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December 2015

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Multiplying the impact on millions of lives

We know how to lift millions of people out of poverty, and save millions of lives.

We know we can do this - by eradicating disease, providing basic healthcare and investing in agriculture and critical infrastructure.

But we also know there isn’t enough money to fund this work.

So, through a global partnership, we’re bringing donors together to unlock the billions of dollars that we need across the Middle East, Asia and Africa, turning every 20 dollars into 100.

The Islamic Development Bank (IDB), together with its partners, will help tackle the root causes of poverty across developing nations with a pipeline of sustainable and dependable finance.

The economic, social and health benefits of each individual project will be felt across countries and societies, multiplied in villages and families, and have an impact on millions of lives.

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Contents

Poverty in context 4

The Solution: Overview of the Lives and Livelihoods Fund 9

Who's involved 17

Which projects will be funded 21

Conclusion 29

Annex 1: The Lives and Livelihoods Fund pipeline examples 34

Annex 2: Capacity, governance and operations 38

Annex 3: Advancing the globaldevelopment agenda 46

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Poverty in Context

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‘It is a historic innovation in development finance. I am glad to participate in it, and invite others to do the same.’Bill Gates, Co-Chair and Trustee, Bill & Melinda Gates Foundation

Maputo, Mozambique, 40th Annual Meeting of the IDB Group

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Dramatic increases in investment are needed to lift people out of poverty

40% of the world’s 1 billion poor are living in IDB member countries.* There’s a cycle of intergenerational poverty and ill-health, in parallel with poor nutrition and little or no rural infrastructure.

Low and low-to-middle income countries want to finance more health and agricultural projects, but can’t do it cost-effectively.

This gap is trapping people in poverty, and affecting the long-term future of their societies and governments.

* Extreme poverty refers to living on less than $1.25 per day* All statistics from the World Bank’s Open Data sources

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Under-5 deaths, highest prevalence – per 1,000 live deaths

Under-5 deaths, highest prevalence –total number

Angola

Sierra Leone

Chad

Somalia

Central African Republic

Guinea-Bissau

Mali

Dem. Republic of Congo

Nigeria

Niger

0 100 200

104

117

119

123

124

139

146

148

161

167 India

Nigeria

Pakistan

China

Ethiopia

Indonesia

Bangladesh

Uganda

Afghanistan

Dem. Republic of Congo

0 1,000,000 2,000,000

134,000

134,000

131,000

128,000

194,000

249,000

352,000

465,000

756,000

1.6m

Child mortality remains high (or is highly prevalent) in many IDB member countries

IDB member countries

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IndiaWorld

Developedcountries

Other developing

countries

IDB Member Countries

China

Indonesia

Nigeria

Pakistan

Bangladesh

0 0200 1,000400 600 2,000 3,000800 1,000 4,000

8142,905

3,429

2,967

2,067

477

110

109

91

66

Millions

People without access to improved sanitation

Land productivity – Value of production per hectare of arable land (US$)

IDB member countries

Millions of people in IDB member countries lack sanitation and suffer low agricultural output

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The Solution: Overview of the Lives and Livelihoods Fund

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'To turn caring into action, we need to see a problem, find a solution, and deliver impact'Bill Gates, Co-Chair & Trustee, Bill & Melinda Gates Foundation

© Simone Santi simonesantiphotography.com

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For the first time, donors can join hands with the Islamic Development Bank and the Bill & Melinda Gates Foundation to permanently improve millions of lives

‘We are very pleased with the growing partnership between the IDB and the Bill & Melinda Gates Foundation… which opens up new opportunities for increasing development assistance.’

Dr. Ahmad Mohamed Ali, President of the IDB Group

Healthier lives and decent livelihoods, enabling more people to lift themselves up out of poverty, resulting in long-term stability, healthier societies, innovative economies, accelerated prosperity and genuine social change.

1. Reduce deaths of mothers and children

2. Increase productivity of smallholder farmers

3. Lift people out of poverty

Change the financial model of development by scaling up investment in health, agriculture and basic infrastructure.

Vision

3 Goals

How we will do this

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Every year, a set of projects will be approved by an Impact Committee consisting of IDB, Bill & Melinda Gates Foundation and other major donors, in accordance with criteria set out in the Lives and Livelihoods Fund’s Charter.

IDB will provide funding on a blended basis including the grant and loan funds, ensuring that the resulting overall funding package is both affordable and International Monetary Fund (IMF)-compliant.

