Foreign Affairs Committee on June 15th, 2017

[The Chair (Hon. Robert Nault (Kenora, Lib.)), Liberal, Bob Nault]

Colleagues, we want to open this meeting of the Standing Committee on Foreign Affairs and International Development. Pursuant to Standing Order 108(2), we will continue our study of Canada's development finance initiative.

This morning, in the first hour, we have the Centre for International Governance Innovation. Mr. Medhora, the president is video-conferencing from Waterloo, Ontario, which is a really nice riding, I hear.

As well, from Oxfam Canada, we have Francesca Rhodes, women's rights policy and advocacy specialist; and Lauren Ravon, director of policy and campaigns.

Welcome to the committee. Congratulations for getting through security. It's always a hassle at this time of year, as I understand it.

We are going to go to our witnesses for opening comments. We'll start with Mr. Medhora, and I'll give our witnesses from Oxfam an opportunity to catch their breath. They can go second, and then we'll go into questions from the committee members.

Mr. Medhora, the floor is yours.

[Rohinton Medhora, President, Centre for International Governance Innovation]

Good morning, Chair. Good morning, members and colleagues.

The organization I head, CIGI, has been working on the broad area of finance and development finance for several years. We've published a number of papers. I have spent the better part of three decades, first at the International Development Research Centre and previously at the University of Toronto, working on the subject. It's a privilege to be with you and to be able to speak with you on this subject.

In the seven or so minutes I have, I thought I would do three things and then we can have a conversation thereafter. They are to provide comments that start with the concept, then lead into the construct of the organization, and then the operation of the proposed DFI.

I'll begin by saying the DFI for Canada is a good and timely idea, mainly because it's in keeping with the transition worldwide from development assistance to development partnerships. That is a good thing. However, globally, capital shortage is not the problem. There is is ample capital for investable opportunities. Rather it's the know-how for making sound investments that is often what is lacking. The main thrust of my comments is going to be that what goes along with the finance is at least as important as the finance itself.

Now that's important to note because the capitalization and therefore the potential lending capacity of Canada's DFI is quite small. In fact, frankly, it's puny; $300 million over five years is going to be about $50 million, $60 million annually, perhaps. Just to give you a benchmark, the International Finance Corporation, which is the multilateral institution that is broadly in the same business, has an annual outlay of $10 billion U.S. dollars. The Nordic Investment Bank, which works both in the nordic countries and overseas, has an annual outlay of $3.5 billion. So Canada's DFI, if it wishes to punch above its weight, has its work cut out for it.

My first point here would be that growth and expansion of the DFI should be in-built from the start and it should be related to the benchmarks of success. We certainly can discuss what those benchmarks might be, but growth and expansion connected to benchmarks make sense.

Since the DFI is going to be funded from EDC's revenues, one thought is that over time a higher proportion of the EDC revenues might be devoted to the DFI. This way the expansion of the DFI is not a net call on the public exchequer in Canada. At the end of the day this is meant to be a private sector-type of activity.

To focus by region or theme when you're this small is also going to be important. There are a number of ways that we can be looking at this. The leverage ratio, meaning the amount of other dollars that the DFI's activities will crowd in, is currently set at about 5:1. My suggestion to you would be that this should be a minimum. In fact, the IFC's leverage ratio is 7:1. In an era when private sector capital outnumbers public money by many factors, I think 5:1 is modest, but It is a very good start.

This, however, has to be compensated for by other forms of assistance that go with finance. We might want to think about what that is. Is it technical assistance? Is it capacity building in sound lending? Is it market research and promotion? Is it technology transfer? I don't know, but it seems to me that these are the kinds of issues we should be talking about.

The second aspect of focus has to do with what exactly the DFI lends about or on. Here again, it's an open field. One thought is to stay within current ODA priorities, which would mean working in industries that work in the maternal and child health sector or perhaps extractives. The other thought is to go completely in the opposite direction, and to complement Canada's official development assistance program by investing in areas that are outside its ambit: green tech comes to mind, new technologies more broadly, or funding start-ups. I'm from Waterloo, so that resonates with me.

