What is Community Driven Development?
Community Driven Development (CDD) projects are initiatives undertaken to aid development within poorer communities by providing them with funding. Community driven financing is a social development activity which has been accredited by the World Bank.
A World Bank report published in 2015 provides a clear understanding of the main aim of CDD projects which includes: sustainable development and poverty-alleviation through heightened capacity building, stakeholder involvement and transparent accountability.
CDD projects work by giving poor communities technical and financial resources, relevant information and guidelines so that they can collaborate with local governments and institutions to address their immediate needs. It is an extremely essential tool for many while for some it is the only way to help remote and vulnerable groups in a well-timed and plausible manner.
Promising CDD Projects Globally
Continuing on the World Bank (2015) report, CDD is an essential means to ensure community development. It is a widespread approach to combat social issues and to target critical circumstances where conflict, fragility and violence are prevalent. CDD projects have shown remarkable results around the world and are implemented in various regions.
Morocco: The National Initiative for Human Development (INDH) was launched in 2005. It aimed to improve the standard of living of the vulnerable segments within the population; through better economic propositions, increased access to basic social services and enhanced administration. It yielded positive results measured by 86% rise in household access to improved water supply, 21% increase in the mean household income and a 62% rise in access to infrastructure facilities.
Indonesia: The Investing in Nutrition and Early Years project was established in 2018. It is working to prioritize health, sanitation and water interventions; while aiming to increase early childhood education, social protection, agriculture and food security for pregnant women and their families. It gained success as it was adopted by 23 ministries, 514 regional governments and 75,000 villages.
Trends – Community Bonds in North America
Similar to CDDs, Community Bonds focus on transforming social capital into financial capital. In 2010, the first community bond was invented by CSI and 10 years later it is a well-known name in the world of impact investment.
In 2010 CSI used CSI annex (first Community Bond) which raised $2 million. Since then its usage has been replicated in Toronto and around the world. Impact investment is another name for this phenomenon and has helped Canadian communities resolve their evolving needs.
Four examples of impact investing within Canada today:
- Fira Fonds D’Inestissement Pour La Reléve Agricole
- Solar Share Community Bond
- RBC Generator Fund
While leading financial institutions (around the world) have made headway in impact investing it is still limited in Canada. There exists promising evidence of financial institutions leaping into impact investment opportunities (Harji, Reynolds, Best, & Jeyaloganathan, 2014).
RBC announced a $10-million investment in RBC Generator focused on countering environmental and social challenges. Moreover, TD Bank has seriously been assessing impact investing for both its Canadian and US operations.
Furthermore, according to the 2018 Impact Investment Survey conducted by the Global Impact Investing Network participants report that they invested $35.5 billion into around 11,000 deals in 2017.
During the coronavirus outbreak there has been an apparent increase in investor interest towards Community Bonds, as investors and companies try to navigate around the economic outcome of the pandemic.
Life insurance has demonstrated particular interest. Global figures accounting for an increase in social, green and sustainable bonds report a 20% rise (Reuterskiöld, 2020). Although Community Bonds have gained popularity they still require better resources and leadership to ensure a worthwhile collaboration across public, private and social sectors. Blockchain technology can be leveraged to achieve this motive as it can yield numerous benefits.
Scaling Community Financing via Digital Technology
In recent years blockchain technology has made its mark on the impact investment community by allowing for greater efficiency and scalability. This has resulted in the formulation of “impact tokens.” These tokens signify a UN Sustainable Development Goal by utilizing a quantifiable metric. They can be suited to make performance-based payments, track impacts by using supply chains or sustainable claims on corresponding SDGs.
For example, Plastic Bank (operating in Brazil, South Africa, the Philippines and Haiti) utilizes impact tokens to:
- Lower plastic waste.
- Provide incentives for investment into a circular economy.
- Promote performance-based CSR.
- Financially include various participants.
Employing blockchain technology holds a number of advantages:
- Trust: Blockchain allows for a trustless environment through its built-in trust generating features.
- Attribution: Impact tokens allow the impact of an investment to be judged through a supply chain.
- Impact Monetization: Blockchain enables the monetization of these impacts to be faster and lowers transaction costs transaction costs.
Blockchain technology that fuels impact investment and tokens has the capacity to achieve UN SDGs by ensuring trust, lower transaction costs and transparency. Although it is still in its development stage and a lot more trust is required; it has been embraced by some very large institutional agencies and has shown remarkable results in some sectors.
The greatest evidence is present in the formulation of the carbon market. Through wide-scale cooperation and a common consensus (guidelines) this innovative technology may achieve its full potential and be an agent in furthering change and development.
- Harji, K., Reynolds, J., Best, H., & Jeyaloganathan, M. (2014). Impact Investing in Canada. RBC Foundation.
- Heuberger, R., & Puhl, I. (2018, September 20 ). 5 ways blockchain can transform the world of impact investing. Retrieved from World Economic Forum : https://www.weforum.org/agenda/2018/09/5-ways-blockchain-can-transform-the-world-of-impact-investing/
- Reuterskiöld, A. (2020, April 23). Coronavirus pandemic drives record interest in social bonds- Insights- Nordea. Retrieved from Nordea: https://insights.nordea.com/en/sustainable-finance/coronavirus-social-bonds/
- World Bank. (2020, May 15). Community-driven development . Retrieved from The World Bank : https://www.worldbank.org/en/topic/communitydrivendevelopment
- Guerdat, P., & Uzsoki, D. (2019, April ). Impact tokens- A blockchain- based solution for impact investment . Retrieved from International Institute for Sustainable Development : https://www.iisd.org/sites/default/files/publications/impact-tokens.pdf