IDB will administer the Lives and Livelihoods Fund as the trustee, and will manage the approved projects in accordance with the Fund's Operations Manual, as well as IDB's internal project management procedures, processes and practices.

At the end of each year, IDB will be reimbursed for costs related to the Bank’s administration of the Lives and Livelihoods Fund (capped at 1.5% of the total donor funds deposited in the Trust for such a year) and for costs related to project preparation (capped at 1%).

Established for five years, the Lives and Livelihoods Fund comprises a pool of IDB lending capital and a pool of donor grant money held in a multi-donor trust fund administered by IDB

The Lives and Livelihoods Fund

IDB capital ($2.0B)

Loans(Min 65% of projects costs)

Donor contributions

($0.5B)

Grants (Max. 35% of

projects costs)

Impact Committee (Donors + IDB)

Management Unit (IDB)

Health projects

Agriculture projects

Basic Infrastructure projects

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More concessional financing is needed to support projects in the poorest IDB member countries

IDB has a huge pool of nearly $4.7 billion per year in ordinary capital resources (OCR) that it can deploy to finance projects, and is keen to use this financing to tackle poverty across member countries.

This OCR has a return based on LIBOR 6 month swap rate plus 135 basis points, which has a level of concessionality of 6% or 7%, making it similar to International Bank for Reconstruction and Development (IBRD) financing from the World Bank. Countries can borrow for typical infrastructure projects but it is too expensive for them to borrow OCR for projects that target the poor.

For poor countries, the Lives and Livelihoods Fund will blend 30% pure grant with the IDB financing, yielding a net grant element of over 35%. This means that it is affordable for the types of projects that the Lives and Livelihoods Fund is targeting and it is even possible for heavily indebted poor countries, under IMF rules, to borrow responsibly.

For lower-middle-income countries, the Lives and Livelihoods Fund will blend 10% pure grant with IDB financing, yielding approximately a 15% or higher net grant element (equivalent at lending at LIBOR).

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If a donor contributes $50 million to the Lives and Livelihoods Fund, each contributed dollar will be matched 9X by other donors and 40X by the Islamic Development Bank.*

Outcomes & Impacts

All projects will make a contribution towards one or more of the following impact goals:

Reduced childhood mortality Reduced maternal and neo-natal deaths Reduced stunting Increased productivity of staple crops for smallholder farmers

Increased access to sanitation Increased access to power Increased access to digital banking

Each dollar donated to the fund is multiplied many times, unlocking more grant dollars and IDB financing, to save lives and improve livelihoods

* Example assumes donor funding is fully subscribed at $500 million and leverage varies depending on amount of grant contribution.

$50m

$100m $100m $250m $2,000m

Donor contribution

Islamic Solidarity Fund for

Development

Bill & Melinda Gates Foundation

Islamic Development Bank

Other donors

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The Lives and Livelihoods Fund allows countries to take responsibility for their own development, while providing a helping hand from donors and IDB

Improving lives is a government responsibility, but lower income countries are unable to meet their needs from domestic financing alone.

Through the Lives and Livelihoods Fund, recipient countries aren’t just taking a grant, they are making a commitment to their future and long-term sustainability by repaying a fiscally-responsible financing facility.

This approach fosters greater ownership, ensuring that beneficiary countries maintain responsibility for the development process.

Because benefiting governments must apply for the financing and repay a significant portion, projects will only go ahead when they fit into the strategic plans of the country, which greatly increases their chance of success.

In doing so, the Lives and Livelihoods Fund helps these countries transition from grant-only programs like Gavi, the Vaccine Alliance, and the Global Fund to Fight AIDS, Tuberculosis and Malaria. As aid and official loans are falling faster than national tax revenues are rising, the Lives and Livelihoods Fund enables the recipient countries to take ownership of their development agenda, smoothing the graduation process.

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The Lives and Livelihoods Fund addresses key Global Goals and focuses on the basics for stable lives to ultimately contribute to the first goal to 'end poverty in all its forms everywhere'

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7

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8

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16

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No Poverty

Affordable & Clean Energy

Decent Work & Economic Growth

Industry, Innovation, & Infrastructure

Peace & JusticeStrong Institutions

Sustainable Cities & Communities

Partnerships for the Goals

Responsible Consumption & Production

Reduced Inequalities

Zero HungerGood Health& Wellbeing

Quality Education

Climate Action

Life Below Water

Life on Land

Gender Equality

Clean Water& Sanitation

The Lives and Livelihoods Fund contributes to these goals

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Who's Involved

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‘ IDB is expected to take a leading role … in addressing the daunting challenges facing our countries and bringing about real change in people’s lives’Dr. Ahmad Mohamed Ali President of the IDB Group

