Structuring global funding for social protection: The Global Public Investment approach

The urgent need to fix the gaps in the global financial institutions that leave social protection under-funded, especially in low-income countries, is increasingly widely recognized. This article suggests that the Global Public Investment (GPI) approach offers an opportunity to provide a fresh start for social protection financing. GPI can enhance the building of universal social protection floors and systems, especially for the poorest countries. Including non-traditional donors and ensuring a fair decision-making process will secure higher levels of funding to build and strengthen universal social protection systems and floors to benefit those in need worldwide. This article analyzes how this approach could be effective whether the idea of a ‘Global Fund for Social Protection’ (GFSP), proposed to embody solidarity and responsibility in addressing profound gaps in social protection globally, operates independently from or is integrated into an already-existing intergovernmental organization.

A clear financing gap

The existing global financing frameworks have consistently failed to allocate an equitable share of development resources to social protection, leaving 4.14 billion people – 53.1% of the world’s population, predominantly in low- and middle-income countries – deprived of any form of social protection (United Nations (UN), 2021). In Africa, for example, 92% of working women are trapped in the informal economy, effectively excluding them from formal social security systems (ILO, 2021). Levels of investment remain alarmingly low; for instance, social protection accounted for just US $2.4 billion, or 1.2% of total Official Development Assistance (ODA) in 2019 (ODI, 2021). This disparity is made starker by the massive increase in billionaire wealth, which has increased by trillions of dollars in recent years (UN, 2021).

Four factors to consider as we build a new approach to global financing for social protection

First, let us consider decision-making processes, allocation, incentives, and sustainability in ODA procedures. Decisions are taken by Organisation for Economic Co-operation and Development (OECD) members, mainly from the global north. Due to this lack of representation, the concerns of ‘recipient’ countries struggle to influence the agenda. For instance, Chile, Uruguay, Antigua, and Barbuda, supported by other Latin American and Caribbean countries, requested adding a fifth category to the allocation list of countries during their graduation process in the frame of the Development in Transition approach. This, however, ultimately did not influence the Development Assistance Committee (DAC) agenda, as they were effectively graduated and ceased to receive ODA in 2018 (Agencia de Cooperación Internacional de Chile (AGCI), 2019). We need to transcend narrow decision-making frameworks to ensure sustainable allocations that empower countries to make decisions aligned with their own development goals, thereby fostering ownership and accountability. Furthermore, the unpredictability of ODA, not to mention its insufficient quantity, makes it an unreliable source of social protection funding, hindering long-term planning efforts.

Second, a fundamental challenge arises from the reliance on GDP per capita as the primary development indicator. This continued reliance diverges from the commitment made by UN Member States in 2015 when they adopted the 2030 Agenda and the Sustainable Development Goals. ¹ A substantial majority of the world’s impoverished population resides within middle-income countries (estimated at over one billion people (UNDP, 2023)), so using country-income levels as the sole measure of development progress obscures more than it elucidates regarding the factors influencing global improvements in social well-being.

Third, the process of ‘graduating’ from ODA, entailing the reduction of support from various sources, poses a risk to the stability and progress of ODA-recipient nations. Graduation from ODA not only means an end to receiving ODA (concessional public money and highly concessional loans) but also the start of increased dues to international organizations and loss of access to scholarships, among other impacts. ²

Fourth, the use of GDP per capita as the only indicator invisibilises women’s poverty, with its causes and potential remedies, and fails to adapt to the evolving geography of poverty, masking the full extent of global human vulnerability, socio-economic insecurity, and poverty.

How GPI can contribute to closing the gap

Valuable insights emerge from examining the experiences of extant global funds. These include the imperative for any new fund to avoid underfunding, reject stringent conditions imposed by the traditional ‘donors’, engage the private sector thoughtfully, actively involve civil society and other non-traditional partners, foster participatory governance, ensure non-patronizing approaches, and adequately resource stakeholder engagement policies and plans (Yeates et al., 2023). In particular, the mode of access to finance from global funds is a critical factor in the acceptability of and engagement with the fund (as Yeates et al. (2023) found in the case of the Adaptation Fund). Similarly, as the study also found, the principle of universal participation by all countries in the governance structures of global funds, especially those in the global South, is a key factor in country ownership of global funds (this was notably the case for the International Fund for Agricultural Development; Yeates et al., 2023). The GPI approach emerges as a viable and transformative solution to bridge these existing gaps.

GPI, developed collaboratively through a process of co-creation among development experts, prioritizes concessional international public finance to tackle global challenges such as building and enhancing universal social protection and funding the Sustainable Development Goals (SDGs).

Breaking away from traditional donor-recipient dynamics that are embodied in ODA while upholding the responsibility of the wealthiest nations to contribute according to their means, GPI is grounded in three principles that advocate for a more equitable and universal approach to addressing global challenges of profound social protection financing deficits: all contribute, all benefit, all decide.

In a GPI approach:

• 1. All countries contribute according to their means: GPI operates through a tiered system of country-level contributions. Even the poorest countries contribute, albeit as heavy net recipients. This inclusive contributory approach allows all countries to participate in governance and decision-making. Existing institutions often perpetuate hierarchical, self-serving, and patronizing frameworks that undermine effective development. It is imperative to move from a ‘charity’ funding model to one which actively promotes country ownership. Promoting national ownership implies thinking about fairer conditionalities linked to the granting of concessional funds, thus encouraging the autonomy and responsibility of the traditionally recipient nations.

• 2. All countries benefit according to need: a GPI model would mean that countries are not categorized strictly as donors or recipients, and they do not graduate from recipient status. Instead, countries’ needs are regularly reassessed, and funding is allocated based on a fair-share arrangement.

• 3. All take part in the decision-making process: GPI proposes a statutory framework within open and transparent decision-making spaces. Prioritizing the alignment between a reformed international financing system with partner countries’ social protection needs and policies is essential to ensure sustainability and effectively enable governments to make serious in-roads into building robust social protection systems suited to their circumstances.

We need to build a fairer international financing system to close the social protection funding gap. By building that system around GPI principles, we would ensure that all countries are directly involved in the decision-making process, contribute according to their means, and receive support based on their needs. Furthermore, we would be establishing structures that are sustainable and capable of responding to persistent global challenges over the long term, adapted to the 21st century. By moving beyond ad hoc approaches to create more reliable mechanisms, we could ensure fair decision-making processes to enhance the effectiveness and legitimacy of funding allocations. In addition, adopting more comprehensive indicators for funding allocation, recognizing the limitations of relying only on GDP per capita, will reflect the multidimensionality of development (Development Initiatives et al., 2023).

A coherent global funding mechanism for social protection should prioritize adherence to GPI principles to ensure equitable contribution and distribution formulas, alongside robust governance frameworks. Putting GPI principles into practice would make a significant contribution to ensuring fairer and more context-appropriate ways of increasing overall resources available for universal social protection and distributing public international finances to end the cruelty of poverty and meet human need.