Private sector development (PSD) approaches seeks to catalyse private investment that benefits poor men and women, directly and indirectly. The private sector is involved in all aspects of development; from job creation and education to financial services and the delivery of health care. As well as creating a significant proportion of jobs, private enterprises produce many of the goods that poor people buy, and drive innovation that can have a transformational impact on poor peoples’ lives.
Making use of social development thinking is essential to delivering effective private sector development work. Recognising the social impacts of PSD can help strengthen the sustainability of business, support inclusive growth, and achieve positive sustainable impacts (Heinrich 2013). Realising social development opportunities can also contribute to, and often enhance, many of the delivery areas of private sector development work, including:
- Adding social value: PSD has the potential to add significant social value;1 however impacts are often uneven or exclusionary. Factors that can add social value include employment and access to finance and assets (DFID 2009). Skill development offers mutual benefits to both social development and private sector development.2
- Addressing gender and social exclusion: There is strong evidence that increasing women’s economic opportunities can help achieve positive development outcomes. Private sector development approaches can support this by, for instance, improving women’s access to employment and financial services (Markel 2014).
- Incorporating human rights: Business has an impact on almost all aspects of human rights. This includes labour rights, the right to land and water, non-discrimination, and freedom of expression.3
Social analysis tools can help to identify the social issues that might emerge in PSD initiatives (ADB 2009; DFID 2009). Gender and social exclusion analysis, for instance, can provide an understanding of how access to finance and services is impacted by gender and social identity, or how different social groups are affected by the investment climate and regulation (DFID 2009). The Asian Development Bank (ADB) has produced a step-by-step guide to social analysis in PSD projects which emphasises consultation and participation (ADB 2009).
The purpose of this topic guide is to bring social development practitioners up-to-date on how social development approaches can help identify and address the social impacts of private sector development work. The guide focuses on three key issues and approaches: regulations and standards; firms and supply chains; and market development.
- 1 Social value typically refers to the broader non-financial impacts of programmes or interventions, including social capital, the wellbeing of individuals and communities, and impacts on the environment. See Wood, C., & Leighton, D. (2010). Measuring social value: the gap between policy and practice. London: Demos.
- 2 Expert comments: Barbara Evers
- 3 See: http://business-humanrights.org/
- ADB. (2009). Social analysis in private sector projects. Manila: Asian Development Bank. See document online
- DFID. (2009). How to note: gender and social exclusion analysis. London: DFID. See document online
- Heinrich, M. (2013). Donor partnerships with business for private sector development: What can we learn from experience? (Working Paper, March 2013). DCED. See document online
- Markel, E. (2014). Measuring women’s economic empowerment in private sector development: Guidelines for practitioners. Cambridge: DCED. See document online