Public and private sectors should speak same language on aid, say development experts

1 Apr 16

The monitoring of public money used to leverage private sector investment in development could be enhanced through greater harmonisation between different actors, delegates at the Overseas Development Institute have heard.


Farmers at work in India

Farmers at work in India


Today’s event at the ODI in London heard from a range of speakers spanning both the public and private sectors, as well as civil society, who discussed how to enhance and track the impact public funds used to catalyse private finance can have and ensure value for money.

One theme running through the discussion was greater harmonisation. For example, panellists spoke of the need for a common system of indicators to measure impact where an array are currently in use.

Richard Gledhill, commissioner at the UK’s Independent Commission for Aid Impact, also called for standardised approaches to reporting and safeguards for ease of comparison and compliance.

Delegates heard that monitoring and evaluation often imposes a heavy burden on private sector partners, and especially smaller ones, and of the need to reduce this.

Another example of incongruity between the approach of the public and private sectors highlighted at the event was language. While both donors often work around the same principles, the way they talk about their work can differ greatly, hampering discussions.

Chair of the panel, Caroline Ashley, a business development consultant and executive editor of the Practitioner Hub for Inclusive Business, offered an example. While government donors will often refer to their contribution as a subsidy, this word is forbidden in boardrooms.

Similarly, the term additionality – the idea that an intervention has an effect that could not have been produced otherwise – is not used in discussions with investors because it is not a concept they are familiar with, despite today’s panellists referring to additionality as one of the key aims of public-private development finance.

Another key outcome emphasised by panellists was systemic change, as opposed to the more direct and immediate outcomes of mobilising private funds, such as opening up a market that was previously unviable with substantial long-term benefits.

Rob Davies, a member of the UK’s Department for International Development’s private sector team, said that this is “where the real value is”, but noted that it is also the most difficult to measure and called for methods to better track its impact and improve returns.

Luke Haggarty, a senior manager at the International Finance Corporation, the World Bank’s private sector investment arm, also highlighted that while direct outcomes are easily observed, some of the most substantial indirect impacts of investment are the hardest to measure.

Typically, the real development impact is up to 10 times more than what can be easily captured by outcome indicators such as the number of jobs directly created, he said.

Davies cautioned about prejudice against private sector partners making a profit as a result of such activities and separating success for business aims and those of development.

 “In a lot of these things the profit level is aligned with development impact,” he said, adding that successful business creates a lot of jobs and growth and that the public sector often gets a similar return on its investment.

But within the audience and other panel members there was less confidence in the private sector as a means for delivering development.

Amy Dodd, director of the UK Aid Network, questioned whether more work needed to be done to evaluate the development impact before using the world’s limited aid money in such a way.

Other issues were raised around the compatibility of the private sector with the development sphere. Delegates heard that commercial confidentiality, for example, has been a major barrier in securing the kind of transparency and rigorous oversight of development projects.

A representative of Publish What You Fund noted that development finance institutions that invest in the private sector tend to rank low in the aid transparency index.

The European Reconstruction and Development Bank and the International Finance Corporation were both classed as “poor” for their transparency in 2014, according to the index.

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