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The Lives and Livelihoods Fund benefits from IDB’s unparalleled relationship network across its membership and the Muslim world, as well as a strong financial commitment

$2 billion of financing to be committed to approved projects

Operational capacity and delivery platform spanning the Muslim world, including established relationships with key decision-makers and implementing agencies

Building off IDB’s existing project preparation, country negotiations, project approval, procurement, implementation, disbursement, monitoring and evaluation will all leverage IDB’s existing operations and processes

Internal technical capacity and know-how of IDB

Established in 1975, IDB is the Muslim world's largest development finance organisation and the fastest growing of all multilateral development banks

Headquartered in Jeddah, it supports development in 56 member countries (field presence in over 20 countries), with 1,144 employees

Cumulative funding of $102 billion for 7,613 operations

IDB promotes comprehensive human development, with a focus on poverty alleviation, health, education and governance

$47 billion of cumulative funding in health, agriculture, water supply & sanitation and energy services projects

'AAA' credit rating from Standard & Poor’s, Moody’s and Fitch Ratings

Authorized capital is $140 billion

Ensuring the Lives and Livelihoods Fund’s success:

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The Lives and Livelihoods Fund’s founding donors, ISFD and Bill & Melinda Gates Foundation, invite like-minded partners to join in transforming millions of futures

ISFDCommitted $100 million of the grant pool over 5 years

Other donorsSeeking additional donor funding of $300 million of the grant pool over 5 years

Commenced operations in 2008 as the poverty reduction arm of the Islamic Solidarity Fund for Development (ISFD).

Established in the form of a Waqf (i.e. endowment), meaning only the income from the investments of the Fund's resources is used to finance its operations.

Paid-in capital of $2.37 billion Provides concessional financing and grants to enhance the productive capacity and sustainable means of income generation for the poor

In 2015, contributed $122 million to 20 projects across 17 member countries, valued at $386 million Cumulative contribution up to 2015 is $562.2 million for 88 projects valued at $2.7 billion across 33 countries; 77% in Less Developed Member Countries (or almost 70% in Sub-Saharan Africa)

Bill & Melinda Gates FoundationCommitted 20% of the grant pool up to a maximum of $100 million over 5 years

Bill & Melinda Gates Foundation is the world’s largest philanthropic foundation with $34 billion in cumulative grant commitments.

Guided by the belief that all lives have equal value, Bill & Melinda Gates Foundation strives to remove the basic barriers that prevent the world’s poorest people from leading a healthy and productive life.

Bill & Melinda Gates Foundation has a deep belief in the power of partnership because its resources are nowhere near enough to combat the challenges it takes on.

Established in 2000, currently has over 1,500+ active grantees, an annual pay-out of ~$3.6 billion (2013) and 1,300 worldwide employees.

IDB member countries Organisation for Economic Co-operation and Development (OECD) and Development Assistance Committee (DAC) members

Philanthropists Socially-minded corporations

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Which Projects will be Funded

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'Using donor grant funding for blending… purposes is not

a new concept as such... The novelty is rather our resolve

to take this blending mechanism to scale'

Dr. Ahmad Mohamed Ali

President of the IDB Group40th Annual Meeting of the IDB Group, June 2015

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The Lives and Livelihoods Fund will target the following IDB member countries:

The following countries will qualify for 35% grant element*:

AfghanistanBangladesh BeninBurkina FasoCameroonChadComorosCote d’IvoireDjiboutiGambiaGuineaGuinea BissauKyrgyz Republic

MaliMauritaniaMozambiqueNigerSenegalSierra LeoneSomaliaSudanTajikistanTogoUgandaYemen

The following countries will qualify for ~15% grant element**:

EgyptIndonesiaMorocco

NigeriaPakistanUzbekistan

95% of the Lives and Livelihoods Fund funds must be used for projects in the target countries listed above. Financing for projects in other member countries not listed above will receive 15% grant element.

* Countries receiving 35% grant element, to achieve IMF conditionality, are classified as 'Least Development Member Countries'(LDMCs) by the IDB

** Grant blending to fully cover spread over Libor

Countries with 35% grant element

Countries with ~15% grant element

Other member countries

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health

agriculture

basicinfrastructure

Which Sectors the Fund will Target

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Financing will be prioritized for projects that tackle the building blocks of life itself - infectious diseases, primary healthcare, agriculture, the essentials of water, sanitation, food security, and access to energy.

