Sections:
Davos 2008: The business of tackling poverty
22 January 2008 (Updated 28 January)
Working with the private sector to help the world's poor
Image courtesy of GMB Akash/Panos Pictures
Last week (23 to 27 January) the 2008 Annual Meeting of the World Economic Forum (WEF)
took place in Davos, Switzerland.
The meeting brought together members of
the WEF - which comprises the world's 1,000 leading companies - with politicians
and figures from civil society, academia and the media under the theme
"The Power of Collaborative Innovation". Focusing on how the critical challenges
facing the world can be addressed through collaboration between businesses, and
between business and government, the event hosted talks on a range of issues,
including the role that the private sector can play in reducing poverty.
Amongst those who attended Davos 2008 were Prime Minister Gordon Brown and
Secretary of State for International Development, Douglas Alexander. Read
Douglas Alexander's blog from Davos for the
Financial
Times.
Bringing banks to customers
DFID is committed to working with the private sector to achieve the Millennium Development Goals. We collaborate both with multinational companies and smaller local businesses to help build the economy in some of the world's poorest countries. In encouraging the growth of the local private sector in developing countries, we also encourage businesses to conduct themselves responsibly, in a way that benefits the poor.
The projects that we support aim to help individuals and communities lift themselves out of poverty, rather than remain dependent on aid. An important part of this work is to expand financial services, so that more poor people can benefit from, for example, bank accounts and loans.
Image courtesy of Sven Torfinn/Panos Pictures
In recent years, our work with the private sector has included support for
mobile phone banking (m-banking) in Kenya. With mobile phone use increasing
rapidly in Sub-Saharan Africa, and network coverage of remote areas achievable
at low cost, m-banking allows poor people to access vital financial services.
Phone handsets are adapted to handle transactions, and people who previously had
no access, or very limited access, to banks, are able to receive
payments and send money to others' accounts.
More than 600,000 customers
have signed up to the M-PESA
service since 2007 and over $38 million of transactions have been processed. This innovative project was made
possible by a £1 million grant to Vodafone provided by the DFID-funded
Financial
Deepening Challenge Fund (FDCF), which works with the private sector
(including banks and multinational companies) to bring financial products and
services to more people in the developing world.
Encouraging new enterprises in Africa
In South Africa, the DFID-owned
fund
CDC has helped to bring cash dispensers to areas
previously neglected by banks. Rural dwellers in particular have benefited from
having access to the machines, provided by ATM Solutions. Since 2000, more than
2,700 of the stand-alone dispensers have been installed, with around 60% of them
located in non-urban areas. By increasing access to cash in these places, local
economies have been stimulated.
CDC is also helping to widen the availability of financial services in
the Gambia, enabling small businesses to acquire loans. Operating through
solar-powered kiosks in busy areas, Reliance Financial Services Company (RFS)
has issued nearly $300,000-worth of credit to a diverse range of businesses.
Microfinance - small loans to help people build their own enterprises and
therefore generate income - has been described as "the world's most powerful
weapon against poverty". Find out more about microfinance in
Developments
magazine.
Harnessing expertise and promoting innovation
Image courtesy of Chris Stowers/Panos Pictures
As well as m-banking in Kenya (and Tanzania), the Financial Deepening
Challenge Fund has backed a scheme that provides farmers in Pakistan with credit
cards to buy essential agricultural items.
Standard Chartered Bank has targeted around 10,000 small farmers with the innovative cards, enabling them to stock up on seed, fertilizer and pesticides, and so boost their incomes at harvest time. Loans are collected after harvest. The cards have improved livelihoods and helped reverse the population drift from rural farming areas to the cities. Launched in 2000 and funded by DFID, the FDCF has supported 28 projects in 15 countries.
New ways of increasing access to financial services have also been explored
by FIRST - the
Financial
Sector Reform and Strengthening Initiative. This programme, to which DFID is
a major donor, brings cutting-edge expertise to developing countries. By helping
to strengthen areas such as insurance, the provision of credit, regulation of
the financial sector, microfinance and pensions, FIRST is working to address the
key financial needs of these countries.
In India, for example, FIRST has collaborated with the Government to ensure that farmers are better covered by insurance if their crops fail. And in Zambia, where it is difficult to access credit, FIRST helped to produce a framework for setting up and running an effective credit bureau.
Getting business on board
Image courtesy of Guy Mansfield/Panos Pictures
A crucial part of DFID's work with the private sector is aimed at improving
the physical infrastructure of poor countries. Businesses can play an important
role in helping to finance and implement better roads, safer water supplies,
greater access to energy, and more reliable sanitation. DFID has supported a
range of partnerships designed to find ways of increasing the private sector's
involvement in delivering these improvements.
The
Public
Private Infrastructure Advisory Facility (PPIAF) has provided advice on how
regulatory bodies in 38 countries can be reformed to maximise the benefits from
private sector involvement. In Peru, this led to the creation of a fund that
brought telephones to over 6,500 rural communities.
The
Private
Infrastructure Development Group (PIDG) is another such partnership,
encouraging businesses to invest in essential services for the poor. In
Madagascar, the PIDG helped to secure the future of the country's major port by
assisting in the selection of a company to take care of its management. With an
estimated $300 million to be invested in the port over a 20 year period, the
impact on the national economy is likely to be significant.
Call to Action on the MDGs
Last year, Gordon Brown and the UN Secretary General, Ban Ki-Moon, launched the Millennium Development Goal Call to Action, with the support of 14 heads of state or governments and 21 private sector leaders. This called for a greater international push towards meeting the MDGs.
In 2008, at the halfway-point towards the target year for the MDGs, with leading political and business figures having just met in Davos to discuss how working together can bring benefits for the global community, DFID reaffirms its commitment to collaborating with the private sector for a fairer, more prosperous world.
Links
- DFID and the private sector
- Public private partnerships in infrastructure
(280 kb)