The document discusses the role of the private sector in development finance. It notes that the private sector plays a key role in mobilizing finances for development through investments, job creation, and tax revenues. Specifically, the private sector accounts for 25% of funds to developing countries, including 12.5% from capital markets. However, there is still room for the private sector to provide more financing. The public sector can help attract private sector investment through maintaining macroeconomic stability, reliable infrastructure, rule of law, and business-friendly policies and reforms. Blended finance models that bring together public and private funds can also promote greater private sector participation in development.

1. THE ROLE OF THE PRIVATE SECTOR IN
DEVELOPMENT FINANCE
Afia Agyekum
World Bank MOOC 2015 Participant
12/09/2015

2. Key Lesson from Financing for Development Course
The key lesson gained from participating in
the financing for development course was
that importance role the Private sector plays
in mobilizing finances for development.
Such as its role as an investor and their
contribution to resource mobilization,
especially taxes in developing countries.
Also, the great role the private sector is
suppose to play for the world to achieve the
SDGs.

3. Overview
The private sector is recognized as a critical
stakeholder and partner in economic
development. The private sector finance can
be from both domestic and international
sources.
The private sector include:
Capital markets
 Banks
Pension funds
Remittances
Insurance communities
Civil society organizations
Foundations and Non-Governmental
Organizations
(Week 2 Video talk, MOOC Financing
for Development Course, 2015).

4. The private sector can contribute to:
Revenue generation, through salaries to employees
and employee and company taxes to the
government.
Job creation: the private sector provide over 90%
of jobs in developing countries, (World Bank
World Development Report, 2005).
Investment in development activities. Private
sector’s contribution to Development finance has
increased over tenfold since 2000. However, the
private sector only account for 25% of funds to
developing countries of which the capital market
contribute 12.5%.
These show that there is room for improvement on
the part of the private sectors, particularly the
capital markets
Contribution of Private Sector to Development
0
200
400
600
800
1000
1200
1400
1600
1800
Funds to Dev.
Countries
Funds from
Private Sector
to Dev.
Countries
Capital
Markets
contribution to
Private Sector
Funds
Funds to Developing Countries by
Sources
Source: Week 2 Video talk, MOOC Financing for
Development Course, 2015

5. Private Sector’s contribution to Development Cont’d
Investment in infrastructure, especially from the
capital markets through project bond markets and FDI
Establish /build thematic bonds with specific focus on
education, health, technology, etc. that allows for
growth in specific areas to achieve specific
developmental targets such as SDGs
Establishing Business linkages and partnerships
Attract other investors and philanthropist
Mentorship for entrepreneurs especially citizens of
developing countries

6. Why the Private Sector would want to invest in
Development Projects
Private sectors will invest when they anticipate higher returns and/or lower risk of
investment (Week 2 Development for Finance)
Private sectors prefer to invest in emerging markets because
 experience rapid growth with much industrialization and prospects for high returns.
However, most emerging markets present high risk mainly due to the unstable nature of the
economy.
Thus, to attract the private sectors into emerging markets, the public sector must institute
policies and measures to reduces the risk faced by private investors and provide a sound
environment for investment

7. How to attract the Private Sectors to Invest in
Development
The Public sector must:
Provide a stable and predictable economy, in terms of, stable macro-economic factors
such as exchange rate, inflation,
Reliable resources such as electricity and water resources.
Rule of Law
Stable political economy, safe and peaceful economies
Fare-play environment for both domestic and international private investors
Lobby for and making changes in policy reforms to promote private sector investment:
e.g. Making the business registration system fairly easy to comply, land rights and
ownership policies, etc.

8. Conclusions
The public sector through processes such as the “blended finance concept” can attract the private
sector to carry out and finance development projects to promote development in the local economies;
specially for LDCs.
• Indeed, there is a huge potential for the private sector to contribute to development finance
Thank You
(see week 2 video talks for more information on blended finance)

9. Reference
• Aidflows, (2015). Website: http://www.aidflows.org/
• Financing for development Week 2 Videotalks available at
https://class.coursera.org/fin4devmooc-001/wiki/Week_2_Video_Talks
World Bank Group (2015). Financing for Development: Week 2. Availble at
https://class.coursera.org/fin4devmooc-001/wiki/Week_2_Overview
• World Bank (2005). World Development Report,
http://www.un.org/en/development/desa/policy/cdp/ldc_info.shtml