In April 2024, Mr. Pradeep Kurukulasuriya was appointed Executive Secretary of the , a flagship catalytic blended financing platform of the United Nations. His tenure begins at a critical moment, as the international community ramps up its push to achieve the Sustainable Development Goals (SDGs) by 2030.
The UN Chronicle availed itself of the opportunity to ask the Executive Secretary about some of the challenges facing UNCDF moving forward, and his vision for the Fund’s unique role in implementing the 2030 Agenda for Sustainable Development. Below is Part 2 of our two-part interview.
18 June 2024
Interview
As the world shifts towards digital economies and societies at an astonishing pace, the promises and perils of new technologies are exposed, including the risk of creating even greater disparity between the developed and least developed countries in terms of connectivity. What are your priorities for strengthening the UNCDF approach to digital financial inclusion and bridging the digital divide?
From the UNCDF standpoint, we have a tremendous opportunity to rethink our investment mandate—a mandate created nearly 60 years ago—and retrofit it to the digital economy. Ultimately, our focus will be on crowding-in finance towards development projects because that is the surest way we can contribute to the achievement of the SDGs. Digital tools enhance the prospect of effectively crowding-in finance by supporting the delivery of capital where it otherwise might not go.
But when you look at the history of UNCDF, our work in digital financial inclusion has had lasting impact well after the end of a given programme, because it gave us a foothold to mainstream financial inclusion at the level of national policy. Take our work in the Pacific. From 2008 to 2020, UNCDF supported over 2.2 million Pacific Islanders to access and use formal digital financial services. Imagine that—2.2 million people! This dovetailed into our working with policymakers and central banks in supporting national financial inclusion strategies in several countries. Crowding-in finance is about financial instruments but it’s about more than that. It also relates to supporting ecosystems that can enable the crowding in of finance. Digital financial inclusion has been a great way for us to support the rise of such ecosystems.
Upon your appointment, it was emphasized that you will focus on boosting the "crowding-in" of private capital to scale up development impact where it's needed most. Could you elaborate on this approach, and on why UNCDF is uniquely equipped to pursue this kind of investment mandate? How can that mandate be strengthened?
Our approach reflects what makes us uniquely equipped. It’s the mandate—a mandate that allows us to deploy grants, loans and guarantees in the form of blended finance. But what does this mean at a practical level? It means we have a suite of financial instruments that we can deploy to benefit the markets that are the most overlooked by the international financial architecture. I already mentioned grants, loans and guarantees. Alongside these instruments, as part of an integrated service offering, we can also deploy investment advisory services to United Nations Country Teams as well as directly to small and medium-sized enterprises (SMEs). We can partner with asset management firms around equity-investment funds. We can work as a provider of project pipeline to development finance institutions (DFIs), international finance institutions (IFIs) and development banks. We can innovate insurance products that leverage digital payment technologies for quick payouts. The mandate is the approach. The mandate is what makes us unique.
So, in my humble view, the mandate doesn’t need to be strengthened. But one of my main responsibilities as Executive Secretary is to ensure that the business model of the organization optimizes the mandate. This isn’t important for the sake of UNCDF. It’s important because if the status quo in development finance remains, the least developed countries (LDCs) and other developing countries will have no glidepath to long-term prosperity. UNCDF has a role to play in crowding-in finance for the markets that other finance players typically overlook. We have the mandate, the instruments and the capabilities to connect these markets to the financing that they need, so that they can drive their development visions into reality.
UNCDF asserts there must be a strategic shift from viewing nature as a resource to treating nature as an asset, but more than half the world’s total gross domestic product (GDP) is dependent on nature. How do you plan to catalyse UNCDF private investment in ways that identify solutions and transform markets to promote the protection and enhanced valuation of nature assets?
This is an example of translation. Investors and other private sector actors understand the investment potential of nature assets, but they may not be familiar with the markets where promising opportunities exist because they are often overlooked markets. On the public sector side, governments are eager to crowd-in private finance for biodiversity conservation purposes, but they may lack the capacities pertaining to investment and development to appreciate how to cultivate such opportunities. UNCDF, as a United Nations platform, can be the honest broker. We can guide, with our neutrality and core purpose of supporting SDG solutions, the private sector in terms of identifying SDG-compliant pipelines, and we can serve as an entry point through our country footprint and instruments. Our experiences and lessons learned, including from our failings, which we will inevitably experience, should also guide development discourse on how to best crowd-in finance from the capital markets to frontier, last-mile markets.
But at the same time, there is more that is required to nature asset investment than translation. There is connection, as in connecting the dots. Investment in nature assets needs to be seen through the peacebuilding-climate-development nexus. Water, coral reefs and forestry are more than nature assets. They can serve as drivers of peace and stabilization in a time of growing conflict. So, this is another role UNCDF can play. We can connect the dots for relevant stakeholders. Presenting the peacebuilding case for scaling investment in nature assets, which will only create a virtuous cycle in terms of crowding-in finance.
UNCDF, as a United Nations platform, can be the honest broker. We can guide, with our neutrality and core purpose of supporting SDG solutions, the private sector in terms of identifying SDG-compliant pipelines, and we can serve as an entry point through our country footprint and instruments.
