Appendix 2: Leveraging Financial Intermediary Funds

One innovative financial arrangement of particular interest for digital public infrastructure (DPI), a Financial Intermediary Fund (FIF), enables funds to be raised from a variety of public and private resources in a coordinated response to a global initiative, such as the provision of a global public good. FIFs often involve innovative financing and governance arrangements, as well as flexible designs, that enable the financial intermediary institution to raise or aggregate funds and then disburse the funds to a range of recipients. By way of example, G20 leaders recently committed to the establishment of a FIF for pandemic preparedness and response (PPR). It is anticipated that this PPR FIF will incorporate a blended financing method in an attempt to close an estimated $10.5 billion (USD) gap in PPR financing.

At a high level, FIFs involve multiple parties with different or overlapping roles:

• FIF donors and investors, which can be private- or public-sector parties contributing funds for a specific cause.
• Financial institutions, such as the World Bank, can assume the role of Trustee of the funds, providing a range of agreed financial services that include receiving, holding, and investing contributed funds, and then transferring them, as instructed by the FIF governing body. The World Bank, which serves as a Trustee of 26 FIFs, may also provide customized treasury management, bond issuance, hedging intermediation, monetization of carbon credits, or other agreed financial services. For example, in the case of the International Finance Facility-Immunisation (IFFIm), the World Bank uses long-term, legally binding donor pledges to back the issuance of vaccine bonds in capital markets to raise up-front money for Gavi, the Vaccine Alliance programs. In addition to a trustee role, international organizations such as the World Bank may have other roles, including serving as an implementing agency (see below), providing secretariat services to the FIF, and being a FIF donor or investor.
• Implementing agencies, such as United Nations agencies or multilateral development banks (including the World Bank itself), that receive funding from the Trustee are responsible for project and program implementation. Alternatively, when a FIF’s governing body has the legal capacity to take on responsibility for the use of funds, as in the case of the Global Fund to Fight AIDS, Tuberculosis and Malaria, the Trustee remits the funds from donors directly to in-country, third-party entities that administer them.
• The FIF Governing Body, usually called the Trust Fund Committee, is responsible for setting the strategic direction of the FIF. In the case of the Clean Technology Fund, the Trust Fund Committee comprises representatives from contributor countries (donors), recipient countries (beneficiaries), a senior representative from the World Bank (overall coordinator of the committee), and representatives of multilateral development banks (implementing agencies).¹

By offering innovative arrangements overseen by trusted institutions, FIFs offer a coordinated global financing framework that could be tailored to meet the needs of the global DPI effort.