Week 5 - The Private Sector
From multinational corporations to local entrepreneurs, private businesses drive the majority of economic activity, innovation and job creation globally. Understanding development will involve having greater context on how this sector functions and interacts with societal goals.
The private sector's role is complex. It possesses the resources and feedback loops to generate growth, provide essential goods and services and lift people out of poverty. Yet, its primary driver, the pursuit of profit, doesn't always align with development objectives. Private activity can also lead to significant social and environmental costs.
We will look into the scale and contributions of the private sector, and the mechanisms through which it impacts development, both positively and negatively. A central question will be distinguishing between standard business activity and actions that generate genuinely additional positive development outcomes, i.e. is there a way to work in the private sector that will lead to positive outcomes that wouldn’t have happened anyway.
We will explore the following aspects to help with understanding how to have impact via the private sector.
Case Studies
Scale and Contribution
Risks and Harms of Private Sector Activity
Counterfactual Impact
High-Potential Sectors
Case Studies
To illustrate the different roles private actors play let's look at a few case studies.
Wave - Mobile Money in Africa
Wave is a mobile money company, founded in Senegal, making financial services accessible through an app with significantly lower fees than traditional telecom-operated services.
Ben Kuhn - Working at Wave is an extremely effective way to improve the world
“Most people in sub-Saharan Africa don’t have a bank account, because the nearest branch is too far away or they can’t afford the fees. Instead, when they can’t use cash, they use digital wallets, usually built by telecoms, carrying a balance that you can send to other users. To fund a mobile money wallet, you deposit cash at a local business (agent) that uses their spare cash on hand to serve mobile money customers. You can then send that balance to another user who can withdraw it at their own nearby agent”
Unfortunately the “winning” system ends up being the one run by the dominant telecom…they aren’t customer-focused, and it shows:
Their apps are hard to use
Their agents are unreliable
Their customer support is unhelpful
They charge enormous fees
They treat mobile money as just another way to profit from their oligopoly
At Wave they:
Built a user friendly app
Ensure that agents always have enough cash
Provide customer support within minutes
Charge a lot less then their competitors
Benefits
Cheaper
When Wave launched in Senegal, the average transfer would have cost 3-5x more if done via the largest existing mobile money system
Multiplied by millions of monthly active users, that comes out to a savings of over $200 million1 for Wave users
Faster
Customers get access to their money much faster
“Modou’s business was to buy fish from fishermen in Joal and sell them to a wholesaler in Dakar. The fish would travel to Dakar on a truck and the wholesaler would send the payment back via mobile money. Modou wanted to withdraw the money immediately to buy his next batch of fish, but his local agent would often take hours or days to come up with the cash. So he’d have to wait until the next morning, two days after his previous batch. When he tried Wave, Modou found that his local Wave agent always had enough cash to withdraw immediately. As a result, he could withdraw the funds the evening of the first day, and start buying fish after 24 hours instead of 48. In other words, switching to Wave allowed Modou to immediately double his business.”
Infrastructure
“What prevents companies from succeeding in other areas? Part of the answer is that if you’re not collecting payments yourself, there’s no one else to do it for you. Building a delivery company? Better take cash on delivery. Financed solar panels? You’ll be sending a collection agent to every town on the map. Software as a service? I’m not actually sure how that one would work. All these businesses can’t exist right now in much of Sub-Saharan Africa because they depend on financial infrastructure that doesn’t exist yet. Just like Stripe has found that easier online payments increases the GDP of the internet, we expect accessible financial infrastructure to dramatically increase the GDP of sub-Saharan Africa by making new types of businesses possible”
Future
Users still have lots of other problems with poor financial infrastructure:
People can’t save or invest their money except through an expensive, inconvenient bank account
Companies pay their employees’ salaries in cash, which requires expensive middlemen who sometimes skim some off the top
People can’t buy things online because they don’t have a credit card.
