Where’s the Money?

Global efforts to build safe, inclusive digital public infrastructure (DPI) have gained momentum in recent months. September saw the G20 New Delhi Leaders’ Declaration include commitments for global financing and technical assistance for DPI, as well as the UN mobilizing global leadership and $400 million to build safe and inclusive DPI for 100 countries by 2030. With DPI now announced as one of the 12 high impact initiatives with the potential to get the UN Sustainable Development Goals (SDGs) back on track, the question of how to sustainably finance this effort remains a critical gap.

Why has financing not been forthcoming for DPI?

A cross-sector group of panelists recently came together at Financial Inclusion Week 2023 to discuss some of the most pressing sticking points from their respective sectors, drawing on their joint report, Financing Digital Public Infrastructure: Approaches to Sustain Digital Transformation. Report co-authors Silvana Rodriguez from New America, Fernando Morera from EY and Jordan Sandman from Co-Develop were joined by senior public sector expert Anders Hjorth Agerskov from the World Bank Group to highlight the following major obstacles:

1. Limited understanding of DPI and the underlying business case hinders financing collaboration between country, multilateral, technical, and philanthropic partners.
   
   While many larger economies are making investments in their own digital infrastructure systems, efforts to support a DPI approach with additional financing opportunities is currently gaining the most traction in developing countries. But both governments and the development actors that often finance such infrastructure are learning how to safely leverage digital technologies for broad public value. Requests for DPI-related financing may be throttled by a lack of capacity, insight, or access to the kind of knowledge needed to discern how digitalization can help governments reinvent how they do business. Neither is the business case being made for how much will be saved or gained in revenue from putting foundational DPI systems in place. This points to a fundamental need to raise awareness across all stakeholders around the potential benefits and availability of DPI, as well as to build the in-country capacity that underpins DPI ecosystems–the technical skills as well as the knowledge of financing mechanisms, policy development, procurement, and governance processes.
   
2. The DPI ecosystem needs mechanisms for sectors to work together.
   
   The long list of challenges underlying sustainable financing–as well as the respective strengths that each sector brings to the table–make it abundantly clear that DPI requires an ecosystem where the public, private, and civil sectors can work together. Any sort of public-private partnership (PPP) must begin with the stakeholders coming together to lay out a joint vision. Further, while it is often assumed that government(s) and philanthropies will be the lead financiers of technology for the public benefit, the DPI space needs financing architecture to align incentives and funding from a diverse set of actors. Specifically, the ecosystem needs to build the mechanisms for the private sector to participate. These mechanisms could range from the special purpose vehicles seen in PPPs in the traditional infrastructure space; to the unified funding platforms driving global public goods like vaccines that accommodate both traditional and innovative financing; to hybrid for-profit/nonprofit models; to philanthropic involvement of the private sector in open-source endeavors, which can, in some cases, result in increased productivity for the firm. Regardless, it should have a laser focus on aligning the right investor to the right stage of development of a DPI project to extend the right incentives.
   
3. Despite their importance - foundational layers of infrastructure aren’t always enticing for funders that are aligned by sector.
   
   It is challenging to drive home the value proposition of funding foundational layers of tech infrastructure. If developed, deployed, and governed responsibly, DPI can reestablish the foundation for society-wide public administration, economic activity, and innovation–hardwired with accountability, effectiveness, equity, and security. But foundational layers of tech infrastructure are capital intensive and generally do not demonstrate substantial value until application layers are created. Private-sector institutions may be reluctant to invest in long-term DPI initiatives unless local governments, philanthropies, or other actors commit funding to de-risk early stages of development, and there is a clear articulation of potential return on investment. However, these early/mid-stage funders that typically channel funds towards specific sectors or verticals may hesitate to assume the financial, social, or political risks of pioneering new DPI on their own. This is particularly true if they fail to grasp the critical impact that DPI can have on an infinite number of sectors, including solutions for real-time payments, banking, e-commerce, communication, remote education, telehealth, resource management, natural disaster mitigation, and government services–among innumerable others.

These insights into the challenges underlying financing for DPI are not exhaustive. But they do suggest that DPI proponents will need to redouble their efforts to build awareness around the use cases, articulate the business cases, and build the financing architecture for the shared digital systems that could dramatically improve our daily lives. Otherwise, users who stand to benefit the most from DPI won’t advocate for it, leaders won’t support it, and funders won’t fund it.