Luckily for me, this is an area of work UNCDF has explored even before I arrived. With the support of Switzerland, we have been overseeing the , which promotes investment in transboundary water management. In fact, we reached a major milestone last year when Blue 91麻豆天美 supported the adoption of a joint investment plan on transboundary water flows between the four member States of the Gambia River Basin Development Organization (the Gambia, Guinea, Guinea Bissau and Senegal). The , which UNCDF is proud to be a part of, is a blended finance facility to preserve coral reefs that has already raised over $200 million for investments and is supporting projects in 19 countries. And UNCDF was proud to partner with the Government of Germany in the to use blended finance to crowd-in capital for peace-positive projects, notably to capitalize small and medium-sized businesses in conflict-afflicted areas. I am excited about the prospects of scaling these beyond what they are today.
The gap between per capita income growth in the poorest and the richest countries has widened over the past five years. What is your overall vision for how UNCDF can help reverse this trend and support developing countries and LDCs in achieving their development agendas in accordance with the SDGs?
Developing countries, especially the least developed ones, are furthest behind, resulting in an inequitable context that is untenable for long-term prosperity. And the truth is, per capita income growth may not even be the best statistical indicator of the situation. One of the more powerful findings of the was that the median debt service burden for LDCs rose from 3.1 per cent of revenue in 2010 to 12 per cent in 2023. LDCs are going to have to channel much of the growth they experience towards servicing their debt, while their access to finance will only get more closed off in the future. That is not the path that will lead us to achieving the promise of the SDGs, to leave no one behind.
Ultimately, what we are talking about is something that United Nations Development Programme Administrator Achim Steiner, who also serves as Managing Director of UNCDF, labelled a “glass ceiling” in financial markets and financial engineering. If I can build on the Administrator’s point, this is a glass ceiling that exists right in between the deployment of grants that are accessible to LDCs but small in volume, and commercial capital that is larger in ticket size but practically inaccessible to LDCs and other developing countries. UNCDF has, can, and must help countries shatter that ceiling.
We can operate in that space where the financial glass ceiling exists through our provision of true concessional financing through our unique ability to blend grants with loans and guarantees. And we can do so because we are prepared to go and designed to go to markets in ways that DFIs and IFIs simply cannot. We can take on more risk because we are not constrained by a credit rating or liabilities to investors. We can offer truly concessional interest rates on loans and low guarantee fees because we are capitalized entirely by grants from Member States. We can provide capital at smaller and more appropriate ticket sizes for projects as well as local and national governments in riskier markets, which DFIs and IFIs are less inclined to do because it would be too expensive for them to service. The fact that DFIs and IFIs typically work in larger ticket sizes and look to carry lower default rates presents precisely the gap that UNCDF will look to fill.
Finally, our governance arrangements are very different from other global funds that are out there, which means the complexity and bureaucracy is far less than what would otherwise be a given. So, in the end, UNCDF can provide early and patient financing in the riskiest and most overlooked markets in a much more nimble and agile way, with the goal of crowding-in finance to scale sustainable development in the future.
We can take on more risk because we are not constrained by a credit rating or liabilities to investors. We can offer truly concessional interest rates on loans and low guarantee fees because we are capitalized entirely by grants from Member States.
Perhaps this speaks to the best way we can partner with the countries we work with. Developing countries and LDCs have visions for national development. UNCDF can be their co-investor, as our Managing Director also recently stated. We can be co-investors in their national sustainable development visions as well as in expanding financing for development more generally.
Now, this is not to say that we are ready to roll today. I have come into an organization that has the potential and, indeed, that has already put into place key elements to form the bedrock of the future. Recall that UNCDF is one of two United Nations organizations (the other being the International Fund for Agricultural Development) working towards pillar assessment to access the guarantee facility of the European Union. I have come, with my sleeves rolled up, to try to help UNCDF achieve this amazing potential! In fact, if UNCDF did not exist today, I would bet that the world would create it as a disruptor to the current system of development finance.
Do I sound like an optimist? Sure. Because I am one. And because the greatest moments of human history occurred because the optimists kept working while the pessimists kept talking. I am bringing a lot of optimism to this role, and to the vision and mission of UNCDF. The Fund had accomplished a lot before I got here. But there is a lot left for the organization to achieve and we do not have the time to do anything else except strive to overachieve. That’s what I bring to the job. And if this motivates you, then let’s work together so we can get done what we know needs to get done.
End of Part 2. For more, check out Part 1 of this Chronicle Conversation, in which Mr. Kurukulasuriya discusses progress and challenges in supporting women’s economic empowerment, and the scaling up of climate finance, including the opportunities and innovative products available for adaptation and mitigation.
The UN Chronicle is not an official record. It is privileged to host senior United Nations officials as well as distinguished contributors from outside the United Nations system whose views are not necessarily those of the United Nations. Similarly, the boundaries and names shown, and the designations used, in maps or articles do not necessarily imply endorsement or acceptance by the United Nations.
