Private sector engagement

Private Sector Engagement (PSE) refers to the interest of donors and others to work more strategically and systematically with business. The OECD has proposed a very broad definition of PSE as ‘an activity that aims to engage the private sector for development results, and involves the active participation of the private sector’ (OECD, 2016). In practice, however, and as the DCED’s Working Group notes, ‘developing an operational framework … necessarily implies a need to narrow down the most relevant PSE categories … and to draw pragmatic boundaries’ (DCED PSE WG, 2017).

For example, PSE strategies tend to focus in practice on working with international business (ECDPM, 2012) whereas other approaches may focus more on local business (e.g. MSD) or on government agencies (e.g. BER). PSE strategies are a means to reach many development goals, the private sector being an equal partner with finance, ideas and capacity. Private Sector Development focuses on stimulating the private sector to generate more economic opportunities for the poor.

In order to engage the private sector more effectively, many donor agencies are now exploring ways to build staff skills in PSE. To assist in this effort, the DCED has compiled a list of training offers on private sector engagement and partnerships on this dedicated webpage.

At a glance: Short reads on private sector engagement

DCED guidance and knowledge products on private sector engagement

The DCED is a key forum and knowledge hub providing practical support to donors that wish to strategically engage businesses in delivering economic development outcomes that benefit the poor. This section provides access to the DCED’s key documents on private sector engagement, based on the experiences of DCED member agencies and other organisations. Click here to learn more about the DCED’s Private Sector Engagement Working Group.

DCED ‘how to’ guidance and resources

DCED research on different formats of engagement

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All new [aid] investments will explore innovative ways to engage the private sector ‘…’Central to this new way of working is ‘the concept of shared value…: that business can deliver sustainable social impact … while achieving commercial returns.’ Australia DFAT

Overview documents: engaging the private sector for development

The SDGs confirm that “private business activities, investment and innovation are major drivers of productivity, inclusive economic growth and job creation.” This section links to selected overview documents on how donors and other organisations engage with business to leverage their capacity and resources for poverty reduction.

Global reviews and typologies

Agency experiences

Different formats of engagement (1): Innovative Finance

Innovative Finance may refer to strategies for mobilising additional private finance  and/or for making more effective use of existing funds for development by engaging with private investors, funds or financial institutions. Three specific concepts that feature frequently in discussions on innovative finance include

  • Blended Finance, i.e. catalytic approaches used by development actors to raising or mobilise additional private finance for development purposes (including from commercial or impact investors), using a wide range of financial instruments
  • Impact Investment, i.e. the practice of private investors of deploying private capital towards development outcomes, while (according to several definitions) generating a financial return
  • Results-Based Finance, which may refer to a specific set of instruments used by development actors to encourage impact investments or the use of private implementation capacity towards development outcomes, by promising to repay investments in full upon achievement of agreed results.

Overview documents

Mobilising additional private finance for development: Blended Finance

Deploying private capital towards development outcomes: Impact Investing

Encouraging the use of private finance for development outcomes: Development Impact Bonds and other Payment for Results initiatives

Different formats of engagement (2): Engaging with business around core business (and related) activities

A second set PSE strategies focuses on engaging with (mainly international) companies – either directly or via an NGO – to support or influence core business investments and practices or related activities (e.g. investments that may become core business in the future). This can be done through a variety of instruments, such as grants, loans, policy dialogue or technical assistance to the partner business. Resources on some of the key strategies used by donors can be found below.

Sectoral partnerships

Sectoral Photo Woman Trimming Fleece 2 2016partnerships are typically multi-stakeholder in nature; they feature combined donor and private funding and an agreement of all funding and implementing partners on the sharing of tasks and responsibilities towards a common goal – such as jointly boosting the competitiveness of a particular commodity in a country or regions, or enhancing sustainable production methods.

Multi-stakeholder platforms and processes

Multi-stakeholder platforms are a specific sub-form of partnerships that typically have a knowledge sharing or standard-setting purpose; involve a large number of organisations; and include multi-stakeholder members, supporters and funders. The direct beneficiaries of platforms are their members. Note that the terms ‘platforms’ and ‘partnerships’ are often used interchangeably in the literature (including some of the publications below). Most of the publications below offer insights into the design and governance multi-stakeholder processes more generally, including platforms.

Challenge funds

A sub-set private sector engagement work is implemented through competitive funds and facilities that invite applications from businesses, such as challenge funds. These central or regional-level mechanisms are primarily geared at businesses from donor countries, and offer cost-sharing and/or technical assistance to facilitate investments in developing countries.

Research on current practice and lessons learnt in challenge funds

Result reports and evaluations of challenge funds

 

Practical tools and ‘how to’ resources for engaging businesslab

This section includes documents which provide practical guidance or pointers for how development practitioners can choose partners, design and manage partnerships and collaborations with business, and assess their results.

In 2017, the Practitioner Hub published a series of blog posts on demystifying the donor-business space, including on how to bridge the cultural gap between business and development organisations, approaches to business collaboration beyond traditional frameworks, and lessons on screening partners from field programmes.

To view a list on training courses on PSE, click here.

Generic handbooks, overviews and guides

Mitigating negative market distortions and assessing additionality

Criteria and processes for choosing partners 

Partnership design

Gender and Women’s Economic Empowerment Mainstreaming

Results measurement

Photo credits

Photo credits in order of appearance: Rob Rickman, Rampant Fiji Ltd/ MDF; Nestlé: Nespresso agro-forestry programme (flickr.com); ALCP Georgia; Urs Flueeller; Nestlé: Youth in Peru (flickr.com)

Photos below: Saira Habib/MDF; Drik/ Katalyst; Tran Viet Duc/Bronwyn Cruden, Global Affairs Canada.