Low-income countries developing sustainable financial systems: IFC

The low income countries including Bangladesh are adopting innovative and sustainable financial practices like reducing environmental and social risks, new green finance opportunities, lending to women, and financial inclusion to make economic and social progress, according to a new report released by International Finance Corporation (IFC) facilitated Sustainable Banking Network (SBN).

The report, "Necessary Ambition: How Low-Income Countries Are Adopting Sustainable Finance to Address Poverty, Climate Change, and Other Urgent Challenges," provides a first-ever look at the drivers and innovation that underpin sustainable finance efforts in low-income countries and captures lessons that will benefit other emerging markets.

The SBN includes 11 countries classified as low-income by the World Bank Group's International Development Association (IDA).

These countries had gross national income per capita below an established threshold of $1,175 in fiscal year 2020.

The countries – Bangladesh, Cambodia, Ghana, Honduras, Kenya, the Kyrgyz Republic, Lao People's Democratic Republic, Mongolia, Nepal, Nigeria, and Pakistan – face immediate and significant impacts from climate change, pollution, biodiversity loss, and social inequality that require urgent responses.

At the same time, however, the new report shows that the SBN IDA countries are keeping pace with more mature markets in driving the adoption of sustainable finance practices.

The new report provides timely case studies and tools for countries planning to leverage green and inclusive stimulus to rebuild their economies while supporting climate action and sustainable development.

"Sustainable development is not a choice, but a necessity. IDA countries are the most vulnerable to climate change and other environmental and social shocks. They will also be hardest hit by the social and economic consequences of the Covid-19 pandemic," said Georgina Baker, vice president of IFC, World Bank Group.

The report found that SBN IDA members' top priorities for future action include promoting green finance, such as green bonds and green loans, developing sustainable finance roadmaps, and supporting sustainable finance implementation.

Sustainable finance is a critical pathway for low-income countries to de-risk investments and spur the financial flows needed to strengthen economic resilience and social inclusion, particularly following shocks like Covid-19.

The SBN was established in 2012 to bring together financial sector regulatory agencies and banking associations from emerging markets committed to advancing sustainable finance. IFC, a member of the World Bank Group, is secretariat for SBN.