Our Perspectives


Overcoming Barriers to Poverty Reduction: A greater role for the private sector

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Female artisan from the Mosuo community in southwest ChinaLuru-Dashima, a female artisan from the Mosuo community in southwest China, participated in a UNDP/private sector project focusing on improving market access and recognition for traditional ethnic minority handicrafts. Photo: UNDP/China

From C.K. Prahalad’s thought provoking call for eradicating poverty through profits to the newly coined words ‘reverse innovation’, various schools of thought have emerged recently to make a case as to why the private sector could and should do more towards poverty alleviation.

Naturally, that case was incubated in business schools—a case for the business community to do more to eradicate poverty needs to be commercially viable. But we, at UNDP’s global policy center for private sector in development (IICPSD), opened the dialogue further and looked outside of the business schools to tap into the wealth of knowledge developed by poverty experts and learn more about various factors that lead to and perpetuate a life in poverty.

Our efforts culminated in a recent conference about “The Role of the Private Sector in Poverty Reduction and Social Inclusion”, where we disaggregated poverty data to a basic set of tangible disadvantages that sustain and perpetuate socioeconomic exclusion. We identified five overarching barriers to poverty reduction: Early Developmental, Health, Skill, Social, and Decision-making barriers.

The rationale behind this approach is based on the premise that private companies first gather in-depth understanding of the needs and challenges facing their potential consumers before presenting innovative solutions to their target consumer base. Similarly, a thorough understanding of the various factors that lead to and perpetuate poverty can help the private sector formulate effective solutions to its eradication.

Using this framework, we then paid a visit to private sector experts looking for answers on how businesses, practically speaking, can help overcome these barriers. For example, farmers in Kenya did not use fertilizer despite low, affordable, prices and being aware of the benefits. They would put it off and by the next planting season would not have sufficient liquidity to purchase fertilizer. Based on this, researchers offered timed discounts on fertilizer purchase following the harvest—providing the nudge to “act now” at a time of high liquidity which significantly increased takeup.

This approach, we believe, facilitates sustainable—and by extension commercial—solutions from the business community.

One key theme at the conference was also that businesses need partners to further guide and facilitate their role in poverty reduction, either academia who can translate findings into actionable recommendations, NGOs for their legitimacy and local reach, or development agencies to promote dialogue with governments and enable public-private partnerships.  As the report concludes, the private sector can “play a much more substantial role towards poverty reduction…[a role] which can be further tapped into with the support and enabling of strategic cross-sector partnerships.”

Private sector Poverty reduction and inequality partnerships Gail Hurley

UNDP Around the world