By doing so, the Lives and Livelihoods Fund addresses basic needs and human dignity, while providing stepping stones to prosperity and self-reliance over time.

By focusing on the basic obstacles to development, the Lives and Livelihoods Fund will contribute to growth and prosperity

In t

ota

l heal

th e

xpenditure

per

pers

on

In GDP per person

N=177 countriesy=1·04×–3·1R2=0·93

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2

4

6

8

10

6 8 10 12

Relation Between Income and Health Spending

Investments in health stimulate economic development, with economic benefits exceeding costs by up to 20 times.

[The Lancet Commission Report: Global Health 2035: A World Converging Within a Generation. 2013]

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IDB and the Bill & Melinda Gates Foundation commissioned an extensive on-the-ground assessment of the demand for concessional finance in priority sectors across 33 IDB low and lower-middle income countries, before embarking on creating the Lives and Livelihoods Fund.

The result of the study was staggering and clearly illustrated that this fund could fill a void in global development projects that would not have otherwise been pursued by domestic governments. The study estimated demand for concessional finance of $2.9-6.5 billion over the next 5 years.

More concessional finance is needed and demand is high Estimated overall trend demand

USD millions: $3,900-8,700

Estimated total demand for the Lives and Livelihoods Fund

USD millions: $2,900-6,500

370–1,070

275-800

1,990–3,210

1,490–2,410

310–685

235-515

1,270-3,750

950–2,820

Priority agriculture

Priority agriculture

Priority health

Priority health

Sanitation/water(small-scale)

Sanitation/water(small-scale)

Energy (small-scale)

Energy (small-scale)

Estimate of additional latent demand

Scaling up the estimated overall trend demand based on estimate

for additional latent demand

Estimated capture rateScaling down the overall trend and latend demand to reflect demand

that might be met by the Lives and Livelihoods Fund

x 150% x 50%

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To save lives and build livelihoods, the Lives and Livelihoods Fund focuses on three crucial areas

Sector Fund AllocationEligible Project Types

Health

Agriculture

Basic Infrastructure

Minimum 20% of Fund

Maximum 60% of Fund

Minimum 20% of Fund

Maximum 60% of Fund

Maximum 20% of Fund

Infectious disease eradication and control, with priority given to malaria, polio campaigns, routine immunization and neglected infectious diseases

Primary health care system strengthening: primary health care system governance and financing, performance management at both the government and facility levels and service delivery improvement at the facility level

Projects predominantly serving smallholder farmers with production of staple products (livestock and crops)

Rural power generation, transmission and distribution for poor communities

Small scale water supply and sanitation projects for poor and currently unconnected communities

Rural infrastructures to promote digital financial inclusion

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IDB and Bill & Melinda Gates Foundation have already identified substantial demand for the Lives and Livelihoods Fund projects spanning regions and sectors, with most of them ready to be approved in 2016

Projects:21

Countries: 12

Amount: $884 million

The Lives and Livelihoods Fund indicative pipeline by sector

Project opportunities are drawn from various sources, including IDB, its member countries, Bill & Melinda Gates Foundation and partners (e.g. NGOs; international organisations)

The Lives and Livelihoods Fund’s current project pipeline totals approximately $844 million in all targeted sectors and regions

Many projects are at an advanced stage and ready to move ahead if the Lives and Livelihoods Fund is funded

IDB, the Bill & Melinda Gates Foundation and the donors of the Lives and Livelihoods Fund will work collaboratively with target countries to refine and further develop project opportunities to ensure the greatest possible development impacts are achieved

$ M

illio

ns

Agriculture

268

Basic Infrastructure

150

Health

466

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Conclusion

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‘ We now have a once-in-a-lifetime opportunity to improve the quality of life for each of the nearly 2 billion people living in the Islamic Development Bank’s member countries’Bill Gates, Co-Chair & Trustee, Bill & Melinda Gates Foundation

40th Annual Meeting of the IDB group, June 2015

© S

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The Lives and Livelihoods Fund offers an innovative bridge for donors from across the world to collaborate with IDB and Bill & Melinda Gates Foundation to solve generational poverty challenges

Leverage

Demand

Oversight

Development Return

Impact

Each dollar contributed catalyzes substantially more resources, while engaging IDB's and Bill & Melinda Gates Foundation's institutional network and capacity for innovation

Rapid fund deployment supported by a substantial project pipeline in all key sectors across eligible countries

The Lives and Livelihoods Fund’s governance and operating framework is supported by IDB’s well-honed institutional capacity and the engagement and oversight of donors via a governing committee

