What works and why

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 continuous assistance.

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 is why aid agencies and governments are increasingly committed to working with and through the private sector as a key element of their development strategies. For example, the Joint Statement on Expanding and Enhancing Public-Private Cooperation, agreed at the 4th High Level Forum on Aid Effectiveness in Busan in 2012 and signed by the DCED, recognizes the critical importance of the for-profit private sector as a key engine of economic growth, job creation, innovation and sustainable development, and encourages greater cooperation between the public and the private sectors to achieve development goals. A lot of the current debates on the post-2015 Millenium Development Goals revolve around the same issues. An overview of private sector development policies can be found at Getting to Zero: Tackling Extreme Poverty through Private Sector Development Policy Guide.

In this area of the website, you can find successful examples and arguments that underpin the rationale behind this increasing focus on private sector development and engagement. You can also find useful information that can help you better understand or communicate private sector development work; to learn more about research-based evidence on results in PSD, have a look at our  Evidence area.

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Raj Kumar Das