Why is innovative financing needed to achieve the SDGs, both globally and in Indonesia?
Around the world, countries are grappling with a pressing question: how can we close the widening financing gap to achieve the Sustainable Development Goals (SDGs) by 2030? Traditional sources of development funding—such as aid, grants, and concessional loans—are proving insufficient, especially in the context of compounding global challenges. The enduring impacts of COVID-19 pandemic, escalating climate-related disasters, and increasing debt burdens in many developing economies have all constrained public budgets and redirected resources away from long-term development priorities.
Indonesia reflects this global challenge. The scale of ambition for achieving the SDGs as vast as the financing gap that threatens to derail progress. The country requires an estimated US$8.7 trillion to meet its 2030 the SDGs targets—an amount around 40 times larger than its annual state budget—leaving a financing gap of US$1.7 trillion.1 This stark shortfall cannot be addressed through public finance alone. Bridging this gap will require more than public finance alone; it demands innovative financing models that can unlock additional resources and drive more inclusive and sustainable development outcomes.
The ASSIST joint programme steps into this void with a bold proposition: to rethink how development is financed by leveraging innovative financing instruments to unlock both public and private capital. Looking from the global lens, the initiative responds to the critical need for innovative financing mechanisms that go beyond conventional development aid. As highlighted by the UN Resident Coordinator, achieving the 2030 SDGs requires "going beyond development funding to develop new forms of partnership and innovative financing solutions."2 The programme is built on a theory of change that envisions a catalytic financing ecosystem—one that not only channels funding toward green and social sectors but also ensures that investments are gender-inclusive and targeted to benefit the most vulnerable communities. At its core, the ASSIST JP is about operationalizing the SDG principle of "Leave No One Behind", by making development finance more equitable, accessible, and impactful.
How does the ASSIST Joint Programme work in practice?
The ASSIST joint programme is more than a leveraging funding initiative–it is a sophisticated choreography of partnerships rarely found on the same stage, bringing unique strengths to create something none could achieve alone. The programme unites the strategic agility of UN technical expertise, government policy frameworks, Islamic finance principles and the market muscle of commercial banks and venture capitalists—proving that development finance can be dynamic, integrated, and transformative.
At the center of this collaboration, UNDP acts as the lead coordinator, while UNEP, through the UNEP Financing Initiative contributes environmental expertise in the financial institutions sector, UNICEF ensures on child-centered approaches, and UNIDO drives inclusive industrial development know-how. All four agencies operate under the strategic leadership of the UN Resident Coordinator, creating a unified yet diverse technical foundation.
The government partners represent the policy and regulatory muscle that transforms good ideas into systemic change. Indonesia's Ministry of Finance provides the sovereign credibility that gives investors’ confidence, while Indonesia’s Ministry of National Development Planning (BAPPENAS) ensures alignment with national development priorities. The Financial Services Authority (OJK) creates the regulatory frameworks that allow scalable innovation while protecting investors, and the Ministry of Home Affairs bridges national policies with subnational implementation. This isn't simply government buy-in—it's government leadership and co-creation in reimagining how development finance works.
Perhaps most remarkably, the programme has secured commitments from six major commercial banks, including three of Indonesia's top six, to develop Sustainable Finance Frameworks. These banks represent a staggering US$136 billion in assets—nearly one-fifth of Indonesia's total banking sector. Their participation transforms ASSIST joint programme from a development programme into a market-making initiative that reshapes how Indonesia's financial sector evaluates and finances sustainable development.
What results have been achieved so far, and what lessons are emerging?
The first pillar focuses on thematic bonds and Sukuk, supporting Indonesia’s efforts to scale up sustainable finance solutions aligned with global trends. Beyond facilitating bond issuances, the programme has helped shape a supportive ecosystem—strengthening regulatory foundations, building institutional capacity within government, supporting corporate issuers, and enhancing transparency through the development of allocation and impact reporting frameworks. Through the support of the ASSIST programme, Indonesia has facilitated over US$5.7 billion in sovereign and corporate thematic bonds, including groundbreaking Sukuk instruments that align with Sharia principles while achieving development outcomes.
The impact ripples through every corner of Indonesian society. A US$2.1 billion SDG Bond facilitated 30 million vaccine doses and supported over 20 million students nationwide through enhanced education assistance. A US$3.2 billion Green Sukuk contributed to mitigating 2.8 million tonnes of CO₂ emissions through energy efficiency and sustainable transport initiatives. A US$309 million Blue Bond contributed to rehabilitating over 2,000 square meters of coral reefs, protecting 684 kilometers of coastline across 33 provinces while supporting coastal communities whose livelihoods depend on healthy marine ecosystems.
The programme also supported Indonesia’s broader public financial management ecosystem. In Aceh, Baitul Mal was able to manage approximately US$13.8 million through Islamic finance to support child-related programmes between 2021–2022, reaching over 84,000 mustahik (eligible beneficiaries).
The second pillar transforms Indonesia's banking sector through green and SDG-linked loans. ASSIST joint programme secured commitments from six commercial banks representing US$136 billion in assets to develop comprehensive Sustainable Finance Frameworks. This wasn't just policy development—it was market transformation that created new products, services, and evaluation criteria. Over 17,000 financial professionals received training, with 43% being women, creating a new generation of bankers equipped to evaluate climate risks, assess social impact, and structure sustainable investments. The capacity building extended beyond technical skills to include cultural change, helping traditional bankers understand how environmental and social factors affect long-term financial performance.