More than doubles IDB’s capacity for concessional funding into key sectors traditionally underserved by conventional development assistance, but with the greatest impacts on long-term prosperity

Direct, tangible development outcomes including reduced childhood mortality, reduced maternal and neo-natal deaths, reduced stunting, increased productivity of staple crops for smallholder farmers, increased access to sanitation, increased access to power and increased access to mobile banking

Key parameters detailed in the Lives and Livelihoods Fund Charter

Key Terms Description

Fund Objective

Target Size

Geographic Scope

First Closing

A powerful poverty reduction tool reaching the most disenfranchised members of society in key economic and social sectors, addressing critical health, agriculture, and rural infrastructure issues. The Lives and Livelihoods Fund will improve livelihoods and save lives in IDB Member Countries by increasing the amount of concessional financing that IDB is able to provide in these critical sectors. This will be achieved by blending IDB ordinary financing with grant funding contributed by Donors to the Fund.

$2.5 billion, comprising $500 million in donor grant funding and $2 billion in IDB Ordinary Capital Resources (OCR).

95% of the Lives and Livelihoods Fund funds must be used for projects in IDB lower-middle-income countries and least developed member countries.

Target first closing in June 2016, subject to mobilising a minimum of $100 million of grant funds to blend with the already earmarked $400 million of IDB’s OCR.

Impact Committee

The Impact Committee is the decision-making and oversight body of the Lives and Livelihoods Fund and will include IDB, Bill & Melinda Gates Foundation, Islamic Solidarity Fund for Development, and any other donor committing 10% or more of the total grant pool.

Fund Manager

Knowledge Partner

Management Unit

IDB will manage the Fund including the project pipeline, project structuring with member countries, loan and grant negotiation, selecting and managing the implementing agency, and reporting on results.

Bill & Melinda Gates Foundation will support the Lives and Livelihoods Fund and IDB staff with sector-specific technical advice, including innovative development solutions.

IDB will be compensated for costs related to the Bank's administration of the Lives and Livelihoods Fund (capped at 1.5% of the total donor funds deposited in the Trust for such a year) and for costs related to project preparation (capped at 1%).

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Pilot(Completed)2012-2013

Scale-Up (Completed)2014-2015

Fundraising & Launch of Operations (in Progress)2015-2016

Building on a successful pilot project in Pakistan and substantial commitments to date, we invite like-minded donors to partner in a successful first closing and launch

IDB and Government of Pakistan sign a $227m concessional loan for polio vaccination, catalyzed by ‘buy-down’ funding from Bill & Melinda Gates Foundation

IDB and Bill & Melinda Gates Foundation begin work to develop a multi-donor fund building on the successful Pakistan concessional funding approach

Initial donor engagement and fundraising

IDB and Bill & Melinda Gates Foundation announce the new Lives and Livelihoods Fund at IDB’s 40th anniversary event

The Lives and Livelihoods Fund targets $100m in donor contributions and $400m in IDB financing to start Year 1 projects

First donorcontributions

Charter establishing the Lives and Livelihoods Fund signed

IDB commits $2 billion OCR; Bill & Melinda Gates Foundation commits 20% of the grant pool (up to $100m); ISFD commits $100m to the grant pool

First Impact Committee meeting and the Lives and Livelihoods Fund commences formal operations

First projects approved

Jun 2015

Jun 2014

Jan 2014

Oct 2012

Jul-Late 2015

Mid 2016

June–Sept 2016

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Annex 1The Lives and Livelihoods Fund pipeline examples*

* A full list of the Lives and Livelihoods Fund pipeline project concepts is available upon request

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Objective:

Total project cost:

Reduce malaria mortality by preventing transmission and improving primary healthcare

$94 million

Zoom on project in Senegal: supporting the country’s transition from malaria control to pre-elimination

Objective

Rationale

Development Return

Support recipient country’s goal of improving universal access to quality curative and preventative healthcare services for all its people

Complementing the existing Global Fund’s program with a pre-elimination phase in 20 North districts with malaria incidence of less than 5 infections per 1,000 people.

Contribute to the achievement of the country's National Malaria Control Program, by reducing morbidity/mortality and preventing transmission

Improving case management at the primary healthcare level

Reduce malaria mortality by 75% by 2018 Provide 2.5 million people with free

Long Lasting Insecticide-Treated Nets Distribute 1 million Rapid Diagnosis

Tests and 708,000 Anti-malarial Drugs doses freely at primary care level

2.5 million people benefit from Information Education and Communication activities

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Zoom on project in Nigeria: supporting the country’s Agricultural Transformation Agenda

Objective

Rationale

Development Return

Support the emergence of an integrated agribusiness supply chain project in selected agribusiness clusters (including in Kogi state and up to three other sites).

