SDG 9 – Industry, Innovation and Infrastructure

Innovation drives development

Whether in agriculture or industry, in education or energy supply, modern operations, innovative solutions and up-to-date infrastructure can unleash enormous economic potential. This potential is important for employment and income, and thus for development and poverty reduction. These are also key factors in making climate change manageable. However, the world is still a long way from exploiting these opportunities to their full extent. Developing countries also have some catching up to do here.

Digitalisation in particular as a driver of innovation can pay a quick dividend in countries with undeveloped or inadequate infrastructure: Internet academies replace visits to universities, while digital currencies and mobile banking solutions replace the establishment of a bank branch network. Telemedicine brings health services to the most remote village. Corresponding measures, especially in the digital sector, allow economic and social development progress. Not only because knowledge can be tapped quickly on the Internet, but also because it reduces costs and time, eliminates physical distances and allows stages of technology to be skipped. New technologies also pave the way for a sustainable growth path. Climate change and the overuse of resources can only be counteracted if growth is kept from automatically resulting in environmental pollution.

On behalf of the German Federal Government, KfW is committed to improving the conditions for the implementation of innovation and digital technology in its partner countries.

The economic focus of many developing countries and emerging economies continues to be on agriculture and tourism – even if attention to the latter is not quite as strong. Until now, industry has played a lesser role. Agenda 2030 aims to change this. At KfW Group, DEG finances, advises and supports private companies that wish to invest in the production sector in developing countries and emerging economies.

KfW Development Bank’s role is to work with partner countries to create an improved and economically stable framework for the private sector. Although small and medium-sized enterprises (SMEs) in developing countries are responsible for over 60% of newly created jobs, a large proportion of them do not have access to financial services. And the coronavirus pandemic has exacerbated this situation considerably. This is where KfW comes in, by developing need-based financial systems. This also includes corporate financing via funds and SME promotion, for example, the Enterprise Innovation Fund (ENIF), which provides young, high-growth companies in the digitalisation and technology sector with equity capital in the early stages. KfW has long supported the work and funds of the non-profit organisation Women's World Banking (WWB) in order to specifically improve the financial inclusion of women and female entrepreneurs, promote their participation in economic life and increase their involvement in digital technologies.

However, KfW also promotes the private sector by supporting vocational training measures that are geared towards the needs of local companies and produce qualified specialists, such as through the Regional Challenge Fund in the Western Balkans.

While innovation is not synonymous with digitalisation, it is inevitable that both are intertwined as digitalisation creates countless innovations. There are many opportunities for developing countries to catch up on development backlogs through leaps in technology (“leap-frogging”). However, there is still often a lack of the necessary infrastructure, expertise or simply financial means to use digital applications across the board.

To bridge this gap, KfW is involved in many projects for innovative technologies and sustained, risk-aware digitalisation. In Peru, for example, it is supporting the introduction of a digitalised land register to ensure a long-term and dependable water supply. In Laos, it supports a digital remote sensing system to prevent illegal logging. And with the initiation of the InsuResilience Investment Funds (IIF), which invest in companies in the insurance industry to expand access to climate risk insurance in developing countries, KfW is promoting adaptation to climate change in an innovative way.

Infrastructure includes all state and private facilities that are necessary for sufficient public services. These span from roads and sewers to schools and hospitals, to digital infrastructure that not only includes servers and computers but also and primarily tends to the network itself. In most developing countries there is still a lack of adequate infrastructure – and the quality of existing infrastructure is often insufficient. Water pipes are often defective; drinking water seeps away unused. Schools and other public buildings are poorly insulated, which means that an unnecessary amount of energy is required for heating.

KfW is therefore promoting the expansion and renewal of resilient and sustainable infrastructure. This includes, for example, the expansion of rural roads, as well as modern, climate-friendly mobility in cities in order to connect people and goods and to enable the population to access markets and educational facilities at all times. The expansion of digital infrastructure and the implementation of IT solutions can also help to improve the living and economic conditions of poorer countries. Rwanda, for example, digitalises municipal administrative processes with a monitoring, evaluation and information system ( MEIS) supported by KfW. This not only allows social benefits to be processed more transparently and efficiently for the poorest members of the population, it also allows for greater citizen participation in decisions on investments in local infrastructure, which is the project’s stated aim.

KfW Development Bank helps its partners tap into this potential for sustainable development through technology and innovation in various sectors. At the same time, it pays attention to the responsible handling of the social consequences that can be associated with the use of state-of-the-art technologies and to risks in the areas of data privacy, cybersecurity and environmental protection.

Development cooperation itself is also increasingly using digital instruments to become more efficient and effective. With TruBudget, KfW has developed software based on blockchain technology that enables partner countries to use promotional funds much more efficiently and transparently. The coronavirus pandemic triggered a surge in remote management, monitoring and verification (RMMV) of KfW projects. KfW has summarised its experience with this and the associated instruments in its RMMV guidebook. Geodata is playing an increasingly important role in FC projects, and not only when working remotely. For example, evidence-based statements on the effectiveness of protected areas can be made with the help of the MAPME initiative of the KfW Evaluation Department.

Since digitalisation and innovation are cross-cutting issues, they are incorporated into projects in all sectors. New commitments for KfW Development Bank projects aiming to support SDG 9 amounted to around EUR 963 million in 2023. In total, the ongoing portfolio of the Financial Collaboration business area includes 408 projects that are focused on digital transformation or contain major digital components (reporting date 31.12.2023). Promoting sustainable development in partner countries through digital innovations remains a key concern for KfW Development Bank.

Frau Arlina Elmiger (Leiterin der Abteilung Digitalisierung, Innovation und Kommunikation der KfW Entwicklungsbank)

“We’re making progress, but we still have a lot to do”

Interview with KfW Director Arlina Elmiger about the status digitalisation is at in development cooperation and why KfW has to meet its ambitious goals in this area.