Engaging the Private Sector for Sustainable Development

A dynamic private sector is a key driver for reducing global poverty. In developing countries, the private sector generates nine out of ten jobs. It contributes to development through incomes earned by employees, capacity building and taxes paid which can be used for the provision of public services.

Two women in a field are looking at a smartphone.

The online-to-offline platform in Kenya connects farmers with producers via app, that allows consumers to buy products online and pick them up at the next "DigiShop". © Shamba Pride

Switzerland's international cooperation strategy 2021-2024 includes Private Sector Engagement (PSE) among its priorities. The Swiss Agency for Development and Cooperation (SDC) sees PSE as a way to foster innovation and achieve greater impact. PSE is defined by the SDC as interventions where the SDC and one or several private sector partners share a vision and join forces for impact-driven development interventions, in support of SDC’s existing strategies. PSE at SDC is characterised by three core attributes. Firstly, interventions are conceived and developed jointly (co-initiating). Secondly, all partners are involved, at least at the strategic level, in the implementation (co-steering). Thirdly, all partners contribute in a substantive way to the financing of the intervention (co-funding). In a true partnership, costs, risks and benefits should be distributed equitably. As a benchmark for assessing this, SDC uses three dimensions of fair play. Firstly, risks should be shared in a fair manner. Secondly, costs should be distributed equally. Thirdly, all partners involved should accrue an equitably share of the benefits.

As of the end of 2021, the SDC's active portfolio of projects with a PSE component includes 142 projects with a total financial volume of around CHF 900 million. PSE is present, in one way or another, in all of the SDC's thematic areas and all operational divisions. The main partners in PSE are private foundations, small and medium-sized enterprises, large corporations, and social enterprises. The SDC wanted to know, how well its PSE project portfolio is performing and if SDC's procedures and PSE

modality are adequate for achieving the goals of Switzerland's international cooperation strategy. To that purpose, it mandated an independent evaluation by external experts.

Evaluations at SDC

The Evaluation and Controlling Specialist Service of the SDC is responsible for mandating institution-wide evaluations and for promoting evaluations within the SDC. Evaluations at SDC have three purposes: to provide solid evidence for 1) project and programme steering, 2) institutional learning, and 3) accountability to the public and parliament. Each year, the SDC commissions 80-100 project evaluations and 3-4 thematic and institutional evaluations.

The evaluation found, that the diligent effort and significant resources invested by the SDC in its PSE are starting to pay off in innovation, learning and some promising results. Examples can be found in the considerable innovation across the PSE portfolio. In a PSE, the SDC co-developed a payment mechanism that remunerates enterprises for a specific impact, known as the Social Impact Incentives. This mechanism has been taken up widely by different donors in different sectors.

Social Impact Incentives: Rewarding for Social Outcomes and Mobilising Capital for Impact

Social Impact Incentives (SIINC) are an innovative finance tool that uses public and philanthropic finance to help Social and Impact Enterprises (SIEs) grow and scale their impact and make them more attractive for private providers of capital. Pioneered by SDC jointly with Roots of Impact and the Inter-American Development Bank in Latin America starting in 2016, the concept has expanded and SIINC as well as other Impact-linked Finance (ILF) instruments are now deployed in many countries in support of SIEs. SDC alone has invested USD 50 million in ILF instruments.

Social Impact Incentives: Explanatory video

Social Impact Incentives: Rewarding for Social Outcomes and Mobilising Capital for Impact

SDC has developed a strong set of PSE tools and guidance documentation and training material through its Competence Centre for Engagement with the Private Sector (CEP). These materials are taken up by SDC staff, albeit only slowly. Through its PSE work, the SDC is starting to foster increased private sector long-term involvement in emerging solutions to developmental problems. To foster the development of and access to treatment for diseases mostly affecting the poor, the SDC has been supporting Product Development Partnerships. These are considered to be a game-changer for diseases such as tuberculosis, malaria, and HIV.

Product Development Partnerships: Multi-Stakeholder Collaboration for Innovation and Access in Health

Since the late 1990s, Product Development Partnerships (PDPs) have been set up with the objective to develop and to improve access to new products for people who suffer from diseases and health threats and are underserved by the market. PDPs initiate, strengthen and coordinate multi-stakeholder partnerships between the public, private, academic and social sectors. PDPs work with different partners across all stages of product development, from discovery to market access.

The Swiss government has been an early supporter and funder of several PDPs. These include the Foundation for Innovative New Diagnostics (FIND), the Medicines for Malaria Ventures (MMV), and the Drugs for Neglected Diseases initiative (DNDi).

Recent evaluations show that the PDP model has indeed been a game changer to Poverty related neglected diseases (PRND) such as tuberculosis, malaria, and HIV. Selected PDPs assessed within the context of a major review in 2020 have collectively mobilized almost USD 5 billion (2007–2018), brought 85 new products to market and currently have more than 300 products in the R&D pipeline. The PDP model of collaborative medical innovation also helped enable a rapid and effective global response to COVID-19.

Product Development Partnerships: Multi-Stakeholder Collaboration for Innovation and Access in Health

The external experts recommend in this evaluation that the SDC strengthen and streamline the PSE monitoring and evaluation system to improve decision-making. To capitalise on the work carried out and the existing guidance documents and trainings, the SDC should develop a coherent narrative defining PSE and provide clear guidance for implementation of PSE to external and internal stakeholders. In response to the evaluation and the recommendations, the senior management of the SDC defines measures. These are recorded in the Senior Management Response which is included in the evaluation report. For example, the SDC agrees with the evaluators that PSE expertise needs to be enhanced. This has to happen in a targeted manner, taking into account the different levels of engagement for different SDC staff in PSE. If there is a basic understanding about PSE that needs to reach all operational SDC staff, there are also particular capacity building needs to mid and senior management and Thematic Regional Advisors in charge of PSE.

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