Paper short abstract:

Does reality match the enthusiastic rhetoric on the role of the private sector in development? This paper examines blended development finance and broader donor-private sector partnerships, assessing whether these reduce poverty and inequality, advance gender justice, and promote sustainability.

Paper long abstract:

Development discourse increasingly looks to the private sector to play a key role in filling the estimated $2.5 trillion annual financing gap on achieving the Sustainable Development Goals. Donors see blended public-private development finance as a crucial modality that allows them to strategically use small amounts of official development assistance to leverage substantial private funds and overcome market failures in developing countries. But does the reality match the enthusiastic rhetoric? Or is blending really just a subsidy that drains scarce aid funds away from financing poverty reduction and environmental protection? Does it mostly go to private investments that would have occurred even in the absence of a public financial component? Is it a way for donors to help boost the profitability of their own companies, thereby constituting a form of tied aid? Does private sector engagement in development help reduce poverty and inequality, advance gender justice, and achieve environmental sustainability? This paper synthesizes two years of Oxfam research on the role of the private sector in development. It will examine blended development finance, focusing on European Union, Netherlands, and World Bank blending facilities, based on work carried out in collaboration with Eurodad. In addition, the paper presents the results of Oxfam research on donor-private sector partnerships, which developed frameworks for categorization and assessment, as well as the results from applying the assessment framework to 20 partnerships involving nine OECD donors, and findings from additional case studies of donor-private sector partnerships in the health and agriculture sectors.