It’s expensive or even impossible to get a loan, because it’s hard for underwriters to know anything about your ability to repay
Zipline - Drone Delivery for Global Health
Zipline specialise in drone-based delivery of medical supplies and other goods. They began delivering blood in Rwanda in 2016 and have expanded to Ghana, Nigeria, Côte d'Ivoire, Kenya, United States and Japan. They have served over 4,500 hospitals and health facilities.
The problem
Traditional delivery in rural regions faces numerous challenges - poor roads, heavy rainfall, difficult terrain and limited transportation options
This can lead to increased wastage, prolonged stockouts and lower vaccination rates
Zipline’s approach
Centralised storage of medical supplies at distribution centers
On-demand ordering system for healthcare facilities
Autonomous drones deliver supplies within minutes
Temperature-controlled delivery maintains cold chain for vaccines
Each distribution center can serve facilities within a ~100km radius
Results
96% of providers report increased access to vaccinations in their area
51% fewer deaths from postpartum hemorrhaging in hospitals served
A 2025 Ghana study showed that Zipline helped averted 688 disease cases and saved 4 children's lives in the study districts in 2021
Cost-effectiveness of ~$50 per averted DALY. Approximately 35-50x more cost-effective than standard willingness-to-pay threshold
Cost of $0.66 per fully immunised child, outperforming other delivery methods including mobile immunisation teams
Pinky Promise - AI-Powered Healthcare in India
Pinky Promise is building an AI-powered digital healthcare app in India, designed to reliably diagnose and manage women's reproductive health issues, aiming to make care instantly accessible.
The Problem
Accessing timely, reliable and potentially private reproductive healthcare through traditional means in India can be challenging
Existing systems may involve significant delays in getting appointments, inconvenient travel, lack of specialist availability or social discomfort discussing sensitive health issues
Pinky Promise's Approach
Users describe their symptoms to the app anytime
An AI system asks clarifying questions about symptoms and medical history then analyses creating a suggested diagnosis and prescription
A human gynaecologist reviews the output, edits the prescription if required, and sends it to the patient
Ongoing doctor-patient connection and support is maintained via chat, facilitated by an AI co-pilot for the doctors
Results
High patient satisfaction, with over 85% reporting feeling cured by their treatment out of 50,000 users
A 25% return rate for other issues within 8 months
These examples highlight the potential for private sector solutions to address key development challenges. However we need to zoom out from individual companies and consider the sector's overall scale and contribution to national economies.
Understanding its size, the typical dynamics of firms within LMICs and the fundamental ways incentives differ from public or non-profit actors can help when considering impact in development.
Scale and Contribution
It is impossible to discuss development without acknowledging the sheer scale and fundamental role of the private sector. Private enterprises provide roughly 90% of jobs globally. This positions the private sector as the central engine for employment and, consequently, poverty reduction. Jobs are the principal pathway out of poverty for most people, serving to boost living standards.
Beyond direct employment, the private sector is the primary provider of the vast majority of goods and services essential for daily life and economic progress. From food (produced, processed, distributed and sold largely by private actors) to construction, transport, telecommunications, manufacturing and retail.
The private sector contributes ~80-90% of most countries GDP, although in poorer countries this can be as low as 60%, with more government control of different industries and higher development assistance.
Economically, it acts as the main engine of growth through three main channels.
Investment
Businesses invest in machinery, technology, buildings and infrastructure, expanding the economy's productive capacity
Innovation
Competition incentivises firms to develop new products, services and more efficient methods of production.
Productivity
Theoretically, market forces drive resources towards more efficient firms and encourage improvements within firms, leading to overall economic gains
The private sector in LMICs has different dynamics to those in high-income nations.
Across LMICs, SMEs (small and medium enterprises with 5-250 employees) represent about 66% of permanent, full-time formal employment in low-income countries specifically, small firms often constitute the largest share of employment
SMEs in LMICs often face significant barriers to growth. Unlike the 'grow or die' dynamic often seen in richer economies, firms in countries like India or Mexico tend to either stay small or grow very little over their lifespan. This suggests systemic constraints, like access to finance, infrastructure or increased regulations, are preventing firms from reaching efficient scale
This stunted growth has consequences. Larger firms, while employing a smaller share in low-income contexts, tend to be more productive, invest more in training and innovation and offer higher wages. There are wage premiums of 10-30% for small companies and 20-50% for large companies compared to micro-enterprises
Karthik Tadepalli - Want Growth? Kill Small Businesses2
A country's economic growth can be understood as the aggregate of the growth of its individual firms. Growth rate is determined by three factors.
