Why should Private Sector Development (PSD) be a core element of development strategies?
Ultimately, the purpose of development aid is the ‘graduation’ from
foreign assistance altogether. This is only possible where poor people earn a better
living within their own economy, without the risk of depending on outsiders for
By providing the poor with the capacity to find jobs and improve their incomes,
PSD lays the foundation for their exit from charity. In addition, a growing private
sector will ultimately enable governments in developing countries to generate the
tax revenues needed to emulate government provision in more wealthy countries -
of health care, education etc.
This page offers an overview of key information, data and arguments that underpin
this rationale. Each section is linked to more detailed pages on the DCED website.
They include success stories of how PSD has helped to reduce poverty at scale, and
a results chain showing how different PSD interventions are expected to lead to
pro-poor impacts – as a means to organise and reference the available evidence.
Are you looking for specific examples of the development impact of PSD? We have
dedicated a webpage
to a collection of PSD programmes which report success at scale in improving
the living conditions of the poor through the creation of jobs and economic opportunities.
Classified by different areas of intervention, they not only provide lessons on
what kind of interventions seem to have worked well, but also underscore the
the value and benefits of PSD for wider development goals.
How PSD leads to Poverty Reduction - A Results Chain for the Evidence
The main goal of most private sector development interventions is to provide jobs
and increase incomes for the poor in developing countries. The underlying logic
of how PSD practitioners expect to achieve these pro-poor impacts is the subject
of our ‘Framework
for Evidence’. This framework is designed as a results chain which
organises the available evidence on results in PSD; this evidence can be viewed
by clicking on the hyperlinked arrows in the chain.
The framework also links to sub-pages
explaining the general rationale for different types of PSD interventions as well
as the anticipated sequence of steps between these interventions and poverty reduction.
You can also go directly to these pages, by clicking on the links below:
Rationales for different types of PSD interventions
Updates on the latest Research and Evidence on PSD
The DCED's publication "Latest
Research and Evidence on PSD" highlights some of the most interesting recent
PSD-related research, evidence and trends. It draws on books, academic journals
and studies from various sources and is sent out regularly via the DCED's mailing
Beyond the Evidence: Getting the Message Out
the Values behind PSD - A Briefing Note (December 2010): Although PSD offers
one of the most important routes out of poverty, some key supporters of development
aid seem uncomfortable with it. Might this be because we have not articulated with
sufficient clarity the values behind our work on PSD? Have we focused too much on
the 'what we do' and not enough on the 'why'? The DCED commissioned Chris Rose to
consider this question, and his findings are presented in the 3-page Briefing Note.
- Quotes from International
Thought Leaders and Practitioners in Economic Development: Our
'Quotes on PSD' page compiles 'quotable quotes' on Private Sector Development
(PSD) - comments and extracts of speeches by prominent individuals, academics and
development practitioners, as well as quotes from publications, that illustrate
the crucial role of PSD for development and poverty reduction.
- How Businesses brings Dignity to the Poor - A Video of the Acumen Fund: In the video
below, entrepreneurs from across the developing world talk about how their work
brings dignity to the lives of the poor.
PSD Strategies of Member (and other) Agencies
The specific rationales for private sector development presented by different DCED
member as well as other key donor and development agencies, including their focal
areas in developing the private sector, can be found in their PSD strategies. Links
to the PSD strategies and short summaries can be found
Photographs courtesy of Charles Bodwell, Rajat Kumar Das, Sudipto Das