Final project on financial development

Development is a life in peace, life without poverty and inequalities, respect of
human rights. Development is important to a country’s growth and affects the
wellbeing of the citizens as well. Prior to this course, I didn’t know much about the
development goals and the process of achieving it. I have gained great
understanding on the subject to be able to understand the projects going on in my
country and how it’s financed as a whole.
Sustainable development goals (SDG’s) are a set of goals to solve the development
needs of the present without compromising the ability of future generations to meet
their own needs. Below are the SDG goals:
Financing for development is the whole discipline, art and science of managing
money to be used to fund projects and assist countries in different parts of the world
to achieve the Sustainable Development Goals. Money is obtained usually from
individuals through taxes which is where most governments get money to finance
development. Other sources are investments in bonds, equities, savings, pension
funds etc

Development can be financed in different ways. Bonds and investments are loans
from investors through the capital market and fall under vaccine bonds, green bonds
or catastrophe bonds
• Grants- Cash transfers
• Concessional loans- Loans with very low or no interest rates.
• Loans- Loans with market rate interest.
• Equity investments (Private sector) – Financing provided in exchange for
partial ownership. Investor gains profit when company is performing well and
loses out when it is not or company collapses.
• Guarantees- Third parties agree to pay lender if borrower does not.
A country can use a mix of these depending on its conditions to fund its development
needs. Low income/fragile countries usually take up grants and concessional loans
for development which are usually in the form of ODA’s. Official Development
Assistance (ODA) is concessional finance sent from developed countries to
developing countries as measured by the Organization for Economic Cooperation
and Development (OECD). Below is an example of the distribution of ODA in Ghana
within a certain period of time.

Middle income usually goes for regular loans for development because they can
afford to pay back. Money is obtained through public and private resource
mobilization. Public resource mobilisation is raised from the country itself through
taxation and savings. Under public resource mobilisation is Domestic Resource
Mobilization (DRM).
Domestic Resource Mobilization (D.R.M.) refers to the generation of savings
from domestic resources and their allocation to economically and socially
productive investments. Such resource allocation can come from both the public
and private sectors. This is done through taxation, savings and other public revenue
generations.
SOME ISSUES OF DOMESTIC RESOURCE MOBILIZATION ARE:
• Problems with Tax administration.
• Weak capacity for implementation
• Obtaining effective and efficient tax policy.
• Illicit financial flows
• Corruption

SOME SOLUTIONS
• To put right measures in place to strengthen the tax administration system.
• To put the right tax policies in place.
• Combat illicit financial flows.
• Put measures and policies in place to monitor and combat corruption.
Private Resource Mobilisation refers to the generation of funds from private sectors
to be used for development. The resource allocation can come from local savings,
pension funds, sovereign wealth funds, institutional investors, foreign direct
investments etc.
Domestic Resource Mobilization has been a great issue in Ghana. The corruption
level of the country is extremely high which also makes it difficult for private firms to
invest. The tax system has loopholes. Majority of the companies are under paying
tax. Tax officials take bribes and under tax organisations and give low invoices. The
government expenditure is huge and not much has been put in place to manage
corruption.
The ODA’s sent in are not well monitored and unfortunately not the right amounts
are allocated to development. In my opinion, I believe a well monitored tax system
should be developed and tax systems and payments should be computerised. That
is the system should be set up online and be linked directly to a bank account
whereby, the computer system generates the tax code based on the business
registration process. The bill and payment should be linked to a bank account to
avoid any middle men.
This makes it easier to track payments and check codes against actual companies to
see if right payments are being made. I believe this would help make funds available

for other projects and would cut down on foreign aid and encourage private sectors
to invest.
REFERENCES.
1. http://www.jm.undp.org/content/dam/jamaica/img/Icons-
FINAL.png/_jcr_content/renditions/cq5dam.web.699.470.png
2. http://pubdocs.worldbank.org/pubdocs/publicdoc/2015/7/69291436554303071
/dfi-idea-action-booklet.pdf
3. What Is Development? Jan Eliasson. Deputy Secretary-General of the United
Nations https://class.coursera.org/fin4devmooc-
001/wiki/Week_1_Video_Talks
4. What is financing for Development? Susan McAdams. Senior Advisor,
Development Finance, World Bank Group.
https://class.coursera.org/fin4devmooc-001/wiki/Week_1_Video_Talks
5. The New Framework for Financing Development. Bertrand Badré. World
Bank Group Managing Director and Chief Financial
Officer.https://class.coursera.org/fin4devmooc-001/wiki/Week_1_Video_Talks
6. http://www.aidflows.org/GH_Beneficiary_View.pdf
7. (Taxation and aid for domestic resource mobilization (d.r.m.) aid: helping or
harming domestic resource mobilization in Africa.
http://www.oecd.org/site/devaeo10/44272298.pdf
8. http://citifmonline.com/2015/11/05/corruption-levels-scare-investors-send-
ghana/

Final project on financial development

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