Increase market linkages for farmers and strengthen the institutional framework for inclusive public and private investment in selected agribusiness clusters.

Increase food production and reduce the demand for imports, adding value through processing, reducing cost of doing business for processors, and attracting new investment to create jobs.

Farmers’ productivity increased through better access to inputs and services (including financing, marketing infrastructure, skills development).

Public infrastructure improved

SCPZ authority strengthened through training and technical support.

Objective:

Total project cost:

Support the implementation of the first model of Staple Crop Processing Zone (SCPZ) and assist its scaling up over the country

$300 million

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Objective:

Total project cost:

Improve access and quality of water supply and sanitation facilities in 23 municipalities

$100 million

Zoom on project in Indonesia: Improving access to clean water sanitation facilities for up to a million people across 23 municipalities

Objective

Rationale

Development Return

Construction of pump houses, ground water treatments plants and surface water treatment plants. Installation of water pipelines and water meters

Construction of public community toilets, primary drains, solid waste management systems, and sludge treatment plants

Arsenic and salinity intrusion as a consequence of climate change fall out is exacerbating the availability of safe water especially for the poor

Sanitation has remained a serious problem in the country, mostly in cities and towns

Increase the use of improved drinking water from 85% currently to 90% by 2020; increase the use of improved sanitation facilities from 64% now to 75% by 2020

As a result, health and environmental hazards in the targeted areas will be minimized

Better hygiene practices and physical environment will benefit local population through increased public health

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Annex 2Capacity, governance and operations

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‘ We are very pleased with the growing partnership between the IDB and the Bill & Melinda Gates Foundation… which opens up new opportunities for increasing development assistance.’Dr. Ahmad Mohamed Ali President of the IDB Group

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IDB’s funding operations have more than doubled in the last decade. However, its concessional lending has remained constant, at under $400 million annually.

This limits IDB’s capacity to fund sectors like health and agriculture, which have high development impact but low economic returns in the short term.

The Lives and Livelihoods Fund’s $2.5 billion over 5 years will more than double IDB’s annual concessional financing capacity.

This enables IDB to support many more projects with immediate social returns and longer-term economic returns.

It also allows IDB to increase its staffing focus and expertise in key poverty alleviation sectors.

By more than doubling IDB’s capacity for concessional lending, the Lives and Livelihoods Fund opens up important new paths for poverty alleviation

IDB annual concessional lending window

$ Millions

Without the Lives and Livelihoods Fund With the Lives and Livelihoods Fund

$850

$370

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The financing agreement is between IDB and the Government of the relevant country

Funds flow directly from IDB to the project contractor or service provider, to the benefit of the project

Grant and financing funds are provided in parallel, by the Trust Fund and IDB, respectively, for approved projects

The blending of grant and financing funds means that concessional repayment terms apply for repayment – significantly reducing the burden on the Government

The financing amount and any additional cost are repaid by the Government to IDB

By blending together grants and loans, the Lives and Livelihoods Fund reduces the funding burden on recipient countries

Contractor/Service provider

Project

GrantsOrdinary capital

resources

The Lives and Livelihoods Financing

Agreement

Repays ordinary capital resource

Contract(reports on progress)

IDB$2bn

Government

Ministryof Finance/Ministry of Planning &

Cooperation

Implementing Agency

(e.g. Ministry of Health)

Donors$500m

* Exceptions may occur, for example in the case of numerous small contracts, in which case certain responsibilities may be delegated to the Implementing Agency via a special account monitored by IDB.

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The Impact Committee is the Lives and Livelihoods Fund’s decision-making body and guides the Fund’s main activities

Key Responsibilities

Provide strategic direction for the Facility

Approve the Projects Pipeline and any subsequent changes in the Projects Pipeline

Approve the Lives and Livelihoods Fund’s administrative budget

Approve the addition of new Donors to the Lives and Livelihoods Fund

Decide the termination date of the Lives and Livelihoods Fund

Approve reallocation of Project Financing Funds if/as necessary

Approve the Facility Operations Manual and any changes thereto

Approve any changes to target countries for funds deployment/grant amounts

Members

IDB Bill & Melinda Gates Foundation ISFD Any donor that contributes 10%

or more of total donor funds

Meetings

No later than 6 months after the Lives and Livelihoods Fund’s initial closing, and at least twice a year thereafter

