nights, the stars shine particularly bright over Cabo Verde. Emanating from a
boundless dark canvas, the nocturnal panorama throws in sharp relief the fixed constellations
that long served as reference points for navigators that knew and understood
a certain vantage, the country’s development financing landscape mirrors these
starry constellations. Here, various institutions, policies, and financial mechanisms
link together to shape incentive structures and orient human action. Working
within this landscape, diverse actors – from government and development
partners to businesses, banks, lending organizations, and private citizens – interact,
coordinate, and cooperate in countless ways to arrive at decisions on investment
and financing that help them achieve their objectives.
When we look
at these constellations up close, it’s hard to tell where each point sits in
relation to the larger picture. Often, these points remain disconnected or
disjointed. Even as they come into contact with others, their experience is
limited to their own orbit.
An advantage of developing
an integrated national financing framework (INFF) is that it allows all actors
involved to zoom out of this picture. A foundational step of an INFF is taking stock of the financing landscape, i.e. putting together a
comprehensive picture of the relevant institutions, policies, and structures to
better identify the opportunities and barriers to effectively accessing and
using public and private resources for sustainable development. In other words,
we start the INFF process by first viewing the constellation in its entirety.
When we zoom out, we can see where gaps, duplication
and possible synergies exist. We begin to make connections between activities
that were previously operating in their own orbits. Forging these connections
means governments and supporting partners can leverage progress in one area to
inform and boost progress in others.
The more communication, knowledge sharing, and
alignment between the different points in this constellation, the better
results. This sounds great in theory. But does it work in reality?
In this blog post, we explore an example from Cabo
Verde, a small-island developing state off the coast of West Africa with its
own set of unique financing challenges. Cabo Verde is an INFF pioneer country,
following a commitment by the Ministry of Finance at the UN General Assembly in
2019 alongside leaders from 15 other countries.
In the past, Cabo Verde’s development financing has
centred around domestic public resources and official development assistance.
But the economic shockwaves of the pandemic have highlighted the
vulnerabilities of this model and added urgency to the calls for a shift in
strategy. Developed and developing countries alike are searching for innovative
strategies to finance recovery and get the Sustainable Development Goals (SDGs)
back on track.
For Cabo Verde, the INFF provides an opportunity for
the government to systematically rethink its strategy, focusing on
harnessing the power and resources of the private sector – especially Cabo
Verde’s young entrepreneurs.
conclusion of this pandemic is that we must adapt to the new context in which
the world will evolve,” said Dr Olavo Correia, Cabo Verde’s Deputy Prime Minister
and Minister of Finance. “The role of young people in this journey will be
Supported by the United Nations Development Programme
(UNDP) and the Joint SDG Fund, the Government of Cabo Verde began to look across its financing constellation
as a whole. The recently completed long-term development agenda, Cabo Verde
Ambition 2030, and forthcoming development of the latest iteration of the Strategic
Plan for Sustainable Development 2022-2026 (PEDS II) provided the perfect
window to embed the INFF approach.
Through the INFF, the government and UNDP began to
examine all the different existing and potential instruments available to
encourage greater involvement of the private sector in the financing landscape,
with a particular focus on five ‘SDG Accelerators’:
- Blue Economy;
- Green Transition and
- Innovation and
- Human Capital.
These investment areas form the backbone of Cabo
Verde’s financing strategy, currently under development through the INFF, and
align with priority areas for channelling public resources (outlined in PEDS II)
and attracting private investment.
Through this process, ideas for two new instruments
emerged: the Lavanta Fund and the Negocia Cabo Verde Business
This is the story of how “zooming out” through the
INFF approach helped policymakers integrate two initiatives that, together, empower
young entrepreneurs to become SDG accelerators within their local communities.
“New normal” thinking gives rise to innovation
for the Negocia platform was born out of the pandemic. Under a hard
lockdown from April to July 2020, any hopes of getting private sector actors in
the same room to discuss new opportunities for SDG-aligned investments or
collaboration were dashed. Led by organizations like the chambers of commerce (CCISS and CCB), the Association of Young Entrepreneurs of Cabo Verde (AJEC) and the Association of Woman Entrepreneurs of Cabo Verde (AMES), the Cabo Verde private sector quickly adapted by proposing the idea of a digital business platform.
was simple: build a social network-like platform for companies, entrepreneurs,
and investors to meet digitally. The platform would connect entrepreneurs with
investors looking to finance projects with a positive impact on sustainable
development. It would also offer a space for entrepreneurs from across Cabo
Verde’s nine inhabited islands to exchange ideas and forge partnerships. Developed by local IT firm BONAKO, under the
leadership of the UNDP Accelerator Lab Cabo
Verde and with a
little financial help from the UNDP Rapid Response Facility (RRF), the Negocia platform was born!
same time, the Ministry of Finance kicked off INFF development, with a
particular focus on exploring ways to attract private sector investment and establish
a framework conducive to entrepreneurial endeavours aligned with SDG principles.
is to facilitate and allow our young people to be decisive in the process of growing
the middle class in Cape Verde and to take advantage of the potential that
these young people have and the contribution they can make to our society,”
said Dr Correia.