Finally, it occurred to me last week, when I was listening to the minister unveil Canada's new feminist foreign aid policy, that perhaps investing in women's entrepreneurship, or in organizations or forums led by women, or primarily concerned with producing products and services for women and children, might be the way to go. I don't know for sure, but it seems to me that choices have to be made and have to made early.

My final set of comments has to do with the operationalization of the DFI. Here I should sound a cautionary note that the institutionalization of the DFI within the EDC is not ideal.

The main reason it's not ideal is that the corporate culture of the promotion of trade and export is not the same as the banking culture, and it's not the same as the development culture. The skill sets, the ethos, and the objectives that each of these requires is different, and I fear that if care is not taken to situate the DFI appropriately within the EDC, it might not be fully effective.

I've been following—and associated with in some ways—the development of the DFI for some time. My first reaction was that this is a situation that cries out for a crown corporation set-up, which Canada does so well. Crown corporations are independent, and they provide good governance, diversity in partnerships, and effectiveness, all of which are built into their boards and operating structures.

In fact, one of the committee's questions to us was how this might connect with IDRC. Now, that's a very good example of a small and independent crown corporation that is effective precisely because it has the crown corporation structure.

The Montreal location of the DFI also poses a question in my mind. I believe that the reason for situating the DFI within EDC was to generate economies of scale in things like shared services, location, and staff. If EDC is headquartered in Ottawa, however, and the DFI is in Montreal, I would wonder to what extent the economies of scale from shared services would in fact be achieved.

My final thought is that this is a good idea that must be nurtured. How it starts is critical to how it develops and ends. Keep the operation small but technical and professional. Do not Christmas-tree it with lots of vague objectives that don't add up. If we get it right, though, this will be a feather in Canada's cap and a great benefit to the developing world.

Thank you very much.

[The Chair, Liberal, Bob Nault]

Thank you very much, Mr. Medhora.

Now, we'll go to Ms. Rhodes, from Oxfam.

[Francesca Rhodes, Women's Rights Policy and Advocacy Specialist, Oxfam Canada]

Thank you for the opportunity to share Oxfam's thoughts on the new development finance initiative. Oxfam is an international confederation working in 90 countries to support long-term development and provide humanitarian assistance. We also do advocacy and campaigns to address the root causes of poverty. We put women's rights and gender justice at the heart of everything we do.

The new DFI is an opportunity to be innovative and to leverage finance for poverty reduction and gender equality. Canada will need to be bold in how it is designed in order to ensure that these goals are met. Higher finance should never be a replacement or substitute for aid. However, if designed carefully and in alignment with Canada's new feminist international assistance policy, the DFI could add important contributions toward achieving these same goals.

Oxfam recognizes that the private sector has the potential to significantly contribute to sustainable development. The private sector, of course, comprises a multitude of actors, including those which often offer employment opportunities for women in rural and poorer contexts, such as co-operatives or micro and small enterprises. In a vibrant, thriving, accountable, and responsible private sector, there are greater possibilities for sustainable development and economic growth that can lead to poverty reduction and reduce inequality.

However, the experience of other development financing facilities shows that without a strong alignment with the goals and strategies of sustainable development, public-backed private finance can fail to reach its potential contribution and in some cases reinforce existing inequalities. The DFI should avoid these pitfalls by starting with a strong mandate to reduce poverty and to complement the government's feminist international assistance policy. We have five recommendations in order to do this.

The first recommendation is that the DFI's mandate should align with development effectiveness principles and focus on additionality. In order to ensure alignment with sustainable development, the DFI should conform to the principles of development effectiveness, particularly country ownership, transparency, and accountability. Globally, civil society has called for much greater transparency and accountability of DFIs. The Canadian DFI should consider how it will adjust this, including through complying with the international aid transparency initiative, which several other DFIs, including the Dutch FMO and U.K. CDC, already comply with.