May meet more regularly as required for the purpose of sound governance

Will meet no later than March each year to approve the Projects Pipeline for such year

Decision-Making

Taken by consensus, or by simple majority if consensus not reached (both IDB and Bill & Melinda Gates Foundation must approve the decisions)

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Project development, implementation & monitoring

Development Implementation Monitoring

Identify and design projects independently, and apply for funding

The Lives and Livelihoods Fund target countries

IDB

Bill & Melinda Gates Foundation, ISFD & other donors

Service providers / technical partners (e.g. contractors, suppliers, UN agencies, NGOs)

Impact committee

Assess and refine projects based on country knowledge and understanding of country needs/priorities

Sector and technical specialists collaborate with IDB to ensure best possible development impacts; suggest suitable projects for IDB to discuss with target countries

Regularly monitors progress projects through the Impact Committee interactions and regular reporting from IDB

Suggest suitable projects for IDB to discuss with target countries

Receives funds directly from IDB and implements project

Submit project progress, completion and impact data

Annually reviews and approves project pipeline proposed by IDB

Monitor fund performance, including semi-annual reports from IDB on project status and development results

Negotiate financing agreement with IDB for approved projects

IDB disburses grant and loan funding to Technical Partner

Repay IDB loan; oversee implementation by the Technical Partner

Monitor project progress and results; report on project progress to Impact Committee

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The ultimate objectives, goals, and longer term impacts of the Lives and Livelihoods Fund are clear and articulated.

Development of a detailed matrix, graphic and narrative for a robust results-based framework will be the responsibility of the Impact Committee; and will build on the impacts already outlined – draft shown to the right.

Details will include specific qualitative and quantitative indicators, target levels, and methods of monitoring and evaluating.

Development Outcomes and Indicators

InputsFinancial, human, material

Processes/ActivitiesActions taken for transforming

inputs to

OutcomesIntermediate effect on clients

OutputsProducts and services produced

Particular goods/services provided by the intervention, e.g.:• # Loans provided• # Vaccines delivered• # Mobile banking subscribers

enabled

Benefits of that particular good or services, e.g.:• Improved immunity• Improved childhood health

Evidence of changing behaviour or long-term conditions, e.g.:• Reduced childhood mortality• Reduced maternal and

neo-natal deaths• Reduced stunting• Increased productivity of staple

crops for smallholder farmers• Increased access to sanitation• Increased access to power• Increased access to mobile

banking

ImpactLong term improvements

in communities

Ultimate GoalAccelerate prosperity and self-reliance

across IDB member countries, focussing on key sectors critical to

poverty alleviation

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Islamic finance is a sophisticated, large and global asset class, similar to and complementing conventional finance

Islamic finance assets held around the world currently exceed $2 trillion and are projected to grow by 20% per annum through 2018

Islamic finance features banks, capital markets, fund managers, investment firms, and insurance companies, with a variety of financial structures, products and services.

The most common Islamic modes of financing are: e.g.,Sukuk (Bond), Ijarah (Lease), Murabaha (Cost + Profit Sale Agreement).

Key principles of Islamic finance are:

The exclusion of 'interest' and debt-based financing

The promotion of risk sharing (profit/loss sharing)

The need to be linked to real assets (equity-based or asset-backed)

The prohibition of some activities such as alcohol; arms production/selling; etc

Other important elements of Islamic financing to be carefully overseen by IDB, include structuring, managing and monitoring of the appropriate Islamic mode of finance.

Islamic finance is an equitable form of finance, as it is linked to the real economy and assets. The inclusive form of finance is thus well suited for servicing poverty alleviation projects.

Overview of Islamic finance

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Annex 3 Advancing the globaldevelopment agenda

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The Lives and Livelihoods Fund directly addresses 10 of the Global Goals announced at the UN General Assembly in September 2015 and many of the projects will have a knock on impact on the other goals

Goal 1: No povertyThe Lives and Livelihoods Fund fundamentally accelerates investment in poverty eradication actions. Goal 2: Zero HungerThe Lives and Livelihoods Fund's focus on staple crops, livestock and small-holder farmers will increase production, ensuring the poor and children have better access to nutritious foods.

Goal 3: Good Health & Well-beingThe Lives and Livelihoods Fund's focus on infectious diseases and primary healthcare will contribute to reducing global maternal and under 5 mortality, help achieve access to affordable healthcare and essential vaccine for all and will increase knowledge to the healthcare workforce.

