Promoting development, enabling participation
Roughly 1.4 billion people live in poverty around the world. Not only do they have minimal income, they also have poorer opportunities in life and fewer chances to participate in political and social life.
Overcoming poverty is therefore the most important objective of international cooperation with emerging and developing countries. There are numerous ways to achieve this, and they impact on many levels. Social infrastructure plays a key role in fighting poverty. Developing and expanding this in the fields of healthcare and education is a priority for German Financial Cooperation, which the KfW Group carries out on behalf of the federal government. The building of a new school in the Egyptian Nile Delta is one example of many promotional activities.
Global Health Investment Fund der Bill & Melinda Gates Stiftung
On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW supports the Global Health Investment Fund (GHIF) of the Bill & Melinda Gates Foundation with a grant of EUR 10 million. This innovative financing instrument helps combat maternal and infant mortality in developing countries. The GHIF finances the development and market launch of new drugs, vaccines, diagnostic instruments and family planning products in developing countries.
Health is a basic individual right in the eyes of KfW and is a prerequisite for economic development in developing countries. This is why the bank supports approximately 140 healthcare projects in more than 30 countries around the world. These principally relate to the fight against infectious diseases, HIV prevention and family planning, but also strengthening healthcare infrastructure and healthcare services.
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Promoting family planning, strengthening social systems
Developing social security systems and effective family planning measures are crucial tools for bringing about a sustainable improvement in people's living conditions in emerging and developing countries. Here, KfW works on behalf of the German federal government.
Halving the number of those suffering from extreme poverty and hunger in the world by 2015 (compared to 1990) is the ambitious goal set by the international community during the United Nations (UN) Millennium Summit in New York in 2000. The international community wants to be judged by specific projects with regard to its efforts to improve healthcare, education and gender equality in emerging and developing markets.
These are set forth in the . The Millennium Development Goals apply around the world – and thus for the German federal government too – as a framework for international development cooperation. KfW supports the implementation and financing of associated projects. KfW Development Bank has carried out German financial cooperation projects on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) since the 1960s. With a volume of more than EUR 4.5 billion (2011) it is one of the most important instruments of German bilateral cooperation. The German federal budget has not been the only source of financing for some time now. Almost two out of every three euros come from funding that KfW sources on the capital market.
Impetus for reforms
All told, KfW Development Bank supports roughly 2,000 development projects in more than 100 countries in various sectors – from waste management to water supply. Alongside grants and low-interest loans, innovative instruments such as charitable trusts and the promotion of social enterprises are also used (see box above and p.46). In this context the bank cooperates with other countries and organisations in the global community. To strengthen self-initiative and responsibility, institutions in the partner countries are always responsible for implementing the individual projects. The overarching objective is to achieve sustained effects.
Through DEG, its subsidiary, KfW also supports business ideas and investments that make a contribution to sustained development in emerging and developing countries. For this purpose, DEG provides risk capital and loans at market conditions as well as comprehensive advisory services.
Focus on reproductive health
Sexual and reproductive health describes the human right to lead a satisfying and healthy sexual life and the freedom to decide about the number of one's children. This concept also covers the right of women to go safely through pregnancy and childbirth. Sexual and reproductive health provides freedom for professional fulfilment and the prospect of higher income.
This requires sex education and an appropriate supply of contraceptives and healthcare services. As one of the world's main donors in this area, KfW helps partner countries to design, finance and implement appropriate measures as well as develop the infrastructure required.
Expanding social security systems
Social security systems are crucial with a view to protecting populations from health and other elementary risks. The situation in many emerging and developing countries at present is that if the breadwinner falls ill, often the entire family runs into financial difficulties as they have to meet the costs of medical treatment whilst also coping with the loss of earnings. Due to severe poverty, the low ability to make contributions and the largely informal working conditions, less than 20% of the world's population is insured against basic risks through health or pension insurance for example.
Moreover, the either state-run or private social security systems are often inadequate and do not offer the minimum services required for social security as defined by the International Labour Organisation (ILO).
Developing and expanding social security systems generally requires the joint commitment of several development partners. On behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW took part in a pool funding framework for the Kyrgyzstan healthcare budget in collaboration with the World Bank and three other partners to support the introduction of a statutory contributions-based health insurance scheme in that country.
KfW is also involved in the world's first microinsurance fund as the largest investor, likewise on behalf of the Federal Ministry for Economic Cooperation and Development. The Leapfrog special fund established in 2010 aims to invest more than USD 130 million by 2019 in setting up and growing microinsurance companies. Over the coming years, these will protect roughly 25 million people in Africa and Asia against elementary risks such as illness, crop failures or the death of the main earner in the family.
