Science, Technology, Innovation, and Capacity Building in Financing for Development

For decades, financing for development has focused on macro-level interventions, namely debt relief, aid flows, and infrastructure investment. However, as the global development landscape evolves, a new pillar is emerging that demands greater attention: science, technology, and innovation (STI). According to the Organisation for Economic Co-operation and Development (OECD), while STI has been a powerful enabler of human progress, it remains underleveraged in global development finance frameworks. Additionally, the issue here is not only to utilize STI to spur development but also to localize capacity building. The Center for Strategic and International Studies (CSIS), a global policy think tank, states that to foster innovation ecosystems that empower communities, innovations cannot be “exported” from developed to developing countries. The latter must work to generate their own solutions to guarantee that changes last sustainably. The big question that remains is apparent: how to achieve all these?

FROM DONOR-DRIVEN TO LOCALLY-ROOTED SOLUTIONS

The evidence is compelling. Kenya's mobile banking revolution, driven by M-PESA (a Kenyan mobile phone-based money transfer, payments, and micro-financing service), was launched with a modest £ 1 million grant from the UK government. Now, the app facilitates over $240 million in monthly transactions and supports two-thirds of adult Kenyans. What made it work was not just technology but partnership between donors, private enterprises, and local innovators; while the app was born of foreign funding, it was developed by a domestic private sector. In another case study, Global Affairs Canada, Canada’s foreign relations department, is investing in initiatives such as the Global Development Innovation Ventures and applied solar training centers in West Africa. The Canadian government acknowledges that funding these programs would, as was the case in Kenya, build institutional and human capacity to sustain innovation long after the initial funding ends.

RETHINKING DEVELOPMENTAL FINANCE THROUGH SCIENCE AND TECHNOLOGY

Still, scale remains a challenge. The OECD gives risk-averse funding, fragmented programs, and a tendency to prioritize short-term returns over long-term impact as the reasons why STI investments have yet to reach their full potential. That organization also cites that this is where development finance institutions (DFIs) can play a catalytic role. DFIs, namely the European Bank for Reconstruction and Development and the World Bank’s International Finance Corporation, are well-positioned to de-risk frontier innovation from broadband access to biotech, especially in fragile contexts. However, in a separate report, CSIS recommends these institutions not just invest blindly but shift from booking safe, high-return projects toward funding mission-driven innovations with transformative potential. Balancing profit with impact is essential for 21st-century development finance.

To meet the challenges of tomorrow, whether it be climate resilience or digital equity, the next wave of development finance must place STI and capacity building at its core. That means empowering developing countries not just to use innovation but to lead it. Financing for Development must expand to include tech incubators, research grants, STEM education, and South-South knowledge exchanges. If properly financed, these efforts will not only reduce dependency but also unleash a new generation of solutions born from the communities they are meant to serve. The time has come to treat innovation not as a luxury but as a development right.

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