One of the
first steps in an INFF process is to map all the different institutions, structures
and actors that form the development finance constellation.
Verde (and 60 other countries developing an INFF), this is being done through a
development finance assessment (DFA). A DFA helps all actors involved in the
INFF process - from government and its international partners to civil society
and the private sector - gain a better understanding of the financing
Verde, the current landscape is characterised by a significant cleavage
between, on the one hand, the ‘real economy’ comprised of mostly micro, small
and medium enterprises (MSMEs) with limited access to investment opportunities
and, on the other, the ‘financing ecosystem’ made up of government agencies
(those responsible for credit, guarantees, and business development) that work in
conjunction with a risk-averse banking system.
INFF experiences, one of the main challenges has been identifying the smaller
businesses, investors, and entrepreneurs (and entrepreneurs who may not even
know they are entrepreneurs yet) that make up the ‘real economy’. As the DFA
illustrates, these small actors make up a large part of the private sector
community and represent a large source of untapped potential for development
question then emerges: How do you identify these different actors in the field
and what can the INFF do to support them? Under the umbrella of the INFF, government,
together with the UNDP team, realised the best approach would be encouraging
self-identification. If small actors identified themselves through a dedicated
platform, the government would be able to develop INFF-driven policies and
incentives that correspond to their financing needs. The Negocia
platform offered the perfect solution.
platform, investors, small businesses and entrepreneurs create online profiles
that outline who they are and what they’re interested in: private actors
looking for investment opportunities, informal businesses seeking out capital
to expand, new entrants wanting to connect with experienced entrepreneurs, etc.
By drawing private sector actors to the
platform, Negocia could not only serve as a matchmaking service between
small-scale investors and businesses, but also as a database of private sector
actors operating within strategic sectors. “It gives all stakeholders –
government, investors, partners – a lot
of data to work with in terms of who the innovative entrepreneurs are,” said Vladimir
Fonseca, Head of Experimentation at the UNDP Accelerator Lab in Cabo Verde. “We
would have never been able to identify them without this mechanism.”
Getting the incentives right
If the Negocia
platform was going to succeed in getting private sector actors to voluntarily
sign up, submit their information and connect with other businesses and
investors, there would have to be a draw. But what?
to get the incentives right,” said Elisabeth Goncalves, Innovation and Resource
Mobilisation Specialist at UNDP Cabo Verde. “We needed a honeypot to attract
users to the platform.”
The team soon
found their honeypot in another project being developed under the umbrella of the
2020, Cabo Verde was awarded funding from the UNDP Covid-19 Rapid Financing
Facility to set up a microcredit fund that would provide seed funding to small
businesses. “The goal was to stimulate private sector growth in the wake of
Covid-19,” said Ms Goncalves.
Lavanta - lavanta meaning ‘rise up’ in the local Crioulo language - will
award loans, ranging from US$1,500 to $15,000, to underrepresented
entrepreneurs, primarily young women and men, looking to set up or scale
existing businesses that contribute to the strategic development priorities set
out in Ambition 2030. By design, the fund advances the mutually reinforcing
objectives of socioeconomic recovery, economic diversification beyond the
tourism sector, and geographic consolidation of sustainable development across
all nine inhabited islands.
Fundo Lavanta is a revolving fund.
As the initial borrowers pay back their loans, new loans can be made to other
businesses or entrepreneurs who need seed funding. The below-market interest rate
covers the administration costs of the fund and capacity-building support for
the borrowing entrepreneurs.
Figure 1. From a revolving fund of $300,000 from the UNDP Rapid Financing Facility, Fundo Lavanta awards entrepreneurs US$1,500 to $15,000 in seed funding to start or scale businesses that fall within five categories: green, blue, digital, social and others with inclusive growth and job-creation potential. Once they’ve created a profile on the Negocia platform, entrepreneurs can make connections with other investors looking to support projects that align with the SDGs.
