LocationsEvaluating UNDP's support to the private sector
A vital engine for sustainable economic development
The private sector is a key driver of jobs and economic opportunities globally. In emerging and developing economies, MSMEs contribute to up to 40% of national GDP and create 90% of jobs. Developing countries often have more self-employed people and microenterprises, many of which operate within the informal sector and are highly vulnerable to external shocks.
In recent years, private sector investments have surged in many developing countries, fueled by government reforms that improve business conditions, attract foreign capital and promote entrepreneurship. However, policy and capacity challenges, political instability, corruption, trade barriers and limited access to finance continue to hinder growth and resilience.
Shifting toward a sustainable private sector
Since 2015, more businesses worldwide have embraced sustainability, driven by increased awareness, regulatory incentives and technological advancements.
However, despite a rise in sustainability pledges, unsustainable production and consumption patterns continue to fuel climate change and biodiversity loss. The perception of diminishing returns for shareholders and societal norms continue to negatively influence sustainable investment decisions. Bridging this gap requires stronger commitments, innovative solutions, and a shift in how businesses measure long-term success.
How UNDP supported small businesses
UNDP support was designed to help small businesses grow, especially in countries where the need was greatest. By providing knowledge and assets, UNDP helped entrepreneurs improve productivity, increase income, and keep their business running. UNDP also helped national governments strengthen services for (micro)-entrepreneurs, particularly in Middle Income Countries.
UNDP worked to align business practices with the SDGs, encouraging young entrepreneurs to contribute to sustainable development. It facilitated important dialogues on sustainable food production and Business and Human Rights, helping to build trust and drive change. UNDP also played a key role in advancing environmental policies, leading to reported positive impacts on the environment.
Downstream support for small business
Support to developing the managerial and productive capacities of MSMEs remained a core area of engagement for UNDP.
MSMEs that received support through the SDG Value Chain programme found UNDP’s assistance greatly beneficial. It helped businesses grow and stay motivated, with projects being perceived more as an opportunity in less developed countries where needs were highest and alternative support more limitedly available.
More than 70% considered the programmes impactful in terms of reputational effects and economic gains, while less helpful in providing access to new markets and/or promoting more participation of women in the workforce. More than 60% remained hopeful about their companies’ future prospects, including their resilience to shocks.
Barriers to transformational change
More is needed to spark transformational change, particularly in the face of capacity gaps, social norms and power imbalances in the private sector. Farmers and entrepreneurs continue to struggle with securing better pricing for sustainable products, particularly in local markets where access to external funding or investment opportunities remain limited. Achieving gender equality within companies, particularly at the managerial level, also remains a challenge.
UNDP approach often overlooked the broader enabling environment. While UNDP’s support for institutional capacity development was valuable, it sometimes came at the expense of a more holistic understanding of business needs, with few efforts to promote public institutions as business service integrators, and limited reliance on “anchor companies”.
Although UNDP has made strides in shifting its approach to private sector engagement, these haven’t yet fully transformed the organization’s culture or policies. The evaluation emphasized the need for a thorough review of policies and practice to address recurring challenges - like improving contracting processes, enhancing co-investment opportunities, and enabling access to finance.
Recommendations for UNDP
Based on its findings, the report laid out six recommendations designed to guide UNDP towards greater coherence, effectiveness and sustainability in its private sector endeavours.
UNDP should define how its multiple service offers could be better leveraged to promote more integrated and coherent support for private sector development and structural transformation. UNDP should develop a full theory of change for its Private Sector Development and Partnership strategy to identify how the application of UNDP service offers helps the private sector address its needs to grow, become resilient and transform its practices towards higher sustainability. The exercise, which should be repeated at regional and/or country level and run in consultation with private sector stakeholders, should help UNDP prioritize a dedicated set of interventions that best respond to companies’ needs, while favouring the integration of different tools for more effective support.
UNDP should enhance the integration of market-based approaches and value chain promotion across its projects, especially in middle-income countries. Project design should assess the marketability of supported products and services, avoiding the creation of new institutions or programs unless necessary. Instead, UNDP should strengthen national institutions, enhance collaboration with Chambers of Commerce and business associations, and deepen partnerships with UNCTAD and ITC to integrate trade-related tools. UNDP should also expand its support for e-commerce through more comprehensive interventions.
