Regional : Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities
The knowledge and support technical assistance (TA) program will address interest expressed by the governments of the Asian Development Bank (ADB) developing member countries (DMCs) of Central and West Asia in leveraging private capital to address gaps in the financing of the Sustainable Development Goals (SDGs) using innovative financing modalities.
Hegde, Abhishek Naveen
Central and West Asia Department
Request for information
- Public sector management
|Project Name||Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities|
|Country / Economy||Regional
|Project Type / Modality of Assistance||Technical Assistance
|Source of Funding / Amount||
|Operational Priorities||OP1: Addressing remaining poverty and reducing inequalities
OP2: Accelerating progress in gender equality
OP6: Strengthening governance and institutional capacity
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Gender Equity and Mainstreaming
Governance and capacity development
Private sector development
|Sector / Subsector||
Public sector management / Reforms of state owned enterprises
|Gender Equity and Mainstreaming||Some gender elements|
|Description||The knowledge and support technical assistance (TA) program will address interest expressed by the governments of the Asian Development Bank (ADB) developing member countries (DMCs) of Central and West Asia in leveraging private capital to address gaps in the financing of the Sustainable Development Goals (SDGs) using innovative financing modalities. The TA will focus on advising and assisting sovereign institutions and their stakeholders on strengthening their institutional capabilities to (i) develop a better understanding of various innovative financing modalities being implemented globally to correct specific market failures, realize opportunities, and overcome institutional limitations; (ii) validate the use of complex financing modalities and de-risking mechanisms to tap new sources of private financing for SDG financing gaps; (iii) strengthen the role of sovereign institutions in enabling the flow of private institutional capital for economic additionality, such as high social impact investments; (iv) facilitate novel partnership and contracting arrangements with the private sector, such as outcome-based financing; (v) explore innovative financing instruments to transfer disaster risks at the central and regional levels; and (vi) explore approaches and modalities that encourage the blending of other sources of capital (official development assistance, and private and other similar sources) with traditional forms of ADB financing, such as sovereign loans funded by ordinary capital resources and/or grants. The TA is aligned with ADB's Strategy 2030 vision of supporting DMCs in accelerating the development of approaches to catalyze private financing for achieving the SDGs. The TA supports the implementation of SDG 9 and SDG 17.|
|Project Rationale and Linkage to Country/Regional Strategy||
Limited fiscal resources of developing member countries of ADB's Central and West Asia region for financing the Sustainable Development Goals. To achieve the operational priorities of ADB's Strategy 2030, sovereign institutions in Central and West Asia DMCs must accelerate the mobilization of resources for SDG financing. The impact of the coronavirus disease (COVID-19) pandemic has been felt most acutely by some of the most vulnerable populations, and may delay the achievement of the SDGs in these DMCs by several years. The immediate consequences of COVID-19 have been rising public debt, increased sovereign risk, rating downgrades, capital outflow, reduced tax revenues, a marked drop in overseas remittances, and the reversal of social policy mandates. For women and girls, COVID 19 has further exacerbated gender inequalities. Developing economies in Central and West Asia have been further strained by the invasion of Ukraine. Pakistan's economic growth is expected to be slow in FY2023 (ending 30 June 2023) amid ongoing policy tightening, devastating floods, and a high inflation rate. Furthermore, because of the global investment and remittances, economic growth in Tajikistan and Uzbekistan is projected to be slower in FY2022 than in FY2021.
Weak sovereign institutional mechanisms. The COVID-19 pandemic has further exacerbated the challenges of mobilizing private sector funds for SDG-related investments. The challenges for sovereign institutions in operationalizing or scaling innovative financing modalities in public-private partnership for SDG-related sectors that are public service in nature, such as health care and education, include (i) ineffective cooperation modalities between private and public institutions, (ii) diverse organizational set-ups and management techniques, (iii) varied incentive mechanisms and risk return metrics, (iv) diverse legal provisions and governance mechanisms, and (v) inadequate oversight from public sources.
Insufficient links to private sector resources to address financing gaps. Although there is tremendous appetite and potential among private sector investors, the supply-side barriers include high initial transaction costs in developing a concept; lengthy design development stages; low risk-adjusted returns; disparate performance metrics; unfavorable contracting terms; and a lack of standardization for program design and delivery for key SDG sectors such as health care, education, and climate change adaptation.
Lack of sovereign incubators or sandboxes to nurture novel ideas. Globally, innovative financing modalities, such as impact bonds, guarantees, leasing, and impact investments, have shown that they can unlock new sources of capital and address development challenges. Although there is tremendous interest among sovereign institutions in Central and West Asia DMCs to evaluate various innovative financing modalities to address specific market failures, overcome institutional limitations, build suitable capacity for engaging with the private sector, and implement such novel concepts following internationally acceptable standards and practices, there is also a lack of understanding of innovative financing and global practices being implemented by governments. The sovereign institutions are further constrained by a significant degree of uncertainty, the longtime horizon for developing such modalities, and the substantial financial resources needed to explore such novel concepts.
Institutional capacity of Central and West Asia DMCs enhanced and financial resources for development mobilized.
|Description of Outcome||
Capacity of Central and West Asia DMCs to facilitate the mobilization of capital for financing the SDGs improved
|Progress Toward Outcome|
|Description of Project Outputs||
Institutional capability of sovereign institutions for adopting innovative financing modalities for the SDGs enhanced.
Knowledge support to sovereign institutions on innovative financing modalities provided
|Status of Implementation Progress (Outputs, Activities, and Issues)|
|Geographical Location||Kyrgyz Republic - Nation-wide; Pakistan - Nation-wide; Tajikistan - Nation-wide; Uzbekistan - Nation-wide|
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design|
|During Project Implementation|
|Responsible ADB Officer||Hegde, Abhishek Naveen|
|Responsible ADB Department||Central and West Asia Department|
|Responsible ADB Division||Office of the Director General, CWRD|
Asian Development Bank
|Concept Clearance||09 Nov 2022|
|Fact Finding||29 Nov 2022 to 02 Dec 2022|
|Approval||13 Dec 2022|
|Last Review Mission||-|
|Last PDS Update||02 Jan 2023|
|Approval||Signing Date||Effectivity Date||Closing|
|13 Dec 2022||-||13 Dec 2022||30 Jun 2025||-||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|3,125,000.00||0.00||0.00||0.00||0.00||0.00||3,125,000.00||04 Jan 2023||0.00|
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|Title||Document Type||Document Date|
|Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities: Technical Assistance Report||Technical Assistance Reports||Dec 2022|
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