How the DFI will measure and report on its goal of contribution to poverty reduction should be thought of in the early stages. The DFI should focus on maximizing the additionality that it brings to Canada's development strategy. It could be thought of as financial additionality, where the public and private actors together are bringing additional funding, through development additionality, whether it's a greater sustainable development impact as a result of public and private finance working together, or value additionality where the public actor is bringing something that wouldn't otherwise be present, such as focusing on poverty reduction, sustainability, or gender equality.

The three main pillars of the Official Development Assistance Accountability Act also provide a strong framework that can be drawn on for the DFI's mandates. The DFI currently is not counted as ODA and is not subject to the same principles, but the same principles would be useful to apply to the DFI. That would ensure it would contribute to poverty reduction, take into account the perspective of the poor, and be consistent with international human rights standards.

A second recommendation is that the DFI's investment strategy should be strategically aligned with Canada's new feminist international assistance policy. Ensuring close alignment with Global Affairs and the feminist international assistance policy is key to ensure strategic investments that contribute to development. It would also show that Canada is learning from the experience of other bilateral institutions.

When independently evaluated, the U.K. DFID's private sector investments were criticized for not being aligned with their objective of poverty reduction and for lacking strategic oversight, clear objectives, and the ability to demonstrate additionality. On the other hand, the Finnish DFI, Finnfund, has aligned its investments with the priorities of their aid strategies. They're focusing on green technologies and telecommunications. As Canada's new feminist international assistance policy focuses on a feminist approach to ending poverty, the DFI should complement this and do the same.

In practice, this will require working closely with Global Affairs to develop complementary and focused strategies, and sharing expertise and intelligence about development priorities and particular contexts in which they are both operating. The DFI could also consider designing its governance structure so that accountability is not only to EDC but to the ministers in Global Affairs as well.

Our third recommendation is to ensure that the DFI has the capacity and expertise for mainstream gender equality throughout its work and also to provide targeted investments that benefit women and girls.

In designing any development policy or program, a gender analysis is essential to ensure that both women and girls benefit, and that gender inequality is not inadvertently reinforced. The DFI should ensure that it seeks to build on its own expertise and capacity as well as that of its partners in order to be able to meet this goal. This is another important area where working closely with Global Affairs will be key.

Women's organizations and experts should also be included in the design of investments. The new feminist international assistance policy commits all of Canada's development partners to consult with local women's organizations when designing interventions, which is a powerful principle to ensure they are guided by their priorities and concerns. The DFI should also ensure that, when it's gathering information about the context of the investments being made through any consultations or advisory bodies that are set up, women's organizations are included and able to provide their expertise.

Our fourth recommendation is that the DFI should have robust monitoring and accountability systems and should only involve companies that respect human rights, including women's rights. The DFI must commit to do no harm by ensuring that investments are assessed and monitored for their impact on human rights and women's rights in particular.

Oxfam's research into the World Bank's private sector arm has documented instances of violence against women, land grabs, and other disturbing outcomes of private sector development budgets. The DFI needs to put in place robust monitoring and accountability frameworks that identify and prevent any negative impact on groups marginalized based on gender or sexual orientation, including changes in livelihood, likelihood of violence, access to assets, and labour rights. The DFI should also ensure that jobs created through these investments are decent jobs, that investment partners and contractors respect labour standards, and that measures are in place to avoid discrimination.

Currently, EDC does not have a human rights policy, but it has a statement on human rights that was issued in 2008. This should be updated to a policy and staff should be trained to implement it. The DFI should also consider putting in place accountability mechanisms, for example, setting up an independent complaint mechanism that is accessible to local communities involved in the investments. The Dutch FMO's independent mechanism, which was set up in consultation with civil society, would be a good example to follow.

Another aspect of “do no harm” is ensuring that private sector finance is not a substitute for the public financing of essential services that are accessible to the poorest. The DFI should not seek to increase private sector involvement in the provision of public services. The DFI should only partner with companies that pay taxes on the value created in the developing countries that they operate in. Oxfam research into the World Bank's private sector lending in 2015 showed that 51 out of 68 companies that received loans to finance investments in sub-Saharan Africa were using tax havens, which was denying those countries much-needed public funds.

