Financing DPI for Inclusive and Sustainable Development

Introduction

As India’s presidency of the G20 comes to an end on November 30, 2023, one of the most innovative impacts from the Indian presidency on the development landscape has become clear. The G20 Digital Economy Ministers reached a groundbreaking consensus on how to shape Digital Public Infrastructure as an accelerator of the SDGs.

The Donor Tracker team has launched an investigation into the development of financing for this cross-cutting issue. This Donor Tracker Insight gives an overview of DPI funding and highlights key opportunities for advocates in support of increased and improved DPI funding.

DPI + development

What is DPI, and why is it important for development?

DPI can be defined in essence as an approach to digital transformation that emphasizes open solutions, open standards, and open protocols. In other words, DPI is a digital scaffold to enable the delivery of effective public services at scale. DPG are open-source solutions such as open software, open data, open AI models, open standards, and open content, that adhere to privacy laws and best practices, do no harm by design, and help attain the SDGs. DPG can be embedded in DPI to improve reach and accessibility.

After the September 2023 G20 meeting in New Delhi, India, the G20 members signed the New Delhi Leaders’ Declaration. The declaration showcased opportunities and pathways to build a better future, primarily through just energy transitions to improve employment and livelihoods, as well as strengthen economic resilience. Leaders identified DPI as a key instrument and enabler for inclusive and sustainable development. They committed to providing technical assistance and funding support for implementing DPI in low- and middle-income countries.

Open, just, and equitable DPI can be instrumental to achieving SDG #16. The importance of DPI to ensure government transparency, delivery of public services, efficient governmental responses to emergencies, and equitable social safety nets cannot be understated. Advances in DPI can unlock benefits across multiple sectors, including resilience to public health crises, agriculture and sustainable food production, transparency of government infrastructures, emergency response and preparedness, and population-wide infrastructure benefits.

DPI can be divided into core DPI and DPI use cases, also known as applications. Core DPI includes collecting and sharing information on digital identification, including platforms allowing digital payments from the public to private sector and platforms to share information and data across institutions. The scope of use cases is broader and includes digital solutions across many sectors, such as digital technologies for pandemic tracking or digital satellite products in agricultural development.

Funding evolution + donors

How has funding for DPI been evolving, and who are the top donors to DPI?

ODA is an important source of international funding for DPI. Additional funding for the implementation of large-scale core DPI projects come from loans from MDBs and DFIs, as well as from national funding. Grants from DAC donors support technical assistance to low- and middle-income countries designing DPI solutions, as well as supporting the rollout of safe and inclusive DPI, namely policy and regulation development. Funding for DPI has increased significantly since 2015, mirroring increased interest in digital applications worldwide.

Data from the OECD CRS dataset shows that funding for DPI increased by over 150% between 2017 and 2021, with almost US$1.2 billion disbursed in 2021 to DPI-related projects. ODA from DAC donors provided around 60% of the total funding, while MDBs provided 23% and private donors, mainly philanthropies, provided 17%.

Top DAC donors to DPI are the UK, Germany, US, Sweden, and Canada. Together, these donors constituted 41% of total DPI funding and 72% of DPI funding from DAC donors in 2021. South Korea, EUI, France, Norway, and the Netherlands are also important donor markets.

Themes + funding channels

What are important DPI thematic areas, and how is DPI funding channeled?

DPI-related funding from DAC donors is primarily nested within global health and communication sectoral funding. Main global health DPI projects have been related to the support of platforms for digital health services and digital applications for disease surveillance and contact tracing related to HIV, tuberculosis, and malaria, as well as COVID-19. Communication projects have focused primarily on delivering digital financial inclusion through mobile internet and data protection for digital payments and digital banking.

Funding to DPI-related projects in other sectors has been primarily related to the use of big data for emergency response, such as missing person databases and platforms for humanitarian help, as well as data sharing platforms for e-government and e-learning.

Overall, projects financed by DAC donors appear to be small, averaging less than US$1 million each. This can be linked to the fact that projects are more focused on technical assistance and policy development as opposed to large-scale implementation. In contrast, MDBs have consistently supported broader in-country implementation. An illustrative example of this trend is a project financed by the IADB in 2019, which dedicated over US$300 million to the improvement of Colombia’s economic connectivity, enhancing policies for digital economy and for digital transformation.

