NEW YORK—The Open Society Foundations, together with two other philanthropic funds, are supporting a new global financing mechanism aimed at delivering on a current priority of the international development community: boosting concessional lending by Multilateral Development Banks (MDBs) without them requiring an injection of additional capital from their member states.
Open Society’s Soros Economic Development Fund (SEDF), together with a partner philanthropy, is providing $500,000, which the Jacobs Foundation has matched for a total of $1 million in funding to the new International Finance Facility for Education (IFFEd).
IFFEd is an innovative financing platform that seeks to catalyze significant resources for global education needs and serve as a model for financing interventions for an array of other global challenges.
Mark Malloch-Brown, president of the Open Society Foundations, said: “With the world facing increased demands for global climate and developing funding, this initiative shows how new approaches can increase the amount of money that MDBs can lend at concessional rates from existing resources—without jeopardizing their own credit standing.”
IFFEd was launched in 2022 by UN Secretary-General António Guterres and Gordon Brown, the UN Special Envoy for Global Education. It has developed a guarantee program for lower-middle-income countries which—through credit substitution and other means—seeks to unlock significant new and existing MDB resources.
While developed for education, the approach—if successful—could be applied to climate, health, and other sustainable development goals.
The funding from the three philanthropies will be used to cover some of the additional costs of setting up and administering the IFFEd, which is registered as a public charity in Switzerland, including the costs of acquiring necessary ratings from international credit rating agencies.
Sweden has announced a $200 million guarantee to the IFFEd, while the United Kingdom has said it will commit up to £180 million in grants, capita, and guarantees, with several other countries considering following suit. These funds would be used to support guarantees for MDB education funding—in effect reducing the associated risk for the banks.
“This is an exciting example of how philanthropic funders can pitch in to support innovative approaches in international development and climate finance to unlock new resources to tackle the global challenges we face,” said Georgia Levenson Keohane, chief executive of SEDF. “With IFFEd, we are providing relatively modest support to leverage significant lending to lower-middle-income countries at concessional rates by the MDBs. That would be a huge result.”
MDBs include the regional development banks for Asia, Africa, and the Americas, as well as the World Bank. They are funded by national donors to provide low-interest lending for poverty reduction, climate change, and other development objectives. IFFEd is one of a number of approaches being developed to enable these institutions to lend more against their existing capital resources without undermining their ability to borrow at the lowest possible rates.