This review gives structure to the theme of donor partnerships with business aimed at private sector development. It proposes a focus on key issues that have received little attention so far: assessing additionality, measuring partnership results, and achieving better outcomes based on learning from experience. The report examined evidence from a variety of partnerships between donors and the private sector in various phases of implementation.
- While partnership projects may represent a relatively small share of overall PSD budgets, they are increasingly considered as an important tool to promote private sector development. The overall limited evidence on their effectiveness to date implies that it is important to take stock of existing experience and identify practical ways forward to improve the development impact of partnerships.
- Partnerships are often referred to as a single category, but various models and mechanisms exist.
- Assessing and demonstrating that direct donor support to business adds value is one of the key challenges donors face. Current donor guidelines for ex-ante additionality assessments, i.e. before support is granted, are not always publicly available.
- Development additionality criteria are often too vaguely defined and not well enforced to ensure that only business projects with the biggest development potential are granted support.
- By and large, credible information on partnership results, including assessments of additionality ex-post, is sparse. However, the need to improve and make sufficient funding available for results measurement in this field is increasingly recognised among donors. The efforts of some partnerships mechanisms and initiatives demonstrate that there are practical ways to do this.
- Various lessons are emerging on essential requirements to make partnerships work in practice, as well as approaches by donors and companies to enhance the potential for large-scale and/or systemic impacts of individual partnerships.
- Some key distinctions concerning the efficiency and effectiveness of partnerships deserve particular attention in further research and supporting documentation: e.g. the size and origin of partner businesses and the size of grants; the value of global level compared to country-level partnership mechanisms; the specifics of different management approaches to partnerships; and further orientation regarding the costs and benefits of different partnership models.
- Input additionality concepts could be assessed based on more comprehensive definitions and efforts should be enhanced to scrutinise companies’ proposals.
- Further progress will depend on changes in incentives for implementing organisations and companies as well as funding for results measurement. No material exists to help practitioners improve results measurement in the specific context of partnerships; however, such material can be developed, building on the good practice specified in the DCED Standard.
- Most lessons are based on rather few experiences, but each of them provides a valuable entry point for further research. It may be of particular interest that, despite the objective of many structured partnership mechanisms to provide initial funding for business models that can be scaled up and replicated, few examples where this has actually happened have been identified.