Donor support to partner companies changes their behaviour

On this page you can find a summary of evidence on how firms changed their behaviour or invested more as a result of donor support through a business partnership facility or other form of private sector engagement in their development programmes. This typically involves a grant, loan and/or technical assistance to facilitate changes in the way a company operates.

Several reviews and evaluations of donor grants or loan guarantees to businesses find positive impacts on new investments and adoption of new business models.

  • For example, Poulton and Macartney (2011) find indications that partnerships can respond to market faillures and encourage private investment in poorly functioning agricultural value chains. However, the authors note that this also poses the risk of ‘state failure’: It is often unclear whether public support has been additional, i.e. nececessary for the private investment to proceed (see also DCED, 2013).

Few studies or evaluations are available that explicitly conider the additionality as well as results of donor support to individual companies.

  • One of them the 2012 Annual Portfolio Review of AusAID’s Enterprise Challenge Fund (ECF). The report finds that over half of the 21 funded projects had invested further funds to scale up their operations beyond original expectations, suggesting that providing grants can change firms’ levels of investment in activities which have developmental benefits.
  • A case study in the Review which demonstrates the additionality of a grant that effectively helped to change firm behaviour involves WING in Cambodia. WING is provider of mobile phone payment services that enable customers to transfer, store and cash out their money using a mobile phone. For WING, the cost of rural expansion was too high to justify on commercial grounds. The ECF matching grant funded 25% of the cost of extending affordable payment services to rural Cambodians, and was used mainly on education programs and marketing campaigns to create demand for mobile technology and banking.