Funding from DAC countries has been geographically concentrated in Sub-Saharan Africa. Africa as a continent captured over 50% of DAC DPI funding between 2017 and 2021. Private donors also largely focused on Africa, whereas regional MDBs financed more projects in South and Central America and Asia.

DPI funding from DAC donors is disbursed mainly through international and donor-based NGOs. More than 10% of DAC funding is channeled through central governments and non-profit institutions controlled and primarily financed by a central government. MDBs channel over 95% of their funding through central governments. On the other hand, private donors channeled a large amount of funds through universities and think tanks. Over 50% of DPI-related funding from private donors in 2021 was channeled in this way.

Future of DPI

How is DPI funding expected to evolve?

Funding from top DAC donors to DPI is expected to increase, driven by a generalized interest in digital solutions to a variety of issues in the development space. Even with shrinking budgets in sectors such as global health and agriculture, funding for digital infrastructure is increasing. Data suggest that this interest will likely lead to a redistribution of ODA funding in favor of digital applications rather than core DPI. Funding from the US, Sweden, EUI, Norway, Canada, South Korea, the Netherlands, and France is expected to relatively increase in the mid to long term. Reprioritization of funding towards other pressing priorities such as the war in Ukraine and general stagnation of ODA levels prevent a more dramatic increase in funding, however, general interest in digital issues is on the rise.

Projects concerning digital health, digital agriculture, digital government, and digital financial inclusions are likely to attract more funding. Large-scale programs with a clear digital focus, such as the European Global Gateway Strategy and the Global Digital Compact, are likely to increase DPI-related projects and funding across the whole donor landscape.

Advocacy opportunities

What are upcoming key opportunities for DPI advocates?

The digital space suffers from constraints in overall development budgets, albeit less so than some other sectors. Although DPI-related funding will likely increase in the mid to long term, it is still important for advocates to support projects focused on open, just, effective, and inclusive DPI.

There are many avenues for advocates to achieve a meaningful impact on DPI development. They include:

• Advocate for more ambition on DPI-related funding: Use the momentum built within the New Delhi Declaration to increase support across donor markets. There are opportunities to advocate for an increase of funding within the framework of the currently developing US digital policy, or to advocate for more EU funding in the framework of the Global Gateway by explicitly defining DPI-related funding targets;
• Build evidence on linkages between core DPI and national development priorities: Given that core DPI remain underfunded, there is an opportunity to build the evidence to link core DPI to donor priority outcomes with the aim of increasing support and funding. For example, building evidence to link core DPI and the SDGs could direct funding towards core DPI within projects related to the SDGs; and
• Increasing funding to DPI with use cases: With donors focusing on digital applications, the use of innovative technologies and AI-driven tools will increase funding for DPI via use cases. Sustainable development use cases can further the application of novel approaches and applications which promote social justice, inclusion, climate resilience, and gender parity.

Multilateral forums, as shown in the 2023 G20 and UN General Assembly meetings, are potential opportunities to increase overall awareness of DPI. COP28 in November 2023 has the potential to be a catalyzing event for DPI funding, showcasing the importance of DPI for climate resilient sustainable food systems, conservation work, as well as the establishment of digital, large-scale early warning systems for climate disasters that could drastically reduce the climate vulnerability of millions of people.

The Summit of the Future, slated for September 2024, will bring world leaders together to develop a new international consensus on methods for a better present and safer future. The summit will represent a huge opportunity for DPI advocates to highlight concrete, realistic, and holistic digital solutions to challenges highlighted by the Universal Declaration of Human Rights, the 2030 Agenda, the Paris Agreement, the Addis Ababa Action Agenda, and many others.

Other upcoming key events in the near future are re:publica 24, which is the main and most important digital event on digitalization in Europe, the Paris Peace Forum, linking DPI to human rights and collective action, and any event organized by the Digital Public Goods Alliance, a multi-stakeholder initiative to accelerate the attainment of the SDGs with investment in DPG.