Growth in the number of firms
The average growth rate of each firm
The market share of high-growth firms relative to low-growth firms
The average Indian firm that survives 20 years only adds 20% more employees compared to when it started, while US firms that survive 10 years typically triple their employment
This stagnation explains why firms in LMICs remain overwhelmingly small. Without ‘grow or die’ pressures, countries become stuck with low-value manufacturing as many modern goods require scale to produce efficiently
The vast majority of firms in LMICs have fewer than 10 employees, with most being single owner-operators. Self-employment represents 55% of employment, rising to 77% in sub-Saharan Africa
Evidence suggests these self-employed people are not ‘micro-entrepreneurs’ looking to grow businesses (as microfinance assumes), but rather workers looking for wage employment. They transition to wage jobs at similar rates as unemployed people and microloans have little impact on business outcomes
This suggests policy should focus on formal-sector firm growth rather than microenterprises
Firms face two major barriers to reaching customers - physical mobility barriers and information barriers that prevent consumers from learning about better options
When these barriers are reduced, market consolidation occurs, less productive firms close and more productive ones grow
Without prospects to sell to a large market, firms don't have any incentive to invest in productivity improvements
Solutions include better transportation infrastructure and e-commerce logistics chains
Even large firms in LMICs use frontier technology at much lower rates than counterparts in rich countries
Importing technology helps, but knowledge transfer is needed. Without training, productivity improvements can disappear
Firms also have weak management practices. Studies show management training significantly improves productivity and profits, with effects persisting for decades
Global market interaction catalyses productivity growth. When firms gain export opportunities, they invest more in technology and quality improvements
When firms grow, they create stable formal-sector jobs that provide paths to prosperity. Helping even one firm grow can benefit hundreds of people, far more leverage than targeting individual households
Feedback Mechanisms
Private sector entities operate within distinct feedback systems that fundamentally shape their behaviour and impact. Understanding these mechanisms helps explain why businesses act as they do and how they might contribute to, or hinder, development.
Market-Based Feedback Loops
Consumer Demand Signal
The most immediate feedback comes through purchasing decisions. When consumers buy products or services, they signal approval of price and quality (more so in regularly repeated purchases)
This feedback is typically rapid and quantifiable, allowing businesses to quickly identify successful offerings. In LMICs these signals may be distorted by limited choice, information gaps or purchasing constraints
Competitive Pressures
Companies face pressure from competitors, driving innovation and efficiency
When new entrants offer better value or established rivals improve their offerings, businesses must adapt or risk losing market share
The intensity of this feedback varies significantly across markets, highly competitive sectors generate stronger improvement incentives, while monopolistic or oligopolistic structures weaken these pressures
Capital Markets and Investor Discipline
For formal businesses, particularly larger ones, investment capital provides crucial feedback. Investors reward companies showing growth potential and profitability with continued funding, while withdrawing from underperforming ventures
This mechanism can be particularly potent in driving business decisions, though it may prioritise short-term financial metrics over long-term value creation or developmental impact. In many LMICs, limited access to formal capital markets means this feedback may operate primarily through informal lending networks or international investors
Supply Chain Relationships
Businesses receive important feedback from suppliers and business customers. Requirements for quality and timeliness create pressure for operational improvements, especially when integrating into global value chains
These relationships often transmit international standards and practices to local businesses, though power imbalances may lead to unfavourable terms for smaller players
Comparison with Other Sectors
Public Sector
Unlike businesses, government entities respond primarily to political processes - elections, public opinion and lobbying
These feedback loops typically operate on longer cycles (electoral terms rather than quarterly earnings), allowing greater policy stability but potentially slower adaptation to changing conditions
Accountability mechanisms are often less direct than market forces, relying on citizen voices rather than buying competitor products
Non-Profit Feedback
Non-profits face a double accountability challenge, responding to both donors who provide resources and beneficiaries who receive services, with donor preferences generally being optimised for
This can create tension when donor preferences diverge from recipient needs
Measurement challenges also complicate feedback, as social outcomes are harder to quantify than financial returns, making impact assessment more difficult, less accurate and less timely
Market-Based Approaches vs Other Solutions
Understanding when market-based solutions are likely to be more effective compared to government or non-profit interventions is helpful when considering development strategies.
