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Private sector development

The private sector has an important role to play in creating jobs and alleviating poverty. Many companies operating in Sida’s development cooperation countries find it difficult to develop their businesses and contribute to economic growth. Sida therefore supports initiatives that make it easier to run a company, especially for women.

Progress has been made

Technology increases productivity

New technologies and digital solutions make it easier for people in low-income countries to run a company and increase the productivity, profitability and sustainability of agriculture. Mobile banking services make it easier to accept payment, transfer funds and take out a loan. 

Reforms make it easier for businesses

Many countries have pushed through important reforms that make it easier to start and manage a business and for entrepreneurs to take the step of investing. During 2018-2019 alone, 294 such reforms have been enacted globally, according to the World Bank report Doing Business 2020.

Commitment to sustainability

The private sector has never been more committed to sustainable global development than it is now. There is a growing awareness among businesses worldwide of the responsibilities and opportunities inherent in social, economic and environmental sustainability. 

Challenges remain

Vulnerable economies

In many of Sida’s development cooperation countries, the economy is based on a single or a few natural resources, leading to economic vulnerability, sustainability problems and an inability to create jobs.

Informal labour market

In many of these countries, most companies operate in the informal economy and their employees often work for low wages in poor conditions. Certain companies remain on an informal basis due to the expense and complexity of running a formal business. Productivity is also often low at these informal companies.

Gender inequality

It is still the case that most of those who start and manage businesses are men. There are only four countries in the world in which as many women as men own businesses.

Sida's work with private sector development

Sida operates in many of the countries in which it is most difficult to start and manage a business. The various obstacles make it hard for the private sector to develop and create jobs, which in the long term makes it more difficult for people to improve their standard of living and for the country to strengthen its economy.

Business climate and financial inclusion

The level of innovation in low and middle-income countries is enormous and would be quite capable of meeting global development challenges were it not for a lack of capital and investment that prevents these innovators from implementing their projects. The financial system is also out of bounds to many people due to poverty, lack of knowledge or discrimination.  They may for example be unable to open a bank account, save digitally, take out insurance or obtain a loan, making it difficult to support themselves and deal with unforeseen events.

Reforms create jobs and provide food security

Regulations in many countries make it difficult for people to run a company, own land or gain access to electricity. The Facility for Investment Climate Advisory Services (FIAS) programme supports developing countries in implementing reforms to simplify trade, which in turn creates jobs, provides food security, reduces climate impact and contributes to gender equality and sustainable development.

FIAS web page

Increasing access to financial services

The Financial Sector Deepening programme in countries such as Zambia, Mozambique and Kenya contributes to increasing access to and reducing the cost of financial services such as loans, savings accounts and digital payment solutions. The programme specifically focuses on women, young people and the inhabitants of rural areas. 

Developing small businesses

While small and medium enterprises (SMEs) account for over half of all jobs worldwide and a large proportion of the economies of developing countries, their ability to grow is hindered by a lack of finance and knowledge. This is especially difficult for female entrepreneurs, who often operate small holdings and enterprises and must negotiate social norms that make it even harder for them to grow their businesses.

Developing markets for shea and baobab

Burkina Faso is one of the poorest countries on earth. It is also undergoing rapid population growth, increasing the pressure on natural resources. Tree Aid works to achieve sustainable forestry and strengthen entrepreneurship, among other things by developing markets for shea butter and baobab fruit and supporting small business owners, particularly women.

About the project on the Tree Aid web page

Building up the Palestinian digital communications sector

Around 60% of young people in Palestine are unemployed. The Israeli occupation has isolated the Palestinian market, making it difficult to find work, start a business or export products. Mercy Corps works to build up the country’s digital communications sector and make it competitive internationally in order to create jobs for young people and women in particular, including by supporting startups and freelancers online and promoting outsourcing and entrepreneurship.

Mercy Corps web page

Corporate sustainability

Foreign development aid is by no means sufficient to finance global sustainable development. The business sector therefore has an important role to play, both in terms of fighting corruption and promoting environmental sustainability, gender equality and human rights.

Increasing corporate transparency and sustainability

Achieving corporate sustainability requires governments and consumers to demand that the business community takes corporate social and environmental responsibility. The Danish Institute for Human Rights and the Global Reporting Initiative are collaborating with government stakeholders, businesses and policy-makers to increase corporate transparency and sustainability, among other things by improving companies’ accounting practices for sustainable development and human rights and encouraging them to make production more sustainable.

Scope of Sida's work with private sector development

Sidas support within private sector development amounted to about SEK 4 billion in 2019. Private sector development is a broad definition that, except from the above mentioned efforts, include support to agriculture and forestry, fishery, communications and trade.

Updated: 17 December 2020