Local Private Sector Partners Generate Enduring Results
Third in a series of five blogs on the factors that contribute to sustaining and scaling private sector partnerships from the Enduring Results Study 3.0
USAID published the Enduring Results Study 3.0 (ERS 3.0) in 2020 to illustrate how USAID’s private sector engagement activities can deliver market solutions with a lasting impact. The study captures and offers evidence on the drivers of sustainability and scale in the Agency’s partnerships with the private sector after USAID's role ends.
One of the findings in ERS 3.0 is that local private sector partners continued their contributions more often than the global private sector partners. Thirteen of the 14 local private sector partners, or 93 percent, continued to contribute to their program, and only eight global private sector partners, or just 57 percent, continued to engage once USAID funding ended.
For local partners, continued engagement was often linked to commercial interests. While all 14 of the local private sector partners had commercial interests in the partnerships, just 29 percent of the global partnerships had a commercial interest. The study found that local private sector partners often sustained activities by establishing or expanding market linkages.
Local Private Sector Adds Unique Value
Emily Varga, a Cooperative Business Specialist and Private Sector Engagement Liaison for the Local, Faith and Transformative Partnerships Hub in USAID’s Bureau for Development, Democracy and Innovation, shared her insights on the value add of partnerships with the local private sector.
“There is a history of USAID valuing engagement with local private sector actors because they are drivers of long-term, sustainable development results,” said Varga. “The local private sector is rooted in communities and invested in local markets, but beyond that there are social ties and social motivations at play that incentivize the local private sector to expand market linkages.”
In USAID’s Local, Faith and Transformative Partnerships Hub, Varga supports cooperatives, which she describes as “democratically-run, member-owned businesses” that require member equity and social capital from their local communities to be sustainable enterprises. “There are mutually reinforcing economic incentives for these businesses to sustain presence and expand market linkages in their communities,” she explains.
Varga said many local cooperatives have contributed to the needs of their communities in response to COVID-19 in locations where governments or donor organizations could not adequately respond. “In Mexico, we’ve seen agricultural cooperatives provide food supplies and basic goods to their community members. In Uganda, we’ve seen health cooperatives set up SMS communication channels to ensure formal and accurate health communication was disseminated to rural villages. In Guatemala, credit unions are working with their members to ensure there is adequate personal protective equipment (PPE) for all community-level health workers,” said Varga.
“So these local cooperatives are vested in their communities and their communities are vested in them,” said Varga.
“The value proposition for partnership with the local private sector is our ability to bring specialized technical expertise, convening power to establish new relationships, and access to appropriate financial instruments.”
Emily Varga, Local, Faith and Transformative Partnerships Hub, USAID
USAID’s Unique Value Add
Jay de Quiros, USAID/Philippines Economic Growth Specialist, echoed this same value proposition for local actors from his work with the local private sector in the Philippines. He serves as the interim Lead for the USAID/Philippines’ Private Sector Engagement Working Group and is a member of the Mission’s Core Team for Local Works, the Agency’s flagship locally-led development initiative . He said that while private sector entities want to contribute to development, many may not know how to deal directly with grassroots communities or marginalized groups.
“That just happens to be something our different projects/activities specialize in,” said de Quiros. “For instance, I recently had a conversation with someone in a company that wanted to expand their agribusiness, but they didn’t have expertise in supporting farmers, in organizing them, training them, and in aggregating them. We can help to fill the development gap.”
He added that local actors value USAID’s convening power, including connections with government, wide networks, and being an honest broker.
“In my area, which is economic growth, they [local private sector] value our ability to convene, especially when they are aligned with what would make their businesses flourish - for instance, less red tape, better national and local laws, and improved logistics and infrastructure.”
Jay de Quiros, USAID-Philippines
Due to its global reach and experience, USAID is a valuable source of innovation and technical expertise for the local private sector. But overcoming barriers to engagement remains a priority for both Varga and de Quiros.
Challenges and Solutions to Engaging the Local Private Sector
de Quiros observed three challenges around private sector engagement and offered corresponding actions for USAID staff to take to mitigate them.
First, often local private sector actors do not know how to approach or work with USAID. He recommended that Missions continue to convene private sector forums and for staff to continue to attend PSE training.
Second, he brought up that there still exists the “old mentality of private sector engagement as traditional corporate social responsibility” around the Agency. “They still think it’s a matter of partnering for charity and philanthropy, rather than finding ways to advance the development-profit or business nexus.” De Quiros encouraged USAID staff to amplify examples of shared value, where profit and development coexist.
Finally, de Quiros noted that Missions may lack the dedicated technical expertise and funds meant to engage the private sector. To address this issue at USAID-Philippines, the Mission is hiring a staff person specifically to engage businesses in existing activities and create new partnerships. The Mission has also used its Local Works funds “to solicit innovative, locally-led ideas for PSE.” In fact, the first project under this call, which seeks to create the first impact investment network in the country, was just awarded in August to a local business accelerator .
Varga concurred with de Quiros’ points, adding that USAID is often not “on the local private sector’s radar or considered ‘too big’ to engage.”
“Our value proposition for the local private sector is not always clear or convincing for behavior change. Often there are valid perceptions of the overly burdensome steps for a formalized partnership with the Agency,” said Varga.
To address this barrier, Varga said the private sector values the role of a client services liaison — or “sherpa” — in the Agency to help navigate USAID processes, acronyms, and mechanisms.
Varga also said she’s been encouraged by USAID’s Effective Partnering and Procurement Reform for its greater flexibility in how the Agency can engage new and underutilized local organizations.
‘Listen twice as much as we speak’
Listening tours help to overcome barriers with engaging with the local private sector, said Varga. These listening tours allow USAID mission staff to hear directly from new local constituents to learn more about the local private sector actors and identify potential partners.
“We need to listen twice as much as we speak. We must first learn about these businesses - their history, whom they serve, future aspirations. By doing this, we can determine how we can be a force that generates value without extracting it, and how to be a partner that complements a system without disrupting it,” said Varga.
de Quiros cautioned that it's also important to recognize that the private sector is not monolithic — some are against pro-competition measures and profiting greatly from the status quo. He recommended that USAID “be cognizant of the nuances and adapt accordingly - not necessarily to avoid them but to find ways to navigate through potential resistance points.”
Alignment and commitment
Both Varga and de Quiros offered some final thoughts on how USAID can more effectively overcome barriers to engaging with the local private sector.
“The local private sector is playing the long game in their respective markets. If we want them to consider us as an ally, we need to be thinking beyond a single partnership and articulate our long- term commitment as well,” said Varga.
“The local private sector has resources and from what I’ve experienced, is ready to use those and partner with us when interests align. So the challenge is to be able to develop and design meaningful opportunities,” said de Quiros.