Conditions Often Favouring Market-Based Solutions
Clear Revenue Potential
When beneficiaries (individuals, businesses or governments) are able and willing to pay a price that can sustain the service or product, market mechanisms drive scale and allocate resources
Mobile money services charging transaction fees
Affordable private schools or clinics with user fees
Need for Efficiency and Innovation
When the problem demands rapid iteration technological advancement or high operational efficiency, competitive pressures and profit incentives often spur faster innovation and cost reduction than typically found in public bureaucracies or non-profits
You may also see operational efficiency in militaries (mostly government run), but militaries face a different type of competitive pressure to ensure that they stay effective, with strong feedback mechanisms (during war times)
Requirement for Large-Scale Delivery
When reaching millions of users is necessary, private capital markets can provide significant funding for rapid expansion assuming a viable business model far exceeding typical non-profit budgets
Mass expansion of mobile phone networks
Roll-out of successful consumer technologies
Close Alignment Between Profit and Impact
When the core business activity inherently generates the desired social or environmental good creating a sustainable revenue stream directly linked to positive outcomes
Companies selling clean cookstoves or solar lanterns that save users money and reduce indoor air pollution
Businesses providing essential productive assets (irrigation pumps tools) that directly increase farmer income
Conditions Often Favouring Government or Non-Profit Approaches
Provision of Public Goods
When benefits are non-excludable (difficult to prevent non-payers from benefiting) or non-rivalrous (one person's use doesn't diminish another's) making private provision unprofitable or inefficient
Basic scientific research
Public health surveillance and information campaigns
Environmental protection (clean air, national parks)
Serving the Ultra-Poor or Acute Crises
When target populations have essentially zero ability to pay or require immediate humanitarian relief unlinked to payment
Free food distribution during famine
Emergency healthcare in disaster zones
Basic services targeted specifically at destitute populations
Very Long Time Horizons or Uncertain Returns
When the benefits of an investment are diffuse realised only decades later or highly uncertain making it unattractive for private capital seeking predictable returns
Universal basic education systems
Preventive public health infrastructure with long-term payoffs
Fundamental infrastructure in high-risk fragile states
Severe Information Asymmetries or Trust Deficits
When consumers cannot easily judge the quality or necessity of a service creating potential for exploitation that markets alone may not solve
Regulation of complex financial products
Oversight of highly specialised medical procedures
Ensuring quality in credence goods (expert services)
Focus on Rights Policy or Systemic Change
When the primary goal is not service delivery but establishing legal frameworks protecting rights or advocating for policy reform
Hybrid Models
Occasionally the most effective solutions might blend approaches.
Public-Private Partnerships
Government contracts with private firms to build or operate infrastructure/services leveraging private efficiency with public oversight
Market Shaping
Non-profits or governments use subsidies information campaigns or guarantees to reduce risks or build initial demand making a market viable for private actors long-term (common in vaccines or renewable energy)
Results-Based Financing
Funders (often public or philanthropic) pay private providers for achieving pre-agreed verifiable social outcomes allowing providers flexibility in methods
The private sector is vast and economically central, acting as the primary engine for job creation and growth, driven by powerful feedback loops. However, this carries inherent risks and the potential to generate significant negative consequences.
Risks From Private Sector Activity
While essential for economic activity, the pursuit of profit within competitive markets can lead to significant negative outcomes, particularly when regulation is weak or externalities are ignored.
