November 3, 2010

By Zahid Torres-Rahman for the Guardian Professional Network

Donor agencies are finally starting to engage meaningfully with business, which offers the promise of more sustainable, scalable solutions to poverty than aid alone could ever deliver
Poverty footprints and supply chains

"There's always someone who stands up at a conference on international development and says, 'what about the private sector?'" That was the observation made to me recently by a former special adviser to the UK's Department for International Development (DFID) when I asked that question at a recent event.

And as I stood there, I realised how much further we have yet to go to embed a better understanding of the private sector's role in development.

In one sense, this describes DFID's evolution in thinking about the private sector: from a slightly awkward afterthought, towards a growing sense of the powerful role that business can play in driving poverty reduction across the developing world.

In what was a milestone speech at the London School of Economics earlier this month, the secretary of state for international development, Andrew Mitchell, went further than any of his predecessors in arguing the case for placing the private sector at the heart of the development agenda: "It is the private sector that creates the jobs, goods and services that the world's poorest people so desperately need to lift themselves out of poverty."

Stephen O'Brien, another DFID minister, spoke equally passionately about the private sector the next day.

DFID's interest in business is not, as it might first appear, a reflection of the recent move to the right in British politics (Gordon Brown, the former UK prime minister from the now-opposition, left-leaning Labour Party spoke of the importance of business at a UN Summit in 2007; the issue has for a while been part of the political centre-ground). It is in fact, a reflection of the growing realisation that we need to move the focus of the conversation from "aid" to "development".

And it is when we think about what will drive development in a truly long-term way, that it becomes clearly important to focus on enterprise, jobs and economic opportunity. Ask a poor person what they see as their exit strategy from poverty, and they reply growing their business or getting a job. Two successive surveys of over 60,000 poor people by the World Bank have clearly demonstrated that.

As a result, DFID– and many other donor agencies around the world, 11 of which have released a statement (PDF) are starting to think more constructively and creatively about how they can harness the private sector for development impact, and to generate the millions of jobs needed in developing countries. The same goes for a growing number of civil society organisations, such as Oxfam and Care, both of which have dedicated teams looking at how to partner with business.

This includes helping small businesses to grow and small-holder farmers to earn a more stable living. But it also includes engaging with large corporates both international and national– from which much of the development community have instinctively shied. Yet it is in this area of big business engagement that much of the most innovative and promising solutions are emerging.

Best of all, these are not solutions being driven by "corporate social responsibility" or philanthropy, but by business sense and commercial opportunity which makes them intrinsically sustainable and scalable.

The Business Call to Action, housed at the UN, provides some inspiring examples of companies having an impact through business models that create opportunities for poor people as employees, suppliers, distributors or customers. To date, according to Helen Clark, head of the United Nations Development Programme, companies that have made commitments under the Business Call to Action will bring access to affordable IT, finance, healthcare and agricultural goods and services to over 10 million people, as well as jobs for nearly 40,000 people and better livelihoods for hundreds and thousands of farmers in Africa and India.

In a report that we have co-published with the Business Call to Action, among others, we get into some of the detail of how such business models can be replicated and scaled.

There are a growing number of us who stand up at conferences to ask, "what about the private sector" (several thousand in one professional network alone). That is because we passionately believe that the private sector offers a long-term solution to promoting dignity and opportunity for poor people across the world.

Zahid Torres-Rahman is director of Business Action for Africa and founder of Business Fights Poverty.