A SIDA Perspective on the Private Sector
- the Swedish International Development Cooperation Agency. The interview was conducted by the Business Call to Action.
Lena Ingelstam is director of partnerships and innovations for the Swedish International Development Cooperation Agency (Sida). She has been working in Sida in a number of positions, both in Stockholm and abroad. Before joining Sida she worked for Diakonia as a regional director at the office for South America and has also been a delegate to the Board of Global Partnership for Education (under the World Bank).
Sida is a government agency under the Swedish Foreign Ministry and administers approximately half of Sweden's budget for development cooperation. The overall target of Sweden's development cooperation is to ensure that those in poverty have the ability to improve their living conditions; the individual person is always the focus of our work. Sidahas three thematic priorities; democracy and human rights, environment and climate change, and gender equality and women's' role.
Q: There is growing interest in advancing inclusive business models, as we have seen from a number of new public commitments to the Business Call to Action Initiative by Swedish firms like IKEAand H&M,–what do you think is responsible for driving this momentum?
We are very happy to see a strong engagement to inclusive business in the Swedish private sector. It is clear that there is an increasing interest among Swedish companies to engage in partnerships for development. Last year in May, Sida initiated the network "Swedish Leadership for Sustainable Development", which consists of around 20 leading companies with Swedish connection, working together to take leadership for sustainable business and at the same time reduce poverty and find long term solutions to today's major development challenges. I hope this network will inspire other actors, and help achieve development outcomes in the priority areas of job creation with decent working conditions. The network also focuses on the reduction of corruption and unethical behaviour, reduction of negative environmental impacts and maximisation of resource efficiency and finally, integration of sustainable development into core business models and activities.
The base of the pyramid represents a significant business opportunity. By using inclusive business models - commercially viable, scalable business solutions that expand access to goods, services and livelihood opportunities for the economically disadvantaged - business can play a role in reducing poverty while improving the lives for people living in poverty. We believe it is important to admit to the dual incentives of the public and the private, but to recognise joint opportunities. For companies, advancement in inclusive business models does not only correspond to doing business responsibly but also in a smarter way.
Q: What is the Swedish government's strategy regarding the role of the private sector in development?
The Swedish government strategy is very clear - the private sector actors have an important role to play and we are working to find new and innovative ways of collaborating to effectively contribute to development objectives. Sida´s development cooperation is untied and therefore open to the private sector from all over the world. We see our support as additional and catalytic. The idea is to make things happen that would not otherwise occur by, for example, sharing costs. But equally important is know-how and access to national stakeholders and networks in the developing countries. These things are imperative to create conditions for sustainable development change. Collaborating with the private sector is not only relevant for economic growth. The Swedish government's strategy also emphasises that it is important to leverage the resources and innovation capacity from business in all thematic areas.
Q: How can platforms like BCtA supported by Sida, achieve the development goals of donor governments?
Sida has been supporting BCtA since 2011. By challenging companies to commit to inclusive business practices through implementation of specific in-country initiatives, we believe that BCtA can facilitate learning by doing and broker peer-to-peer and sector outreach. BCtA also provides a great network between a range of different actors; allowing for access to expertise and collaborating opportunities.
We are very keen to continue to take an active part in the further development and design of BCtA during the next implementation phase in 2014-2016. We hope to see more committed companies joining, including an increased number of SMEs and national companies from the developing markets. The new phase is also expected to improve further the tools and methods for measurement of inclusive business impact. This is important in order to keep the momentum of engagement. We need to be able to demonstrate business and development value from the investment and to learn from the initiatives supported.
Q: How important is promoting inclusive business (pro-poor business) to Sida, as compared to a more general promotion of private sector and development?
I believe that we have a demanding task ahead of us – and that is how to secure systemic change and in-country ownership. In many countries market failures, governance gaps, and other bottlenecks prevent business from reaching scale or leverage. There has to be broad-based work in country contexts to strengthen governance and create an enabling environment. This is especially the case when it comes to serving low-income consumers or engaging with low-income producers and workers. People living in poverty face not only lower incomes, insufficient assets and exclusion from formal economic value chains, but often limited education and skills, geographic isolation, and legal or political exclusion. The challenge when it comes to collaboration with the private sector and the promoting of inclusive business is not the implementation of individual projects.
Q: What are the challenges that you see to 'mainstreaming' inclusive business in development institutions?
Over the years, our role as a development agency has changed. We need to be very sensitive and increase our knowledge when it comes to the complexity of development and the possible effects of different forms of capital flows. I think we can be better at understanding where and how development cooperation can support in a more catalytic way. However, more traditional aid is still very relevant in many contexts. Sida has been developing methods and ways of collaborating with and approaching the private sector to work together for development. This work is now being integrated into Sida´s general programmes and the whole organisation as such.
In partnership with business, I would say that the main asset as a donor is our focus on development. That is the additional approach that we can contribute.
Q: How does Sida stimulate innovation within its private sector programmes?
Promoting innovations is becoming increasingly important to Sida. Innovations Against Poverty (IAP), is a Sida challenge fund aimed to support SMEs and start-ups, helping them to overcome the initial valleys of death. In collaboration with USAID (and some other donors), Sida invites all kind of actors, including business, to apply for funding from Grand Challenges, aimed to support the development and diffusion of game-changing innovations.
By making use of the Sida State Guarantee Scheme, we can share risk with companies willing to develop, and scale products and service in favour of the poor. One example is the Global Health Investment Fund, in which the Gates Foundation and Sida provide a joint guarantee mobilising $100mn which will be invested in accelerating research of drugs aimed to fight neglected diseases.
Likewise, we are increasing the development of new, innovative financing mechanisms, which hopefullywill stimulate the financial sector to more actively take part in global development and the fight against poverty. Finally I would like to underline the importance of strengthening innovation systems in developing countries; to support the interaction of different kind of actors (business, academia, public authorities, the financial sector, etc) and to enhance the capability of those actors to take part in the innovation system.
Q: What do you see on the horizon for post 2015 regarding private sector and development?
As we all know, the world is changing rapidly. People live longer, read better and use cell phones and internet much more than we imagine. The former 'third world' is now the engine of global growth. There is a vision – increasingly shared amongst world leaders – that we can actually eradicate extreme poverty by 2030. It is within reach in our lifetime!
Development cooperation is also changing with this changing world. We are moving from aid to development. We have to mobilize all good forces and come together to address new global challenges. Today, development cooperation makes up a shrinking part of global financial flows and emerging economies. Companies and philanthropists, like Bill and Melinda Gates Foundation, are becoming more influential around the world and very much so in low-income countries.
The Fourth High-Level Forum on Aid Effectiveness in Korea in 2011 recognized the diverse forms of engagement that the private sector brings to support development, together with governments, donors and civil society. It illustrated the importance to include new actors for more effective development. The business community has also been included as a dialogue partner during the work of the High Level Panel on the Post-2015 Development Agenda.
What we are seeing is a re-designing of development finance and Sweden is among the countries taking lead as a driver of change. I believe that inclusive business will be an important piece in this new jigsaw puzzle.