Negative Externalities
These are costs imposed on third parties or society at large.
Environmental Damage/Public Health
Industrial pollution contaminating air and water
Contributions to climate change, particularly from the fossil fuel industry and energy-intensive sectors
Depletion of natural resources and deforestation
Governance Challenges
Companies may engage in bribery to secure contracts or permits over other organisations, or lobby to weaken useful regulations
Tax evasion can deprive countries of revenue for public services
Monopolies or cartels can lead to higher prices, lower quality, reduced innovation and barriers to entry for smaller competitors
Economic Inefficiency or Misallocation
Market pressure can sometimes prioritise short-term profits over long-term investments
Companies may possess information that consumers or regulators lack, leading to suboptimal outcomes (selling unsafe products)
Significant resources allocated to advertising or creating artificial demand for marginally differentiated products
Social Costs
Public health burdens from the promotion and sale of harmful products
Large-scale projects can displace communities without adequate consultation or compensation
Labour Issues
The drive to minimise costs can lead to exploitation and unsafe conditions such as excessive working hours, dangerous workplaces and use of child or forced labor in some supply chains
Precarious work lacking job security, benefits and a stable income
It can be pointed out that many of these issues can also occur via governments and to a lesser degree non-profits.
Positive Externalities
Private enterprise can also generate positive externalities, benefits that extend beyond direct business transactions to benefit society more broadly.
When companies invest in employee training, they develop human capital that remains valuable even when workers change jobs, raising productivity across the economy
Infrastructure investments by businesses, such as telecommunications networks or transportation hubs, often create shared value by improving connectivity and economic opportunities for communities well beyond their customer base
Knowledge spillovers occur when innovations, management practices and technologies developed by one firm spread to other companies through employee movement or observation
Private sector growth can strengthen institutions through demands for more transparent governance, standardised regulations and consistent enforcement
Foreign firms may introduce higher environmental or employee standards that domestic companies eventually adopt
Successful private enterprises expand the tax base, generating revenue that funds essential public services
In sectors like healthcare and education, private provision can reduce strain on public systems while sometimes pioneering improvements that public sectors later adopt
Acknowledging the economic role and the potential harms forces an analytical step. Simply observing positive outcomes like job creation or service provision isn't enough, especially when weighed against potential negatives. This brings us to a key question. Even when the outcomes appear positive, how much of that impact is truly additional? We need to assess whether our actions generate benefits beyond what standard market forces would have produced anyway.
Counterfactual Impact
The pursuit of profit drives private sector activity. This generates economic benefit but understanding actual impact requires looking beyond this inherent activity. We need to assess what positive outcomes would have happened anyway without a specific company or action.
Additionality
This is a core concept, assessing the difference made compared to the most likely alternative scenario. For the private sector, the baseline is typical market activity driven by profit incentives. Additionality is the positive outcome that occurs because of a specific intervention or firm, which would not have happened, or would have happened slower or less effectively, otherwise. I.e. “What was the added positive impact beyond what the market would have delivered?”.
Sources of Company-Level Additionality
A company generates additional impact when its actions lead to positive outcomes that would not have been produced by standard market forces alone. Markets, particularly in LMICs, are often inefficient. Promising, impactful opportunities may be neglected or poorly executed by existing players.
Sources of additionality include:
Addressing Market Failures
Operating profitably in areas where mainstream markets fail to serve needs (designing products for ultra-low incomes, providing financial services for the unbanked in remote areas ignored by competitors)
Pioneering Innovation
Introducing genuinely new technologies, business models or approaches that unlock previously impossible solutions or dramatically reduce costs for underserved populations
Exceeding Standards
Voluntarily adopting higher environmental, social or labour standards than required, incurring costs others wouldn't, leading to better non-market outcomes
Operating in Difficult Contexts
Investing or maintaining essential services in regions facing instability, conflict or severe logistical challenges where others withdraw
Leveraging Scale via Capital Access
Achieving significant development reach and impact that would be impossible or far slower without the large-scale capital (venture funding, debt) accessible through a for-profit structure
The Individual Counterfactual
Applying counterfactual thinking at the individual level is needed when considering a career for development impact. It’s worth asking yourself “What positive difference results because of my presence in this role, compared to what would have happened if someone else filled it?”
