifies start-up and expansion opportunities for investors from both partner countries to do business in their respective economies.
An important phenomenon integral to the Nordic’s private turn in development cooperation is the impact of the policy choices of their governments and the business strategies of the state-supported business enterprises on one of the fundamental objectives of their international development policy ideals: the promotion of democratic values which, at a minimum, means the establishment of the rule of law, respect for human rights, and good governance. The Nordic countries’ priority partners in East and Southeast Asia—specifically, China, Myanmar, and Vietnam—are generally characterized as authoritarian, undemocratic, or non-democratic regimes.

Preliminary observation suggests that the private turn, or the private enterprise-oriented development framework, encourages the economic imperatives for entrepreneurship and investments to take precedence over the political agenda for democracy promotion. As a result, Nordic business interests can be made, or are being made, to operate even within the context of non-democratic political regimes of their developing country partners.

 

*This is an abridged version of the original article published by the Poverty and Development Research Center.

 

Join us on 7 June to discuss Private-sector driven development – Views from Academia and Activists! More information and the programme can be found  here.

FSDR Summer Days 2017: Private-sector driven development – Views from Academia and Activists

Time: Wednesday, the 7th of June, 13.00-16.00

Place: House of Science and Letters, Kirkkokatu 6, Hki (Hall 505; 5th floor, lift available)

This seminar, organized by the Finnish Society for Development Research, will explore the drivers and implications of the current “private turn” in development policy and aid practice. The global Agenda 2030 for sustainable development is paving the way for an increased role of the private sector in development. In Finland, the government has made substantial budget cuts in development cooperation, while the funds channeled to the Finnish Fund for Industrial Cooperation (Finnfund) were raised to record height. The seminar addresses questions that are widely discussed among development scholars and activists, Including: Is the private sector taking over the development agenda? How should this private turn be understood in relation to trade policies? Can profit driven activities work for the impoverished? Is knowledge production on development being challenged in new ways? How are development researchers and activists reflecting upon their position and working agendas amidst these changes? Is there a need for new kinds of north-south solidarities and links between researchers and civil society actors?

PROGRAMME

13.00-14.30:

Business as usual is bad for development: the case of tax responsibility in Finnfund’s forest fund,
Sonja Vartiala, Finnwatch

New instrumentalism in development finance, Matti Ylönen, University of Helsinki

The new private turn in Nordic development cooperation: A question of ethics or opportunities?,
Dr. Bonn Juego, University of Jyväskylä

Commentators:
Dr. Marikki Stocchetti, Development policy committee
Dr. Zerfu Hailu, Finnish Agri-Agency for Food and Forest Development (FFD)
Prof. Barry Gills, University of Helsinki

14.30-16.00:

A roundtable discussion with the speakers and commentators. Seminar participants are encouraged to take part in the debate. Moderated by Dr. Minna Hakkarainen, the chair of FSDR.

 

Registration by 1.6.2017: https://elomake.helsinki.fi/lomakkeet/80125/lomake.html
Contact person: Mira Käkönen, mira.kakonen@helsinki.fi
Facebook: https://www.facebook.com/events/1399923093380403/

Master’s award in Development Studies 2016

The Finnish University Partnership for International Development – UniPID and the Finnish Society for Development Research (FSDR) jointly seek exceptional Master’s level theses from UniPID member universities to be awarded.

The prize sum is 1,000 euros. There will also be two honorable mentions for exceptionally meriting works. The Master’s Award in Development Studies 2016 will be presented in February 2017, in conjunction with FSDR’s Development Day seminar.

The Master’s Award in Development Studies application criteria are the following:

§  The thesis has been approved during the period 1.8.2015-31.7.2016 at a UniPID University, as a master’s level thesis included in a degree. The language of the thesis is Finnish, Swedish, or English.

§  The grade is at least magna cum laude or higher, or at least 4 if the work has been graded on a scale of 1-5

§  This is a multidisciplinary competition and the disciplines are not limited in advance. The work should however employ one of the development research frameworks: development studies, developing country research, international development, or Global South research.

PARTICIPATION

See the full call for award submissions with details on the qualifications and required attachments on the UniPID website.

All submissions should be sent in electronic format (PDF) to the Secretary of the Master’s Award Working Group Osku Haapasaari [osku.haapasaari [at] jyu.fi] by 31 August 2016 at 16.00 at the latest.

Docnet launched

The Finnish University Partnership for International Development (UniPID) launched UniPID DocNet, a nationwide initiative to support development research doctoral training. As the Finnish development research doctoral network, UniPID DocNet supports the interdisciplinary training and networking of doctoral students in development research. UniPID DocNet is a membership-based network for selected doctoral students and supervisors from UniPID member universities. For more information, visit UniPID webpages.

Kehitystutkimuksen tohtorikoulutusverkosto UniPID DocNet avajaistilaisuus järjestettiin Kehitystutkimuksen päivillä helmikuussa 2016. Verkoston tavoitteena on tuke kehitystutkimuksen tohtorikoulutettavien tieteidenvälistä koulutusta ja verkostoitumista. Verkosto tarjoaa täydentävää koulutusta, opisklijoiden vertaisuten mahdollisuuksia ja lisäohjauksen mahdollisuuksia. Lisätietoja UniPID-verkoston nettisivuilta.

Professor Neera Chandhoke: Keynote speech

Professor Neera Chandhoke delivers her keynote speech titled as “Realising justice” at the Development Research Day 2016 in Helsinki, February 2016.
Video & editing: Mikael Kanerva.