The large external indebtedness of many poor countries which had negative effects on the growth performance in many cases induced a thinking about the rationale for debt conversion among Swiss NGOs and development co-operation. As a consequence of a petition by a coalition of Swiss NGOs to the Swiss government resulted in the establishment of a debt relief fund. The objective was to reduce the debt overhang of eligible countries and to establish counterpart funds which would finance development projects particularly aimed at alleviating poverty and generating new income at the local level. The working of the concept of creative debt relief is illustrated by the examples of Bolivia, Tanzania, and the Philippines. The advantages of debt conversion are seen in the establishment of a dialogue forum with local NGOs and between NGOs and government; the participation of umbrella NGOs in the designing and decision-making processes; and the creation of a demonstration effect.