The assumption that someone equally good will immediately take your place is not always true. Several factors influence individual additionality.
Likelihood of Replacement
In highly specialised roles, nascent industries or organisations with unique demands, finding a suitable replacement might be difficult or time-consuming, making one less replaceable
Performance Differential
If an individual possesses skills or motivation that makes them significantly better suited for the role than the likely alternatives, their superior performance contributes additional value
Changing the Role
Perhaps the largest potential for individual additionality comes from using the position differently than a typical replacement would. This might involve bringing unique expertise that shapes strategy towards greater impact such as founders building a company explicitly designed to address market failures, successfully advocating for internal changes or measurably improving team performance
Analysing additionality is challenging as it requires speculating about alternative realities. However, it is essential for moving beyond simply observing correlation between private activity and positive outcomes towards understanding genuine contributions that you could make and impact beyond the market baseline.
High-Potential Sectors
Certain sectors frequently present opportunities for private actors in LMICs to generate additional benefits. This often involves tackling market failures, leveraging technology, overcoming structural barriers or adding significant value locally. Identifying these sectors helps focus attention on where private initiative might be particularly catalytic for economic growth and prosperity.
Infrastructure
Why it Matters
Provides the essential backbone for almost all economic activity improved quality of life and connectivity. Gaps severely limit growth and access to opportunities
Potential Additionality
Reaching unserved or underserved populations with essential services (power, internet, transport)
Introducing significantly cheaper cleaner or more reliable alternatives to public systems
Development of critical infrastructure like roads, bridges, tunnels, railways, ports, EV charging networks
Creating logistics solutions that overcome barriers
Developing enabling infrastructure like cold chains or efficient ports
Examples
Solar power (M-KOPA, Greenlight Planet, Niko)
Expansion of affordable internet (various MNOs, Starlink)
Well-managed Special Economic Zones
Finance
Why it Matters
Access to basic financial tools (payments savings credit insurance) is critical for household resilience economic participation and small business growth
Formal systems often exclude the majority in LMICs
Potential Additionality
Designing and delivering affordable accessible financial products specifically for low-income or previously unbanked populations
Leveraging mobile technology to drastically reduce transaction costs and improve convenience
Creating new mechanisms for credit assessment or risk management for those without formal financial histories
Facilitating cheaper international remittances
Examples
Mobile money transfer payment and savings platforms (M-Pesa, Wave)
International remittances often using common tools like WhatsApp (Félix Pago, LemFi)
Healthcare
Why it Matters
Health is fundamental to wellbeing and productivity. Weak public systems high costs and logistical challenges often limit access to quality care and essential medicines in LMICs
Potential Additionality
Significantly increasing the affordability and availability of essential generic medicines
Using technology to overcome distance and specialist shortages
Developing and deploying low-cost diagnostic tools suitable for LMIC contexts
Improving the efficiency and reliability of medical supply chains
Examples
Generic drug manufacturing (Cipla Aspen Pharmacare)
Telemedicine (Pinky Promise)
Agriculture
Why it Matters
The majority of the poor in LMICs rely on agriculture for their livelihoods.
