261160710 - quizz 6

What are the examples of "underserved sectors" that are significantly underfunded by DFIs? and (2)
what factors perpetuate such finance gaps in development? Please add your reflections on Professor
Novak's lecture.

Development financing institutions are financing provided for economic development

initiatives, it can be multilateral development banks and bilateral development financial institutions

operating in developing countries. Some well known DFIs are the World Bank group, inter-American

development bank group and many others. These institutions are playing an important role because

they invest money with the intention to result in development impact, to achieve such development

goals they have financing from either private or public sector. However, there are sectors that are

significantly underfunded by DFIs, large segments of the neediest populations in relation to the

priority sectors education, health and energy. There is every year a huge shortfall in developing

countries, for example the estimated annual shortfall to achieve sustainable development goals was

4.3 trillion USD. These regions were underfunded because DFIs disproportionately benefit upper and

lower middle income countries over low-income countries. Actually, there is a high proportion of

investment concentration in a few non-LICs. Such finance gaps are perpetuating because there is a

very little mobilization of private capital in low income countries, mobilization mainly in economic

sectors such as banking and financial services. While a very little percentage is going to the social

sector, which are definitely the sectors that are underfunded. To change that and be able to achieve at

least one sustainable development goal by 2030, such as education, DFI should adapt their effort from

dedicated teams and increase interaction with private capital because they are the ones that have the

ability to change things. One solution that was provided in Professor Novak's lecture was that we

should change the operating models because this is the current reason for the largest limitations to the

DFIs’ investment potential. To conclude, Professor Novak’s lecture was fascinating because he

provided explanations on why we are struggling to accomplish SDG, and also he provided solutions

on how we should act to be able to face these limitations. For every situation presented, there was the

actual status then the recommendations which help to compare and understand why some sectors are
underfunded compared to others and realize what will be the next step to provide a more sustainable

system. It echoes a lot of lectures that we saw, or even Professor Pai’s lectures because often we see

institutions that are presented as solutions to developing countries’ problems but in fact we realize that

these institutions are principally favoring global north countries, which are the one less in need

compared to global south.