Our final recommendation is that the DFI should invest in projects aimed at reducing gender inequality and that benefit women and girls. Going beyond the do no harm policy, to be truly transformative, the DFI should set the goal of making investments that address gender equality and enable women and girls to benefit from development.

Women and girls often do not benefit from development due to the heavy and unequal responsibility for unpaid care and domestic work. On average, women are responsible for 2.5 times more hours of unpaid care and domestic work than men. Using the DFI to leverage investments that help reduce this burden would be a powerful way to address a structural barrier to women's full and equal participation in the economy. For example, infrastructure projects can be designed to reduce the time women spend fetching water or fuel or transporting dependents, but only if a gender analysis is included in their design and women are consulted on their needs.

Another approach would be to catalyze investments in time-saving and labour-saving technologies and ensure that these are available in rural and poorer areas. Oxfam has been working on small-scale projects in Ethiopia, Uganda, and Zimbabwe that connect communities with fuel-efficient stoves that reduce time fetching fuel and cooking and are also far safer to use. Making these types of investments would be a truly innovative way to address gender inequality.

The DFI should also prioritize financial service programs for women-led small and medium enterprises. The DFI could look at making sure land guarantees are available for women-led small and medium enterprises. Generally, these are at a disadvantage in attracting credit due to women being less likely to own collateral or due to harmful social norms. It could also offer technical assistance to financial institutions and businesses to train women entrepreneurs. I believe Engineers Without Borders provided testimony with further details on proposals in these areas last week, which we support.

To conclude, Oxfam does not believe the DFI should act as a substitute for ODA, and the DFI should not be using ODA allocations. However, DFI has the potential to complement the work of Global Affairs and the new feminist international assistance policy if its aims and objectives are aligned, and to set a new standard for development finance contributing to sustainable development.

We hope the committee will consider these recommendations to help ensure that the DFI is bold and innovative and reaches its goals of reducing poverty and increasing gender inequality.

Thank you.

[The Chair, Liberal, Bob Nault]

Thank you very much, Ms. Rhodes.

We're going to go straight into questions, and we'll start with Mr. Allison, please.

[Dean Allison, Conservative, Niagara West, ON]

Thank you to the witnesses for being here today.

Mr. Medhora, you've studied these and you've looked at a lot of them over a variety of countries, and you did say there are a number of options we could look at. In your opinion, having seen what's out there and what has been done well and where Canada has its strengths, what would you recommend we look at as a focus? I realize that ultimately the minister will decide, and the mandate will come from there.

In your experience and having seen what goes on and where we could have excellence, where would you suggest we focus our mandate on this particular DFI?

[Rohinton Medhora]

On the one hand, you have needs at the other end, and on the other hand, you have the expertise in the source country. I think we have to be guided by what Canada does best. We have to be guided by what we have said we will avowedly want to change.

There are two or three things that strike me. I thought that the unveiling of the feminist foreign aid policy last week was inspired, but then one has to put flesh around it. It seems to me that focusing on women's entrepreneurship is something that Canada has done and is something that we could give focus to through this.

Since one of the biggest issues facing developing countries, and indeed the world, is changes in the environment, anything that promotes green technology might be something worth doing. This is an area in which Canada is rapidly becoming dominant. It creates wealth, but more important, with technology, you find spillover effects, which other witnesses have also pointed to. At the same time, you would find yourself inspiring universities as well as other sectors in developing countries to grow. I would think some combination of working with new technologies and green technologies, and having a social bent, say through women's entrepreneurship, might be the way to go.

[Dean Allison, Conservative, Niagara West, ON]

Do you have any thoughts around rates of return? We had a chance to hear from our colleagues from the U.K., and as has been mentioned through testimony, there have been some issues. They've had some resets in the U.K. over the last 50 years or 60 years. What are your thoughts?

I'm assuming we're looking at it for the long game. Around rates of return and those kinds of things, do you have any thoughts?

[Rohinton Medhora]

The way the IFC, other multilateral institutions, and indeed the CDC in the U.K. work, there is a private rate of return, which is the financial rate of return. Then they try to compute something called the “social rate of return”, which is an attempt to capture those wider gains to society from investment.