Low productivity post-harvest losses and poor market access are major constraints
Potential Additionality
Providing information to smallholders that improves yields or market timing
Introducing productivity-enhancing technologies (irrigation mechanisation)
Reducing post-harvest losses through better storage or logistics
Creating reliable and fair market linkages for small producers
Adding value through processing of agricultural commodities rather than exporting raw materials
Examples
Darli - uses AI for translation and advice, mentoring farmers
Education
Why it Matters
Human capital contributes to long-term growth. Education systems in LMICs often face resource constraints and may not align well with labour market demands
Potential Additionality
Expanding access to quality educational materials especially in underserved areas or local languages
Providing vocational training that is linked to specific industry needs and job opportunities
Creating platforms that effectively connect skilled individuals in LMICs with global remote work opportunities
Examples
Accessible platforms offering locally relevant curriculum content (Abwaab in MENA)
Manufacturing
Why it Matters
Key for structural transformation creating more stable higher-skilled jobs than agriculture or informal services and diversifying economies
Potential Additionality
Moving beyond simple assembly by integrating genuine skill transfer technology adoption and local sourcing
Developing export-oriented industries that meet international quality standards
Manufacturing essential goods locally that were previously imported reducing costs and increasing reliability
Adopting cleaner production technologies
Digital Services
Why it Matters
Can leverage global connectivity to create large numbers of formal-sector jobs especially for educated youth even in countries with limited physical infrastructure or local markets
Potential Additionality
Providing first-time formal employment opportunities and skill development
Generating foreign exchange earnings
Catalysing improvements in local digital infrastructure
Examples
Call centres customer support operations
Data entry and basic IT support services
More advanced digital marketing or software development services
Construction
Why it Matters
A major employer often of lower-skilled labour critical for building essential housing infrastructure and commercial facilities driving urbanisation
Potential Additionality
Developing housing solutions for low-income urban populations
Formalising parts of the construction workforce with better training safety protocols and labour conditions
Wholesale & Retail Trade
Why it Matters
Essential for distributing goods connecting producers to consumers and providing widespread employment often in the informal sector
Potential Additionality
Formalising significant parts of the retail sector leading to improved product quality, consumer protection and tax revenue
Developing efficient logistics and distribution networks that lower consumer prices
Providing reliable market access for small local manufacturers or farmers
Implementing modern inventory management and food safety standards
Water & Sanitation Services
Why it Matters
Access to clean water and sanitation is fundamental for public health and economic productivity
Potential Additionality
Expanding service coverage to unserved low-income or rural areas where public utilities lack capacity or incentive
Introducing lower-cost service delivery models (prepaid meters, community management)
Improving operational efficiency and reducing water losses significantly
Focusing on these sectors does not guarantee impact. The way businesses operate and the specific context are still important. However these areas frequently offer opportunities for private sector actors to make a positive additional difference beyond standard business operations.
Policy and Regulation
The private sector operates within a framework of laws, regulations and societal expectations. This is primarily set and influenced by governments. Effective policy and regulation can guide private sector activity towards positive development outcomes.
Engagement here offers high leverage as it shapes the environment for potentially thousands of firms. This influence and leverage manifest through several key approaches, including:
Designing and Implementing Effective Regulatory Frameworks
Core government function
Roles here involve creating, refining and enforcing the laws and regulations
Example Roles
Economists, lawyers, policy advisors, regulators, inspectors within government ministries, regulatory agencies or within the judiciary ensuring legal enforcement
Holding Corporations Accountable
Often led by civil society
Roles here involve monitoring corporate behaviour, investigating and exposing malpractice and campaigning for greater transparency and adherence to standards and laws
This provides a non-market feedback loop, applying pressure where regulation is weak, compelling companies to change practices through public or reputational risk
Example Roles
Researchers, advocates, campaigners, legal officers, monitoring specialists and journalists
Shaping the Policy Environment
This can occur from various positions. It involves advocating for specific policies or reforms that improve the overall business climate for beneficial private activity (like streamlining business registration, strengthening contract enforcement, or combating corruption to help formal SMEs) or engaging constructively to design regulations that are effective but don't inadvertently stifle innovation or push businesses into the informal economy
This can involve working within a company to advocate for responsible practices, or within organisations that advise or represent the private sector.
Example Roles:
Individuals working in corporate affairs or sustainability roles within companies, staff within industry associations or chambers of commerce, consultants advising governments on regulatory quality, policy analysts in think tanks
Using Public Procurement Strategically
Governments are major customers. Roles in public procurement can achieve development goals beyond simply acquiring goods/services by designing purchasing policies and tender processes that require suppliers to meet standards, set targets for purchasing, or use large-scale purchases to stimulate markets for innovative pro-development products
Example Roles
Public procurement specialists, advisors in international organisations, like development banks, helping governments design strategic procurement policies
Moving Between Sectors
When considering a career with development impact, understanding how to strategically move between different sectors can help increase your long-term contribution.
