What is Leveraged Funding and Why is it Critical to Advancing the SDGs?

If you receive any of my regular emails, you may notice a repetitive attention paid to leveraged funding opportunities, particularly as government agencies release new calls for proposal. Does anyone wonder what the heck I am talking about? It occurred to me that perhaps my casual way of communicating about leveraged funding presupposes that my audience actually knows why leveraged funding is so important to advancing our sustainable development goals (SDGs).
Let’s use the Millennium Challenge Corporation (MCC) announcement around their Annual Program Statement (APS) as an example. MCC prepares their APS to inform potential partners (companies, financial institutions, foundations, universities, non-governmental organizations, faith-based organizations, development agencies, and other U.S. government agencies) about priorities for the next year (or two). In this year’s APS, MCC indicated in its press release that its intent is to "co-create, co-fund, and co-implement partnerships that support MCC’s ability to achieve its mission and programmatic goals." Why is this important? It means that MCC’s funding (in the billions), which will be used for these (and other) programs: (enabling the use of data by and for women’s economic empowerment; enhancing analytical capabilities in various subfields of environmental and natural resource economics, including water resources, natural resource accounting, and climate change; working to help MCC successfully and sustainably address the barriers to women’s and ideally youth entrepreneurship and sustainable business growth) is available to ADD ON TO and advance. If a company with a vested interest in youth entrepreneurship in an MCC country, for example, wants to affect real change (i.e. build out physical and technological infrastructure, engage with governments to advance policy making, shift how market financing is developed, create effective safety nets for low income communities that may be future employees, customers or suppliers, etc) then what better way to do so than by partnering with a private government entity like MCC, which has billions of dollars to invest in these and other programs? Talk about long-term sustainability.

Collaboration is all about joining forces to impact change. Leveraging private sector funding with MCC investments allows for systemic change that is nearly impossible in any other scenario (i.e. a company investing in NGO activity without support of infrastructure that an MCC could help build as an example). Companies, alone, can’t invest at that scale. Governments alone can’t build out private sector investment without those partnerships. Finding economic engines to drive local production and consumption helps propel tax revenue, keeps engagement high and provides for a more satisfied population and workforce. Partnership and leveraged funding between government sources (in this case MCC) and the private sector is what can change the paradigm in impoverished countries. MCC reports on these successes often.
What about the Overseas Private Investment Corp (OPIC) 2X Women’s Initiative? I had not heard about the more than $1 BILLION being invested in women’s empowerment programs in developing countries until this week. How did I miss this? OPIC is looking to invest in women entrepreneurs, women-owned businesses and in partnership with the private sector. How many private sector companies have goals around supporting women entrepreneurs? There are dozens. Think about how beneficial it would be to partner with OPIC (and each other) to both address these goals each entity has in place, but also to scale and amplify the real impact that’s possible. This amplification of funds and impact is leverage.
Nowadays it seems every call for proposals, every challenge that addresses the SDGs, each impact investment, is looking for ways to engage the private sector. There’s a reason for it, though. With private sector ‘leveraged’ funding, other investors (public, impact investors, even NGOs) can be assured that perhaps with their investment there is more opportunity for long term impact. Companies’ investments in sustainability are about building long term returns that allow for future production, more dependable consumption patterns, more predictable supply, even assurance around workforce availability. Government donors and NGOs often operate on a much shorter time frame (think under 10 years). Adding private sector leveraged funding to the mix allows these partners to see a greater, longer-term impact with their dollars.

Collaboration between funding streams like those coming from MCC, or OPIC (or agencies like DFID, USAID, etc) and the private sector, nonprofit sector, academic sector, etc. helps advance economic development around the SDGs in a way that is more market focused, economically advantageous to the communities in need of large scale investment and better for competition of prices and supply. For these reasons (and likely more unmentioned) leveraging funding is critical to advancing our SDGs.

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