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Engaging the private sector

Engaging the private sector

IFAD’s new strategy promotes private-sector development and partnerships to help in the fight against rural poverty

When IFAD started operations more than two decades ago, the public sector was the primary source of new jobs and investment. In most poor countries today, the private sector fills that role. IFAD’s new private-sector development and partnership strategy, approved by the Executive Board last April, promotes private-sector development in rural areas, including by engaging the private sector in IFAD projects. It also examines how IFAD can forge partnerships with the private sector to benefit rural poor people.

“In today’s economic environment, the private sector is the engine of growth in most developing countries,” says Mylene Kherallah, regional economist for the Near East and North Africa Division. “If we want to make a dent in poverty, we must engage the private sector in our development efforts.”

The strategy works on three levels. It encourages policy dialogue to promote local private-sector development, suggests ways for investing in operations to support local private-sector development, and fosters partnerships with the private sector to leverage additional resources and knowledge to help reduce rural poverty.

The private sector is a potential source of investment and can increase the transfer of knowledge and skills in rural areas. By partnering with the private sector, IFAD can encourage it to become more sensitive and responsive to the needs of rural poor people.

Partnerships benefit both sides. “Consumers increasingly make choices based on corporate social responsibility, including respect for the environment, workers’ rights and the principles of fair trade,” says Amanda Pingree, IFAD’s private sector and foundations officer. “Industry is responding to these choices, creating an area where IFAD’s interests converge with those of industry.” By working together, IFAD increases its impact and businesses satisfy demand for socially responsible products.

When people talk about the private sector, they generally think of multinational corporations. But for IFAD, that definition is too narrow, says Pingree. “Foundations, charities and individuals can all be valuable partners,” she says.

IFAD will continue to work with the public sector. “The public sector creates the appropriate framework and the conditions for a vibrant private sector,” says Jim Carruthers, Assistant President of IFAD’s Programme Management Department. “We will work with Member States to create the conditions that encourage income-generating opportunities and attract investment.”

A results framework sets indicators for monitoring increases in private-sector activities and investment. Each IFAD unit or division will identify the activities necessary to achieve this objective and include them in annual workplans and budgets.

For instance, the framework calls for 25 to 50 per cent of agricultural service providers to come from the private sector in projects focusing on agricultural production, and for 50 to 75 per cent of rural financial institutions to come from the private sector in projects focusing on rural financial services.

According to Kherallah, these numbers are within reach. “We’re not starting from scratch,” she says. “We have already started working with the private sector, and these partnerships are growing.”

In addition, all new IFAD country strategic opportunities papers will review the policy and institutional environment for local private-sector development in rural areas, and will involve private-sector representatives during the consultative process. IFAD’s portfolio review and its results and impact management system indicators also provide ways to report on the progress being made.

While the new strategy provides guidelines on how to interact with the private sector, it is not a rule book. A review of private-sector strategies in other organizations found a trend towards flexible policies that allowed partnerships to be formed on a case-by-case basis, using due diligence practices to confirm the reliability of partners. This is the approach IFAD is adopting.

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