How securitization could cut world poverty

Author: | Published: 1 Apr 2005

In January 2003, the UK Treasury put forward a proposal to harness the cash-raising power of the capital markets to make up the shortfall in government-sponsored international aid. The UK government is hoping to use its current leadership of the G8 group of industrialized nations as a platform from which to galvanize support for and implement the project.

The so-called International Finance Facility (IFF) would raise additional finance by using long term commitments by donor countries to leverage frontloaded capital, raised through issuing bonds in the international capital markets.

One recurrent criticism of the proposal is that recipient countries will not be able to effectively absorb the increased amount of aid that would be supplied in the short term. However, the UK Treasury cites figures produced by the World Bank that suggest that countries in Asia and sub-Saharan Africa could absorb a 60-100% increase in aid flows in the short term....