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 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.¹
Private sector important to sustainable development
The private sector´s engagement for sustainability is often cited as a key to sustainable development.² The global goals emphasizes the importance of the private sector to attain a sustainable development.³
Vulnerable economies threaten environment
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.4
Challenging informal labour market
In many 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.
Genders not equal
It is still the case that most of those who start and manage businesses are men. In Africa, for instance, there are only three countries with at least as many women as men own businesses.5
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.
Sida supports an inclusive market development for people living in poverty to be able to participate in, contribute to and benefit from economical development. This benefits, among other things, locally adapted solutions and provides lasting results.
Increasing incomes in Liberia
Liberia is one of the poorest countries in the world; 44 percent live in extreme poverty below $ 1.90 per day.6 Grow Liberia is a project that works with companies cultivating vegetables and coconuts, supporting logistics, marketing and service. This has led to increased incomes for 35 400 households and small companies of $ 11 million and has created 4,400 full time equivalent jobs, mainly among women and young people.
Supporting farmers in Palestine
Bureaucracy and a lack of capital is an obstacle to many small companies. Oxfam runs a market development project in Palestine which has made it easier for thousands of small farmers to gt access to services like tax revenue, insurances and the possibility to get a loan.
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 prevent 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. Sida works to give more people access to financial services.
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.
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.
Increased autonomy from biometrics
Many women can´t partecipate in the economy on the same terms as men because of analfabetism or a low educational level. The UN Capital Development Fund (UNCDF) Last Mile Finance Trust Fund in, among other places, Papua New Guinea supports Women´s Microbank. Among the clients, 97 percent are women in rural areas where literacy is low. When the bank started offering identification through biometrics, it gave the 33,000 clients digital access to financial services.
Developing small businesses and business climate
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. Sida works to strenghten these companies.
Building up the Palestinian digital communications sector
Around 60 percent of young people in Palestine are unemployed.7 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.
Loans to hundreds of thousands agricultural companies
Sida provides loan guarantees to companies. This means that Sida undertakes to repay the loans should the borrower fail, which reduces the risk for both the borrower and the bank. In Tanzania, the aid has led to more than 640,000 companies in the agricultural sector receiving loans of just over 125 million US dollars. The support has also contributed to the development of a gender equality plan prioritizing activities for women.
Foreign development aid is by no means sufficient to finance global sustainable development. The business sector therefore has an important role to play, in terms both of fighting corruption and of 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.
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.
Scope of Sida's work with private sector development
Totalt var utbetalningarna till området inkluderande ekonomisk utveckling runt 3 miljarder kronor under 2020, vilket motsvarar 12 procent av Sidas totala utbetalningar.
Inkluderande ekonomisk utveckling är en bred definition som innefattar utveckling av den privata sektorn och stöd till exempelvis jord- och skogsbruk, fiske, kommunikation och handel.
- Portfolio Overview: Employment – Creating More Productive and Decent Jobs
- Portfolio Overview: Trade – An engine for development
Sidas support within inclusive financial development amounted to about SEK 3 billion in 2020. Inclusive financial development is a broad definition that include private sector development and support to agriculture and forestry, fishery, communications and trade.
Sources on this page
- The report Doing Business 2020 On the Worldbank Open Knowledge Repository webbplats
- About business and sustainability on the Swedish FAO committee webpage
- UN Sustainable Development Goals on the UN webpage
- On economic diversification on the Worldbank webpage
- Women’s entrepreneurship report: Education and finance for successful entrepreneurship in Africa on Reliefweb, 2021
- Poverty in Liberia on the Wolrdbank webpage
- Unemplyment in Palestine on the Worldbank webpage, 2019
- Population growth in Burkina Faso on the Wolrdbank webpage
Updated: 9 June 2021