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What is the rationale for using aid funds to support the private sector?

Aid funds can be used both to help governments in poorer countries tackle the obstacles that may prevent private sector investment to flow (such as better government regulations and capacity) which is not commercially financeable and, by partnering with the private sector in investment, encourage investors to finance projects they might otherwise not do so on their own initially because of perceived risks. Limited use of aid funds, used in smart ways, can therefore catalyse much larger flows of private sector finance and delivery capacity – in the case of the PIDG up to 30 to 40 times.