Usually, although this is not in every case, a good long-term benchmark is to say that the social rate of return should be at least twice as high as the private rate of return. The private rate of return should be about twice as high as the long-term real rate of interest in a country. If you achieve 5% to 7% private rates of return and 12% to 15% social rates of return, you're doing very well. In fact, you might be beating the international average.

Your point about the long-term nature is an important one. If you choose to go into something like green technology, which is highly risky, it may take time to achieve that rate of return, and you have to be tolerant of a lot of failure, just as we have in this country with start-ups, to find those one or two successful firms.

[Dean Allison, Conservative, Niagara West, ON]

You talked about capitalization, about how it's a small amount, and you suggested that 5:1 may make some sense in terms of leveraging some of those dollars. I heard 7:1 and 5:1. Could you expand a bit more on that?

Are we talking about going to the market for bonds? Are we talking about just borrowing the money? What are the thoughts on trying to help this organization create some capacity?

[Rohinton Medhora]

These are off-the-cuff figures, but let's say $300 million over five years. Let's assume that the operating costs are modest. That $300 million, if you divide it by five, gives you $60 million annually. If you then have a 5:1 leveraging ratio, you want to raise another $300 million or so annually to give you a $350-million to $400-million lending capacity.

There are two ways you can do it, and they're not mutually exclusive. One is to have the DFI itself float bonds and in fact raise the money, and then use the money as it sees fit through its various project investments. The second way—and the IFC operates this way, as well—is to go out and look for other partners on a project-by-project basis. The latter is more labour-intensive, but it is often more effective because it gets you the right partnerships in each case. Bear in mind what I said. It's not just the money. It's the non-financial expertise that often makes or breaks these kinds of projects.

Early on, I think the DFI will have to make a choice. If it wishes to float a bond, I think there would be demand for it. There would be institutional investors who could be tempted into doing it. That would increase its core lending capacity, and then on a project-by-project basis it could achieve the rest of the leverage.

[Dean Allison, Conservative, Niagara West, ON]

Thank you.

[The Chair, Liberal, Bob Nault]

Thank you, Mr. Allison.

Mr. Fragiskatos is next, please.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair.

Thank you to all of you for your testimony today.

Mr. Medhora, I want to ask a question to you first. We have heard from a number of witnesses—in fact, it was mentioned today—that poverty reduction ought to be strongly considered, as far as a mandate focus. Looking at that is something that would help the DFI avoid investing in areas that will not help to address problems of underdevelopment.

At first blush, that makes absolute sense, but the devil is in the details. I want to ask you a question about how we measure poverty. I've read articles that you've put forward that present nuances in this regard. For instance, you've written that poverty can be measured simply by looking at per-capita income levels, or according to the multi-dimensional poverty index, which looks at a broader range of factors: nutrition levels, years of schooling, clean water access, or housing, for example.

I point to that nuance because if you look at two countries that you've talked about—I read a Globe and Mail op-ed in preparation for this meeting—India and Uzbekistan, India is a country that is quickly emerging as not just a global player, but when it comes to the economy, a leading player. You could look at per-capita income levels there and be quite impressed. However, if you measure indicators along the lines of the multi-dimensional index—nutrition levels, years of schooling, literacy levels, and the like—India's actually quite poor compared with Uzbekistan. Uzbekistan has low per-capita income levels, but on the multi-dimensional index measures, it does much better.

With that in mind, if Canada were to go ahead and put poverty reduction into the mandate of the DFI, could you give us some cautionary notes, perhaps, about how we measure poverty? It's not simply a matter of investing in countries that are poor. We have to understand how we measure poverty. If we do decide, in fact, to include poverty reduction into the mandate of the DFI, how should we measure poverty: by looking at per-capita income levels, the multi-dimensional poverty index, or some other measure?

[Rohinton Medhora]

Thank you. That is, in some ways, exactly the right dilemma that we face.

