It was at a Partners voor Water gathering at Nieuwspoort in 2010 that I first heard of 'Financial Engineering'. Until then I would have refered to the geeks from the financial districts.
Checking investopedia I found financial engineering to mean "The creation of new and improved financial products through innovative design or repackaging of existing financial instruments". Did we not identify something similar to be at the roots of the recent financial crises? How come this term enters the area of development cooperation?
Only recently, when engaging with a number of funds that support Public-Private Partnerships. I realized that partnership development is not just about relationships, trust, transparency and the like, but is also about 'financial engineering'. May be not exactly in the meaning as described above. But it has similar features: How do you combine a number of financing and accountability frameworks dealing with different backdonor requirements still ensuring achieving your results?
The donor coordination gatherings in Paris, Accra and Busan have at least helped to get a certain degree of harmonization in funding frameworks of development agencies. However, now having to make the match with commercial banking, IFI's and private foundations again requires an entire overhaul of the system of accountability and reporting in case yo wish to treddle this path.
Financing and Accountability frameworks
In an attempt to reform their financing and accountability frameworks, many agencies are adopting the FAF of their major investor, which in certain cases may be a sensible thing to do. However, in case this investor appears to be less long-term then you had hoped, you have built your financing and accountability framework on foreign ground. My advice to agencies is to ensure the rigour of your own financing and accountability structure, matching it with your core mandate and mission and to contextualize it to the different donor demands. Second rule is: Keep it Simple and SMART. In the end investors do not have much time to read and need clear results.
Marrying the development and business financial and accountability frameworks in the context of public-private partnerships provides an excellent breeding ground for new varieties of financing and accountability systems. Still a lot of financial engineering to be done possibly leading to 'GMO-types' of programmes. Let us be careful to ensure the reproductive power of these hybrids is maintained in order to sustain these models beyond transition time.
New Tender new chances
As the new tender "Worldwide working with water" opens on July 16, new options for financial engineering may appear. As a participant in DIBcoop I will be following up on this tender. Naturally, anyone that wishes to make use of our services, guiding your company or organization through the tender procedure, is welcome to get in touch and we will keep you posted.
My name is Reinier van Hoffen.
Click here for a summary.
Also find the text of a lecture Dr. Achterhuis held at the 2012 Bilderberg conference.