Goal 5: Gender EqualityThe Lives and Livelihoods Fund projects will promote a 'gender lens', ensuring non-discrimination towards women and girls, e.g. equal access to healthcare facilities, affordable medicines, life-saving vaccines and mortality reducing maternal child and neo-natal care. The projects will ensure access for all women, particularly in agriculture where most farmers are women and in financial services where female savers are empowered to help the whole family prosper.

Goal 6: Clean Water & Sanitation The Lives and Livelihoods Fund's projects in basic infrastructure will increase equitable access to safe and affordable drinking water and sanitation, while ensuring local communities are supported in sustaining water and sanitation management.

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The Lives and Livelihoods Fund directly addresses 10 of the Global Goals announced at the UN General Assembly in September 2015 and many of the projects will have a knock on impact on the other goals

Goal 7: Affordable and Clean EnergyThe Lives and Livelihoods Fund projects in renewable and rural electrification solutions.

Goal 8: Decent Work & Economic GrowthThe Lives and Livelihoods Fund is supporting economic growth by starting at the base of the pyramid with smallholder farmers – a large percentage of most economies – by improving economic productivity and helping them access markets and enabling growth.

Goal 10: Reduce Inequality The Lives and Livelihoods Fund empowers and promotes the social, economic and political inclusion of the communities who live in the most disenfranchised areas of IDB’s member countries.

Goal 13: Combat climate changeThe Lives and Livelihoods Fund supports small holder farmers to produce sustainable crops.

Goal 17: Partnerships for the Goals The Lives and Livelihoods Fund itself is a great testament to this goal, bolstering domestic resources and assisting developing countries in attaining long-term debt sustainability with appropriate debt. The fund also enhances international support for capacity-building in developing countries in the spirit of North-South and South-South cooperation.

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‘We welcome efforts to increase cooperation between philanthropic actors, Governments and other development stakeholders.’

‘An important use of …ODA is to catalyze additional resource mobilization from other sources.’ Outcome Document of the Third International Conference on Financing for Development: Addis Ababa Action Agenda in July

The Lives and Livelihoods Fund helps advance the post-Addis development agenda by bringing together donors, countries, and philanthropists from across the world in a game-changing development idea

The Third International Conference on Financing for Development concluded in Addis Ababa in July 2015 underscored the need for innovative solutions to unlock the transformative potential of people trapped in poverty, as billions more are needed than domestic tax revenues can afford.

In a period of fiscal constraints and tight aid budgets, donors recognize the crucial importance of catalysing additional resource mobilization from other sources.

Increasingly, governments are joining hands with philanthropic, multilateral development banks and private sector actors, blending grant funding with commercially-oriented loans and investments.

The Lives and Livelihoods Fund builds on this trend by using donor grants to leverage and focus existing funding capacity with a major multilateral institution targeting key sectors for poverty alleviation and economic benefit.

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Governments need incentives to borrow for worthy health projects to reach The Global Goals*

Some argue against using debt to finance health projects, but the Lives and Livelihoods Fund will finance health projects sustainably.

The Impact Committee and technical teams within IsDB and Bill & Melinda Gates Foundation will assess project pipeline and determine the appropriateness of using debt finance vs grant funding from other sources, ensuring the right types of projects are funded through debt.

Any IMF recipient country receiving IDB financing is required to receive sign-off from the IMF before accepting the IDB’s financing terms, ensuring a 35% grant element for low-income countries and that the country can continue to service IMF debt obligations and doesn’t make them heavily indebted.

Investing in the building blocks of life is unfortunately not the highest priority for countries on their list of investments, as traditional infrastructure have obvious expected revenue to match debt obligations (i.e. toll roads). As grant aid for health shrinks relative to need, cash-generating investments are being prioritized, at the detriment of public health.

Front-loading health investments (particularly for immunization and malaria) makes sense, particularly for prevention to avert expensive treatment.

In lower-middle-income countries in particular, aid and official loans are falling faster than national tax revenues, creating a 'missing middle' in development finance. Boosting concessional lending at leading in health through MDBs, is a way to help smooth the graduation process from 100% grant funding to self-reliance.

* This was echoed by Andrew Rogersen's research at the Overseas Development Institute

For more information please contact:

Zahira El Marzouki Middle East Relations Bill & Melinda Gates Foundation zahira.elmarzouki@gatesfoundation.org

Karim Allaoui Cooperation & Integration Islamic Development Bank kallaoui@isdb.org Or visit: www.gatesfoundation.org/Where-We-Work/Middle-East-Office/Lives-and-Livelihoods-Fund

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