Moving from private sector to government or non-profit roles is generally easier than the reverse. Starting in the private sector keeps more doors open, whereas beginning elsewhere may limit future options.
Starting in the private sector offers several benefits that can enhance later development work in other sectors.
Skill Acquisition
Structured training in multiple areas is more common in the private sector and better resourced
Large companies often have access to frontier tools and data that most non profits will be unable to afford or don’t have the scale to use
Professional Networks
Exposure to many connections spanning industries, countries and sectors
The private sector often has a higher focus on the benefits of networking
Understanding
Practical understanding of market mechanisms and specific sectors from the inside helps identify approaches to development challenges
Questions
Overall Reflections
What was the most surprising idea or statistic from this week?
How much do you think the private sector shapes daily life for people in LMICs?
How central do you believe the private sector is to achieving progress, compared to the roles of government, non-profits or academia?
When is the private sector more likely to have a positive impact?
Should international development agencies play an active role in supporting or shaping private sector activity?
How could governments work with businesses to achieve development outcomes?
When might a government, non-profit or academia approach be better?
How do we evaluate the cost-effectiveness of private sector interventions relative to traditional global health or poverty alleviation programmes?
Counterfactual Impact
How could someone have counterfactual impact in a private sector role?
How would you assess whether a company is creating genuinely additional impact versus just capturing market share that would have been filled by competitors?
What factors might make someone less replaceable in a role, increasing their potential for counterfactual impact?
If you joined a company, what strategies might help you increase your impact beyond what would happen if someone else was hired?
How does the speed of market adoption affect your assessment of impact? (If something would happen eventually, but you make it happen years earlier, how valuable is that?)
Risks & Trade-offs
Which risks associated with private sector activity seem most difficult to effectively regulate?
Can you think of a problem where a purely market-based solution might be actively harmful?
How do we balance social impact with financial sustainability of an organisation?
What are the advantages and disadvantages of locally-grown businesses versus multinational corporations?
What are the pros/cons of focusing on policy supporting startups vs small businesses vs large firms?
Careers
Which sectors do you think offer the most promising opportunities for private enterprise to contribute?
If you wanted to have positive development impact through a private sector career, what type of role could you pursue?
If you work in a standard business not explicitly focused on development, what are some ways you might still be able to create positive development impact?
When would it be better to found a startup or join a larger company?
Is working directly for an impactful private sector company in an LMIC likely to achieve more good than an ‘earning to give’ career in a high-income country?
Where do you see the most neglected opportunities for high-impact work within the private sector?
Future Trends
How do you think AI might affect the private sector in LMICs?
What non AI trends will be important in the next 5-10 years?
How should we think about climate change, urbanisation, population change in connection with private sector trends and startup opportunities?
To what extent do you think ‘leapfrogging’ (skipping outdated technologies/systems) is a realistic pathway for businesses in LMICs?
Other links
Ben Kuhn - Why and how to start a startup serving emerging markets
GiveWell - Zipline — Desk-Based Scoping of Drones to Increase Vaccination Coverage
IFC Jobs Study - Assessing Private Sector Contributions to Job Creation and Poverty Reduction
80,000 Hours - What does economics tell us about replaceability?
Charter Cities Institute - Reading list (including Special Economic Zones)
Why Entrepreneurship Is Even More Important in Crisis-prone Regions
Yaw - Manufacturing in Africa - Meet the 14 African countries that each have billions of dollars of manufactured exports that they sell to the world
Tobi Lawson - Free Markets in Africa
Direct Work For-Profit Entrepreneurship is Underrated
~1% of Senegal’s GDP
This feels like an editorialised title as he doesn’t advocate for removing small businesses, just increasing focus on larger firms