There are a number of things that one would want to unpack about this. What I guess I would say is that this goes to my last point about not Christmas-treeing the DFI with objectives that are all valid and make us feel good, but are not verifiable. More importantly, in this case, if you cannot connect an outcome to the activity of the DFI, then it is a bit of a mug's game to say that it was our $50-million investment that resulted in this change. That is why also, by the way, about the time that I wrote that op-ed, some of us, although we consider ourselves development-friendly, were skeptical about the Official Development Assistance Accountability Act, which I know several of my colleagues in the development business supported simply because of the measurability and the connection issue.

I would say give the DFI a mandate to achieve development, recognize that development is more than reducing income poverty, and that, as you pointed out, the human development index—at the very least, which the UNDP measures and propagates every year—has other dimensions to it, of which health, education, and the gender elements of these are important. There may be cases—in fact, my colleague gave the example—for not investing in infrastructure if this is already publicly provided for the very poor. That may well be, but suppose the DFI invested in—the way they have in Stockholm—a green train line between the airport and the city or connecting suburbs to a city, which, in fact, poor people would use. I would argue that anecdotally this is a good investment to make and it's good for development. However, if then someone asked me to show that this investment resulted in a reduction in poverty, either narrowly or widely defined, I'd be hard pressed to do so. In fact, three quarters of my organization would just be writing reports trying to convince folks about that.

I think we're going to need some judgment and common sense, and this is why I'm arguing for small, crown corporation-like professional organizations staffed by experts to whom we should give the mandate because we trust what they're doing.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

To Ms. Rhodes or Ms. Ravon, if Canada does go down the road of putting in the DFI's mandate the objective of poverty reduction, how should we measure poverty?

[Lauren Ravon, Director of Policy and Campaigns, Oxfam Canada]

Maybe I'll just jump in on a couple of these points. I think the issue of measuring poverty and well-being is an interesting one. For example, something that Francesca touched upon is time-years. We see that women who enter the formal economy might have a marginal gain in income but less time, so there are issues. There is time poverty that's worsened. As another example, if you're going far distances to be able to access your job, with the risks on the travel, the risk to your family, the lack of child care for your children, you're actually more impoverished than empowered. I think a simple equation of economic opportunity and empowerment is definitely the wrong way to go. We would definitely consider looking way beyond family income as the only measure of poverty.

I also think that the issue of investing in public services that are specific to women's time use is an interesting one, and one where Canada could be doing a lot of good work. On the issue of transportation, when we look at a gender analysis around transportation, we see that, for example, the roads or the public transportation that men use is often not the same as for women. The men will be using the higher ones, for example the highways in their country or the larger roads, whereas women will be using smaller back roads and country roads. Looking at where we're doing those investments does make a difference. It's something to consider.

Time-use technologies, things like stoves—and she talked about the clean energy linking it to a gender analysis—this is probably where Canada can have one of the best fits in the sense that a lot of the clean technology is actually directed at women because they're the ones who use those at the home level and at the community level.

[Peter Fragiskatos, Liberal, London North Centre, ON]

To sum up, if it wasn't obvious already, but perhaps it bears emphasis, the reason I'm asking this is that at some point if poverty reduction is included in the mandate of the DFI, there could be a situation where the DFI is looking at investing in India or investing in a place like Uzbekistan, to use those two examples.

One might argue that India is doing quite well already on a number of indicators, and namely per-capita income. Why would you want to go there? Go to Uzbekistan, where you have a very low per-capita income, but you look at different measures like the poverty index that I've talked about and you'd get a completely different picture, a very different picture that says that you ought to go against what might appear as common sense. That's why I wanted to put it forward.

Thank you very much to both of you for answering the question.

[Lauren Ravon]

On the issue of countries of focus, Oxfam has moved from investing only in the poorest countries to looking at the criteria of inequality. In middle-income countries, we have poorer communities than we've seen in the past and we're looking at what is driving that gap. As we see those gaps widen, inequality in those countries is actually of greater concern in the long run than only focusing on poverty where it is today. Middle-income countries could be a place to invest; it's just where in the country and in what communities.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

[The Chair, Liberal, Bob Nault]

Mr. Aubin, the floor is yours.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

I want to thank our witnesses for being here this morning and for sharing their expertise. I think they'll be a great help when it comes to moving from concept to reality.

