Innovative financing methods for social protection

Question

Review innovative financing methods for social protection around the world

Summary

This report provides a rapid literature review of the evidence on innovative financing methods for social protection using global case studies. The review found that financing for social protection often comes from government funds. Options for government to increase social investment can be found through reallocating public expenditures, increasing tax revenues, expanding social security coverage and contributory revenues, lobbying for aid and transfers, eliminating illicit financial flows, using fiscal and foreign exchange reserves, borrowing or restructuring existing debt and, adopting a more accommodative macroeconomic framework (Ortiz et al. 2015). Alternative solutions include promotion of social contributions which require formalisation of the labour market (particularly challenging for low income countries). Government and multilateral incentives for private sector initiatives have also proved successful with social impact bonds (SIBs) becoming popular in high-income countries (Beesabathuni, 2016) and matched funding of commercial investment schemes in companies with both a financial and social aim in Haiti (Beesabathuni, 2016). Section 3 identifies documents looking at the concept of innovative financing for development. Guarnaschelli et al. (2014) describe innovative financing instruments as reallocating risks from investors to institutions better positioned to bear the risk and, in the process, enable participation from mainstream investors. Liquidity is enhanced and volatility reduced. They propose three drivers of innovative financing: 1) increased use of established financial instruments, 2) 3 expansion into new markets through growth of replicable products, and 3) creation of new innovative financing products

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Suggested citation

Bolton, L. (2017). Innovative financing methods for social protection. K4D Helpdesk Report. Brighton, UK: Institute of Development Studies.