How can we improve collaboration between development finance institutions and donor-funded programmes?

As a major contributor to economic growth, innovation and job creation, the private sector has a key role in efforts to reduce poverty and achieve the Sustainable Development Goals (SDGs).

Within the sphere of private sector development (PSD), many organisations and actors pursue a mutual and overarching goal: namely, supporting poverty reduction and bolstering sustainable and inclusive economic growth in low- and middle-income countries. Yet despite this overlap, collaboration between development finance institutions (DFIs) and donor-funded PSD programmes could be improved. This report, jointly commissioned by British International Investment (BII) and Gatsby Africa, aims to help change that.

Our organisations share similar development impact goals but, by our nature, we have different strategic and operational approaches to achieving these goals. There is a lot of opportunity for the various tools we use to complement each other. For example, donor funded PSD programmes can help prepare markets and companies for DFI investment, whereas capital provided by DFIs can help businesses supported by PSD programmes to grow and contribute to broader sector transformation. Positively, this study finds evidence of development finance and donor funded PSD tools moving closer to each other. DFIs are becoming more involved in broader private sector development while donor programmes are moving closer to investors and sometimes include investment tools.

We have jointly commissioned this report to explore examples of collaboration and better understand the drivers of – as well as the barriers to – effective relationships between DFIs and the broader private sector development community. The report also provides recommendations for both sides to consider that could enhance collaboration moving forward.

We hope this report furthers an important dialogue between providers of development finance and funders and implementers of private sector development, and that the report’s recommendations give rise to innovation and experimentation within and across these organisations. We look forward to building stronger bridges between these two complementary disciplines.