Digital Public Infrastructure
Fostering an enabling environment for Digital Public Infrastructure in Least Developed Countries (LDCs) — the role of the UNCDF Policy Accelerator.
Evidence shows that countries that have invested in digital platforms are more resilient in the face of crises.
Foundational digital platforms such as payments infrastructure, digital ID and data exchange system, collectively called Digital Public Infrastructure (DPI), provide an on-ramp to the digital economy. They reduce the practical and cost barriers to using payments, savings, credit, and other tools for individuals and small businesses, giving them access to and use of important data about their lives, businesses, and markets.
Kenya's mobile money system M-Pesa, which grew by 20% in transactions during COVID-19 and helped the economy rebound by 7.5% in 2021, and Bangladesh’s digital financial services, used by 80 million people, which supported 3.5% economic growth in 2020. Similarly, Rwanda’s digital public services enabled an economic contraction of only 3.4% during the pandemic, lower than many African peers.
Despite the potential of DPI, Least Developed Countries (LDCs) face significant barriers to establishing and scaling these infrastructures. Policy and regulatory constraints, fragmented market structures, insufficient funding, and limited capacity to adapt global standards to local contexts have inhibited progress.
The Policy Accelerator’s experience highlights that there are numerous public policy and regulatory challenges for policymakers and regulators:
Navigating complex trade-offs;
Ensuring stakeholder alignment;
Building the foundational systems necessary for equitable digital access.
Key leverage point: Policy harmonisation to manage trade-offs
Implementing harmonized, risk-based frameworks that address trade-offs and unintended consequences is a critical leverage point for LDCs. Harmonisation can foster both innovation and inclusion, while aligning the goals of multiple government agencies involved in DPI implementation, as demonstrated by models in India, Ethiopia, Brazil, and Rwanda.
Examples of policy trade-offs that call for greater harmonisation include:
Balancing data privacy with the need for seamless cross-border data flows, as seen in global standards like the GDPR, which, while protecting personal information, can impede international digital services.
Tension between fostering competition to spur innovation and ensuring inclusivity, as overly competitive environments can exclude smaller players.
Cybersecurity, critical for trust in DPI, must be balanced with maintaining affordable and accessible digital services.
Consumer protection regulations need to safeguard users without stifling market flexibility and innovation.
Ensuring widespread broadband access while securing investment in DPI infrastructure requires coordinated efforts, including public-private partnerships.
Contribution to the DPI enabling environments
The Policy Accelerator aims to bridge policy and regulatory gaps in LDCs, focusing on the development of DPI through a multi-faceted approach that includes:
Advisory and Technical Assistance: Supporting governments to promote innovation, ensure data protection, and guarantee equitable access to services.
Stakeholder engagement: Convening dialogue between governments, private sector players, civil society, and end users to align public policies with market objectives.
Investment models: Designing an enabling environment for blended finance approaches to attract private capital, while de-risking investments in DPI.
As DPI becomes increasingly vital for economic resilience and inclusion, UNCDF’s role will remain indispensable in ensuring that LDCs can participate fully in the global digital economy.
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“DPI seamlessly weaves together digital data exchanges, identification systems, and payment solutions for a smarter, more connected world.”
Key topics in DPI
