NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, August 11, 2017

Sustainable Development Goal One (SDG1) calls for over one billion people to begin earning more than $1.90 a day by 2030. For a household of five, this equates to $3,500 per annum.

There is significant interest in the donor community in using private sector partnerships to help realise SDG1. Such partnerships have typically focused on donors providing funds to a business. Businesses are asked to put forward a new business activity which will increase household incomes. A common activity is to source a product from poor families. However, by definition, the activity has a negative business case. The business and its competitors would not normally take part. Thus, the donor must choose from a range of negative business cases, which are only made worthwhile by the donor’s contribution. This presents a number of challenges; principally, that donors are typically ill equipped to make such decisions.

This article sets out an alternative approach – in which businesses co-finance the cost of a largely donor-funded asset for households, rather than donors co-financing the cost of a private sector business activity.