Since the start of the study, two concepts seem to have received unanimous support. These concepts are the importance of DFIs and additionality. However, in Canada, I wonder whether this is such a good idea. Let me explain.

Let's take the Canadian DFI concept. Mr. Medhora, you said earlier that $60 million a year would give the Canadian DFI very minimal capacities. You even questioned the decision to establish the institute in Montreal. You think this would result in additional administrative or operational costs, and leave little money for tangible investments in the field. If the lending institution must generate its own revenue quickly to increase its capacity, this seemingly leaves little room for venture capital.

Also, in terms of official development assistance, we have been moving backward each year. In 2015, the assistance amounted to around 0.28% of the national revenue. In 2016, the percentage dropped to 0.24%. In 2017, it will be a bit less. The Minister of Finance has already sent the message that we must learn to do more with less.

So, in the end, if cuts are being made all over the place, does the additionality concept really exist in the Canadian model? Could we actually do something with the two tools proposed, which have very few resources at their disposal?

My question is primarily for the people from Oxfam Canada, and then for Mr. Medhora.

[Lauren Ravon]

I don't know whether my colleague understood the question. I don't know whether the interpretation system worked. However, I can give a short answer.

In principle, Oxfam is rather sceptical about the idea of this type of investment, simply given the evidence issue. There isn't much evidence that it helps reduce poverty. This doesn't mean that it could never work. We're therefore open to the idea of the mechanism in Canada, especially when we see a heavy focus on poverty reduction and women's rights. This is encouraging.

The fact that Canada's DFI is small may not be a bad thing. It allows for a more careful launch and for investments in more specific projects, and above all with a smaller mandate. For example, we could decide to prioritize the economic participation of women or poverty reduction among women and girls, and invest only in that area. If we start on a smaller scale, we could avoid certain issues, such as the one faced by the World Bank. The World Bank has large-scale funds, but has also had major issues. In fact, serious human rights violations have occurred.

We're looking at the investment with sceptical optimism. We aren't saying it couldn't work. However, in development, we know the government, in particular Global Affairs Canada, asks us for a considerable amount of evidence of our results. We're asked to be very specific about what we manage to accomplish with the money given to us. That said, DFIs in other countries have produced very little evidence. Therefore, Canada's DFI and our own NGOs that use public funds must be asked to show the same level of accountability.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

Mr. Medhora, what do you think?

[Rohinton Medhora]

I think those are very good observations embedded in the question, and I share some of the points my colleague from Oxfam made. First, whether we like it or not, in an era of stagnant and perhaps even declining ODA—and by the way, there are good reasons for it—the fact is that the emerging developing countries now have capacities to fund development that they did not have 40 and 50 years ago when we conceived our aid programs. In any case, given that kind of stagnation, creating an instrument that crowds in other private sector funding is surely a good thing.

Second, starting small is okay, as my colleague said. Especially in the early years, you're going to want to make a few mistakes, learn from them, and then build. My point is to build benchmarks into the growth of this organization that allow it to grow and prosper so it becomes a larger proportion of Canada's overseas assistance.

Third, about whether we are expecting any more or less of this organization than we are of Canadian organizations that work in the development sphere, my sense is it should be about the same. However, my real sense is that we might want to lower some of the burden of reporting on Canadian development organizations, rather than simply saying we should have the same burden on everyone. I think being a humanitarian agency is different from being a bank, so the nature of the reporting is going to be different too.

When you add all of that together, I am optimistic about this. I don't mean to suggest that because it's small it's not going to be effective. The example I'd give you, by the way, is exactly my former employer, IDRC. IDRC is about 4% of Canada's ODA, and in global ODA flows it would be about 1/25 of that. As I think you all would know, because you've had people from IDRC at your table, it is one of the jewels in Canada's overseas presence and has been a hugely effective agency over time.