August 2020 the Cabo Verde Ministry of Finance, together with ProEmpresa,
the public institution responsible for managing the fund, launched the Fundo
Lavanta on the Negocia platform.
With 60 people
in attendance, Dr Correia addressed key stakeholders during the virtual launch:
“Covid-19 acted as a brake on our development process. But we are going to be
able to make a comeback and the Fundo Lavanta will allow young people to
be at the centre of this recovery.”
of the fund was followed by a national media campaign to encourage small businesses across the country to
apply for funding. The campaign was picked up by national media
outlets, generating broader credibility for the
By using Negocia to administer the fund,
the Ministry of Finance created a strong incentive for entrepreneurs with
business ideas and start-ups to sign up to the platform. Once they’ve
registered, they will gain access to a hub of private sector activity. “We’ve
essentially created multiple benefits from a relatively small amount of public
funding,” said Steven Ursino, Head of the UNDP, UNICEF and UNFPA Joint Office
in Cabo Verde.
first round of Lavanta funding comes to a close, entrepreneurs who were
not awarded funds can connect with other potential investors on the platform.
They can also be considered for future Lavanta funding rounds. “This is
not a one-off event that just selects a few winners,” said Mr Ursino. “The
platform is a lasting institutional structure that will extend beyond the scope
of this one opportunity.”
The honeypot effect
three-week Fundo Lavanta application period, the platform reached nearly
2,000 visitors, while registered users grew to over 700.
300 entrepreneurs applied for funding across five categories of projects: green
(33%), blue (31%), digital (15%), social and health (10%) and other (10%)
(Figure 2). Of these, nearly 54% were individual entrepreneurs who have not yet established
Figure 2. Over 300 entrepreneurs applied for funding across five categories of projects.
The design of the platform ensures accessibility for a
wide range and variety of private actors. Applicants were drawn from each of
Cabo Verde’s nine inhabited islands. Over 60% had either vocational training
or a secondary school education level. Significantly, 54% of the applicants were
women (Figure 3).
Figure 2. More than half of the Fundo Lavanta’s applicants were female.
“These connections would have never happened
previously,” Mr Ursino added, “particularly for the youth and women
entrepreneurs who have historically been underrepresented in traditional
business networking fora.” The beneficiaries will be announced on the 10th
The hope is
that the success of this funding round will draw other investors to the
platform, essentially creating a digital marketplace for sustainable investment
and innovative entrepreneurs. The Ministry of Finance believes the success of the
platform has the potential to attract other international donors, Corporate
Social Responsibility contributions, impact, ethical or ESG (environment,
social and governance) investors and diaspora investors from overseas.
As more private
sector actors register and use the platform, Negocia will not only serve
as a matchmaking service between investors and businesses, but as a
communication and knowledge sharing hub for ethical innovators. “Once we bring people
to the platform, we’ll start to see interactions that were previously not
possible – between investors and business, and between the public and private
sector,” said Mr Fonseca.
In the future, Negocia will focus on
facilitating innovation and entrepreneurship from the ground up. “The fund will
literally be a corridor for financing major projects that will create jobs,
increase the productivity of our young people and support economic recovery,”
said Dr Correia. Private citizens will be able to draw on local knowledge,
skills, and strengths to build ethical businesses that further the development
goals of their community.
Catalysing agents for change
Within Cabo Verde, there is a lingering narrative that
the government is responsible for development. However, the INFF process is
trying to change this narrative by encouraging everyday citizens to rise up. At
the fund’s launch, Dr Correia drove this message home. “The future belongs to
you,” he told the next generation of sustainability innovators and aspiring
Through initiatives like Negocia and Fundo
Lavanta, the government, together with the support of its partners, is promoting
decentralised platforms for financing development that will empower citizens to
contribute to Cabo Verde’s development story.
This kind of thinking is core to the INFF approach. In
many ways, INFFs are about moving beyond traditional narratives of what
development financing looks like and making space for more imaginative
from Cabo Verde provides some food for thought: Within our financing
constellations, everyday citizens make up millions of tiny little points, but
they are often overlooked. How can we use the INFF process to uncover the
synergies between these points? How can we forge connections between
individuals to accelerate progress?
In each country
developing an INFF, there are citizens interested in becoming agents for change
within their communities.
The example of Cabo Verde highlights an important
lesson: to unlock the SDG financing potential of these everyday citizens, governments
need to create inclusive and accessible spaces for private sector engagement, facilitate
access to financial resources and tools – and then get the incentives right.