Education as the key to the world
As the safest way out of poverty, a prerequisite for economic growth, and a boost for health and family planning, education is the driving force behind development. KfW works in emerging and developing markets to achieve international education targets.
For people in developing countries, getting a good education is the most promising way of improving one's own living conditions. It holds out the prospect of work and independent income, and goes hand in hand with a more conscious approach to nutrition and healthcare. It is also an effective contraceptive: the higher the ratio of women with a secondary education qualification in a country, the lower the birth rate. This improves the health of mothers and newborn children, and strengthens the role of women in society as a whole. In turn, better-educated women pay more attention to ensuring their children also achieve a satisfactory qualification.
From an economic perspective, a well-trained workforce boosts productivity, innovative potential, and can even directly affect the economic growth of a country. Politically speaking, the more educated someone is, the more they tend to demand their personal rights and take an active part in political processes.
KfW is involved in the "Education for All" initiative through KfW Development Bank on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ). In 2011 roughly EUR 1 billion was provided for investment and consulting services in the form of grants, low-interest loans, credit and equity investments. The bank particularly supports disadvantaged groups in primary and secondary education, and invests in the quality of services offered.
At the World Education Forum in Dakar in 2000, the international community agreed on the following objectives as part of the "Education for All" action plan:
- Expanding and improving early childhood care and education, especially for the most vulnerable and disadvantaged children
- All children, particularly girls, children in difficult circumstances and those belonging to ethnic minorities, have access to and complete free and compulsory primary education of good quality
- Ensuring that the learning needs of all young people and adults are met through equitable access to appropriate learning and life skills programmes
- Achieving a 50 percent improvement in levels of adult literacy, especially for women
- Gender equality in primary and secondary education
- Improving all aspects of the quality of education
Source: UNESCO (2000).
Expanding higher education
Supporting higher levels of education is increasingly coming under the spotlight too. Many children in emerging and developing countries have successfully completed their primary education and are now moving through into secondary schools or vocational training programmes. The ratio of those attending university amounts to only a fraction of the figure in industrialised countries. Yet poor countries also need highly qualified people, who can bring social, economic and environmental developments forward in the country as the "leadership elite". This is why the volume of vocational and higher education projects is growing in KfW's portfolio, including in the sense of lifelong learning. The bank is currently developing its potential for expanding the demand-driven financing of education, to which end it is also drawing on experience gained in Germany. Using products such as student loans, scholarships, education vouchers or cash transfers for poor parts of the population, the bank is focusing on pupils, apprentices and students in emerging and developing countries.
Tackling structural reforms
Once governments in emerging and developing countries have recognised the value of education in terms of the development of their country, they frequently set about gradually reforming the entire sector.
We help partner countries of the German federal government to draw up and finance education programmes spanning multiple years. Adopting programme-based approaches, we create favourable conditions for education together with our national and international partners – either by improving access to educational institutions for everyone, supporting public finance in a country, raising the quality of training, decentralising education administration or modernising the education system. Programme-based, sector-wide approaches have been employed in Mozambique, Malawi and Yemen for example.
Cooperation with private executing agencies
KfW is involved in this field via its subsidiary DEG. A key project in what is still a young education portfolio is driving the expansion of higher education in Brazil. In this emerging market, only one in every nine adults currently has a higher education degree, compared to the OECD average of 30%. The fees charged by state-run higher education institutions mean that it is mainly only children from well-to-do families that can study at this level in Brazil. However, having a broad swathe of highly qualified people is crucial for pushing ahead with positive economic development in the country, and ensuring as many citizens as possible can benefit from the growing prosperity.
This is why DEG supports the Brazilian education provider Anhanguera Educacional Participacoes S.A. (AEDU), together with two other development finance partners. The largest national provider of tertiary education operates private universities in more than 50 small and medium-sized cities in south-east Brazil, and also offers distance-learning courses. Its courses are designed for young students and employed people with medium to low incomes. AEDU educates roughly 220,000 people every year. The provider is able to keep its operating costs and tuition fees low by offering standardised curricula for the programmes and handling administration centrally.
Using financing of more than EUR 73 million – with DEG providing EUR 15 million in the form of an equity-equivalent loan – AEDU is set to establish further locations in the coming years. The company also intends to expand its study programme and involve existing universities in the project. This will all bring Brazil one step closer to the goal of providing high-quality education for all.