UNDP Country Offices should focus on sectors that significantly contribute to poverty reduction and a greener economy. Programmes should be built on market analyses, such as SDG Investor Maps, and explore foresight tools to identify future opportunities, including circular economies. Sectoral approaches should address barriers to growth and structural transformation, working with partners on multiple entry points for maximum impact.
UNDP should strengthen its engagement with larger companies and private sector networks at global, regional, and country levels to integrate MSMEs into global value chains on fair terms and drive broader structural transformation. UNDP should facilitate dialogue between businesses of different sizes and consider establishing Business Advisory Councils. Lessons from initiatives like FACS dialogue mechanisms, the SDG Impact steering group, and the Regional Bureau for Africa advisory group should inform these efforts. Additionally, UNDP should clarify its role in reducing inequality through private sector engagement and integrate insights from the Business Call to Action (BCtA) into future initiatives.
UNDP should identify and address key factors influencing investor decisions in developing countries, focusing on areas aligned with its comparative advantages. Efforts should prioritize policy de-risking and enhancing private sector capacity to attract national and foreign investments through bankable business plans and investment-ready project pipelines. UNDP should continue engaging financial institutions and intermediary services to align financial flows with private sector opportunities for the SDGs.
UNDP should finalize its policy and regulatory updates based on recommendations from its internal private sector task force. New instruments should facilitate private sector engagement as a partner, including for jointly designed initiatives. If needed, UNDP should propose updates to its Financial Regulations and Rules (FRRs) for Executive Board consideration. The revised due diligence policy should be monitored regularly, and risk assessments should be digitized to accelerate decision-making. UNDP should provide clear guidance to staff on the application of rules by engagement type and promote a risk-responsive organizational culture that recognizes the private sector’s role in development.
Good practices and lessons learned
The evaluation compiled good practices and lessons learned on ‘what works’ for private sector development and structural transformation, based on the evidence collected.
How to engage the private sector for higher effectiveness
- Build on existing initiatives by the private sector.
- Stand ready to be flexible and non-prescriptive.
- Integrate tools into day-to-day operations.
- Select your messengers to influence change.
- Create a repository of information that remains
easily accessible.
How to effectively support private sector development at downstream level
- Provide sustained support for habit formation and behavioural change.
- Use role models and community agents to transmit knowledge.
- Time training of seasonal workers outside peak production moments.
- Extend training to cover product preservation, packaging and marketing.
- Enlarge support to access to finance, as this is the often the reason why participants engage in training.
- Be careful about disbursing seed money before training, as it may disincentivize participation.
How to enhance supply and value chain development
- Plan activities (and time) to enhance trust and social cohesion for individuals to collaborate and move beyond micro-businesses.
- Enhance attention to marketing and business-to-business linkages for higher market access.
- Do not dismiss the important role of intermediary services, which can provide good value-for-money when the skills gap of producers is deemed too deep. Aggregating production from multiple smallholder farmers and strengthening cooperatives’ intermediary functions can be
too time-consuming and costly. - When engaging medium-large companies to enhance trade opportunities for smaller enterprises, balance the risk of bigger companies diverting and disrupting local (food) supply chains.
- In project design, factor in any planned intervention (by governments and IFIs) to develop infrastructures.
How to best support enhanced trade opportunities
- Align national policies with international requirements for trade (World Trade Organization rules, regional and national standards)
- Provide institutions with access to market intelligence and use big data for foresight and market expansion/diversification analysis.
- Reduce bureaucratic sludges (including long and paper-based administrative procedures for trade and customs).
- Build the capacity of national business associations to engage in dialogue with public stakeholders on desired changes.
- Facilitate the participation of producers in international events to cultivate collaboration with foreign partners (including through business-to-business matchmaking).
- Support producers’ access to certification schemes.
What to consider when supporting e-commerce initiatives
- Internet connectivity and bandwidth
- Choice of products (based on their shelf-life)
- Simplicity of user interface
- Creation of order notification function
- Overhead costs for delivery in remote locations
- Different payment modalities (bank account, mobile money, cash)
- Cost of platform maintenance (for sustainability)
- Language barriers
- Producers’ age (and eventual involvement of younger relatives for family businesses)
- Role of markets and shops as social connectors