The third pillar operates the Indonesia Impact Fund (IIF), representing something entirely new in the country's financial landscape: the first venture capital fund focused exclusively on early-stage startups aligned with the SDGs. With US$2.35 million raised, it has invested US$2 million across four carefully selected startups, proving that purpose-driven investing can generate both financial returns and social impact. The Fund operates with commercial discipline while maintaining development outcomes, demonstrating that the traditional trade-off between profit and purpose is a false choice.
The programme's beneficiaries span Indonesia's entire socio-economic spectrum, creating a comprehensive transformation that touches every level of society. Under the IIF programme and in collaboration with the Indonesia Environment Fund, the initiative has positively impacted over 2,800 beneficiaries from diverse groups: over 720 students in remote areas received green-learning modules; 150 individuals—including women, persons with disabilities, and the elderly—across 11 micro, small, and medium enterprises (MSMEs) were trained in shrimp-processing entrepreneurship; 100 fishermen’s wives gained financial literacy skills; over 240 children received environmental education; and 456 farmers and community members, 80% of whom are women, benefited from training in climate-smart agriculture and farm management.
Furthermore, over 1,000 government officials have received training in thematic bonds and sustainable finance, building the institutional capacity that makes systemic change possible. These aren't one-off workshops but comprehensive capacity-building programmes that create lasting expertise within Indonesia's public sector.
Corporate bond issuers receive technical assistance and capacity building through specialized accelerator programme that help them structure, market, and manage thematic bonds and Sukuk. This support transforms companies from passive recipients of development finance into active participants in sustainable capital markets, creating a multiplier effect as successful issuers inspire and mentor other companies.
Students and youth represent the programme's investment in Indonesia's future, with over 19,000 engaged through initiatives like the Budget Olympics and green learning modules. These programmes build financial literacy, environmental awareness, and civic engagement among young Indonesians who will inherit the challenge of sustaining the country's development progress. The approach combines formal education with experiential learning, helping students understand how their choices and careers can contribute to sustainable development.
At the grassroots level, the programme supported over 1,400 MSME entrepreneurs in agrifood, aquaculture, textile, and jewelry sectors through training in sustainable practices. This included financial literacy, market access, and business networking. A total of 21 MSMEs and smallholder farmers also received US$96,000 in loans to grow their operations. A gender-responsive approach was prioritized, for example, over 150 women shrimp farmers in North Lombok were supported through a partnership with a local aquaculture tech startup. They gained access to digital tools for water quality monitoring, sustainable aquaculture practices, and financial decision-making training through the Gender Action Learning System (GALS). The programme recognizes that empowering women creates ripple effects that benefit entire communities.
The programme also launched MyNyale, a collective branding initiative that unites 12 SME leaders and over 1,000 businesses in West Nusa Tenggara. The initiative enhances production standards, facilitates access to wider markets, and improves financing opportunities for local enterprises. Through MyNyale, participating MSMEs established business-to-business linkages with 20 hotels, 27 shops, and 24 suppliers—contributing to a 58% increase in sales and a 14% rise in employment. These outcomes have improved the financial profiles of participating MSMEs, making them more visible and attractive to potential investors and lenders.
What message does this send to the global community for the FFD4?
As global leaders prepare for the Fourth International Conference on Financing for Development (FFD4), Indonesia's experience offers both inspiration and instruction. The traditional development finance architecture is no longer sufficient to close the SDG financing gap.
The ASSIST Joint Programme model suggests an alternative path: utilizing development resources as catalysts, rather than subsidies. Instead of giving money away, use it strategically to de-risk investments, build capacity, create enabling environments, and demonstrate proof-of-concept for innovative financing mechanisms.
This approach transforms the development finance conversation from "How much aid can we mobilize?" to " How can we leverage innovative financing to mobilize resources for the SDGs?”
Countries seeking to replicate this approach must invest in financial sector capacity building before launching innovative instruments, develop robust regulatory frameworks that balance innovation with investor protection, and create enabling policy environments that align government incentives with private sector returns. Additionally, they need to build multi-stakeholder partnerships that leverage each actor's comparative advantages while ensuring inclusive design that specifically benefits women, vulnerable communities, and marginalized groups. This comprehensive foundation enables the sustainable implementation of innovative financial mechanisms that can effectively serve diverse populations while maintaining regulatory integrity and market confidence.
The programme's legacy extends far beyond Indonesia's borders. It demonstrates that emerging economies need not wait for increased aid flows or debt relief; instead, they can take the lead by tapping into their own creativity, leveraging domestic potential, and pursuing innovative solutions tailored to their unique contexts. With the right partnerships, innovative instruments, and commitment to inclusivity, they can mobilize domestic and international capital markets to achieve their development aspirations.
Note
All joint programmes of the Joint SDG Fund are led by UN Resident Coordinators and implemented by the agencies, funds and programmes of the United Nations development system. With sincere appreciation for the contributions from the European Union and Governments of Belgium, Denmark, Germany, Ireland, Italy, Luxembourg, Monaco, The Netherlands, Norway, Poland, Portugal, Republic of Korea, Saudi Arabia, Spain, Sweden, Switzerland for a transformative movement towards achieving the SDGs by 2030.
