Global progress in reducing poverty and hunger has slowed dramatically, while aid budgets are shrinking and fiscal pressures on governments are intensifying. This report, commissioned by the FCDO STAAR Facility, argues for the rapid expansion of social protection through a virtual financing mechanism. Drawing on lessons from other vertical funds and country platforms for coordinating finance, virtual financing could mobilise and coordinate donor support behind nationally led programmes, delivering many of the same benefits without the costs and delays associated with creating new institutions. In a context of limited appetite for new multilateral bodies, virtual financing offers a practical and timely alternative to current approaches.
Virtual financing refers to the pooling and coordination of support around shared objectives without establishing new legal entities. Previous ODI Global research has identified this approach as a way to reduce fragmentation in development assistance. Building on coordinated national platforms, such as those used in climate action, virtual financing could help accelerate the expansion of social protection coverage and improve the effectiveness of international support.