This blog accompanies our comprehensive infographic leaflet on Financing for Development trends across regions. For those interested in the source data and methodology, we have attached the original document containing all references and data sources used in this analysis, including the OECD, World Bank, IMF, UNCTAD, and regional development banks.
The complex world of development financing is evolving rapidly. Our new infographic provides a comprehensive snapshot of key financial flows to developing regions and highlights critical trends that European policymakers should consider.
In a global economy marked by multiple crises – from debt distress to climate emergencies – understanding the full picture of development finance has never been more crucial. Official Development Assistance (ODA) remains important, but it’s just one piece of a complex puzzle that includes remittances, public and private sector investments, trade, tax revenues, and multilateral development bank funding.
Our new infographic synthesises the latest data on financial flows to Africa, Latin America and the Caribbean (LAC), and Asia, revealing both opportunities and challenges for European development policy.
Regional Disparities in Development Finance
The data reveals striking regional patterns that demand differentiated policy approaches:
Africa: High Vulnerability, Limited Resources
Africa received approximately $73.3 billion in ODA (2020-2022 average), with the bulk directed to Sub-Saharan Africa ($60.9 billion). While this makes Africa the leading ODA recipient region, these flows must be viewed alongside significant challenges. Africa loses $88.6 billion annually to illicit financial flows – equivalent to 3.7% of the continent’s GDP. Only 30% of African Small and Medium Enterprises are registered for tax, with a formal Micro and Small Medium Enterprises (MSMEs) finance gap of $331 billion. African economies show lower tax-to-GDP ratios (15.6%) compared to other regions. The region also faces the highest climate vulnerability, with 8.34% of Sub-Saharan Africa’s population affected by climate disasters in 2022.
Latin America and Caribbean: Private Flows Dominate
LAC received significantly less ODA ($9.6 billion on average between 2020-2022) compared to Africa. The region has stronger domestic resource mobilization, with tax-to-GDP ratios of 21.5%. Private sector involvement is substantial, with $193.2 billion in FDI inflows (2023) and $156.8 billion in remittances. Impact investments represent 23% of total financial flows to the region – the highest among all. The LAC countries also lead in private participation in infrastructure projects (98 projects in 2023).
Asia: Economic Powerhouse with Persistent Gaps
Asia region received $51.7 billion in ODA (2020-2022 average). The region hosts the highest FDI inflows ($677.6 billion in 2023), while remittance flows are substantial ($362.8 billion in 2023). Asia also shows the highest government revenue as percentage of GDP (35.65%). Digital financial inclusion is advanced, with 82.85% of the population having accounts at financial institutions or mobile money providers.
Beyond Regional Comparisons: Critical Trends for Policy Consideration
Our data highlights several cross-cutting trends that European policymakers should address:
1. Climate Finance: Urgency Meets Inequality
The ND-GAIN Index reveals that the most climate-vulnerable countries are predominantly in Africa, with Chad, Central African Republic, and Eritrea topping the list. In 2022, over 8% of Sub-Saharan Africa’s population was affected by climate disasters, compared to 1.35% in Asia.
Yet, these vulnerable regions contribute minimally to global emissions. Africa accounts for just 4.66 billion tons of greenhouse gas emissions (2023), compared to Asia’s 29.99 billion tons. This stark disparity underscores the need for climate justice in financing arrangements.
2. Debt Distress: A Growing Concern
Government debt burdens have reached concerning levels across regions. General government gross debt stands at 67.3% of GDP in Africa, 73.9% in LAC, and 92.4% in Asia & Pacific. External debt compositions vary significantly, with private creditors accounting for 74% of LAC’s external debt but only 44% of Africa’s.
The reform of the international financial architecture remains critical, with Special Drawing Rights (SDRs) playing different roles across regions. While many African countries have drawn down their SDR allocations for fiscal purposes and pandemic response, LAC countries have predominantly used SDRs to increase international reserves.
3. The Private Sector: Untapped Potential with Regional Variations
Private sector engagement varies dramatically across regions and sub-regions across regions and sub-regions. Impact investments represent 23% of financial flows to LAC but only 12% to Sub-Saharan Africa and 3% to Southeast Asia. Private participation in infrastructure projects shows similar disparities (98 projects in LAC versus 43 in Sub-Saharan Africa in 2023). The MSME finance gap ranges from $185 billion in MENA to $2.4 trillion in East Asia & Pacific.
4. Digital Finance: A Revolutionary Force with Persistent Divides
Digital technologies are reshaping financial inclusion. Internet access varies from 37.1% in Africa to 97.2% in Asia & Pacific. Mobile money accounts are held by 33% of adults in Sub-Saharan Africa. Account ownership at financial institutions or mobile money providers reaches 82.85% in East Asia & Pacific but only 55.07% in Sub-Saharan Africa.
Conclusion: Toward a nuanced European Approach to FfD4
The data presented in our infographic highlights the need for European policymakers to move beyond one-size-fits-all approaches to development finance. Regional and sub-regional differences in financial flows, development challenges, and resource potentials call for tailored strategies that recognise the unique contexts of Africa, LAC, and Asia.
As discussions on financing for development continue at global fora, European actors can lead by advocating for data-driven approaches that respond to these diverse realities while addressing shared challenges such as climate change, digital transformation, and sustainable development.
Recognising the stagnation in multilateral FfD4 progress, as detailed in our prior blog and publication, a region-based strategy presents a crucial opportunity for actionable progress. By prioritising regional cooperation and context-specific solutions, we can break the current impasse and inject vital momentum into FfD4 implementation
Blog and infographic leaflet authored by Mariana Camelo (ETTG), with contributions by Iliana Olivié (ETTG & Elcano Royal Institute), Daniele Fattibene (ETTG), Maria Santillán O’Shea (Elcano Royal Institute), Niels Keijzer (IDOS), Karim Karaki (ECDPM)
Indicator compilation by: Maria Santillán O’Shea and Lucía Fernández (Elcano Royal Institute)
This blog includes data compiled with the assistance of AI technology
