24.07.2014 | Association for Women's Rights in Development

The role of the private sector in financing for development from a feminist perspective

It is a well-known fact that development cooperation is no longer the exclusive domain of states or international organizations. Private sector resources have long accounted for a significant share of financial flows to developing countries, consistently higher than ODA from donor countries.

Development financing is progressively being privatized: an increasing amount of aid, taxpayers’ money, is being channeled to private companies or financial institutions, mostly in developed countries, rather than civil society organizations or governments in developing countries. Over the past decade, multilateral development banks have tripled their private sector portfolios, and since the 2007 global financial crisis, development finance institutions, particularly in Europe, have increased financial flows to the private sector by almost 200 per cent.

True, the idea of a monolithic private sector fails to acknowledge the power imbalances between large transnational corporations and small and medium enterprises (SMEs) or cooperatives, all included in the same bag without much differentiation. But Public-Private Partnerships (PPs) have become a mantra as a way to pool needed resources in tough times, when the financial health and future of states and international organizations that have historically led financing for development is increasingly fragile.

There has been little scrutiny thus far of how the private sector is influencing development priorities and having an impact in the advancement of human rights and environmental sustainability.

The private sector alone cannot reduce poverty and economic inequality, as its raison d’etre is to make profits. This begs the question of how to finance development and rights-based efforts that do not necessarily offer a good investment return, like women’s rights, for example?

Even if states and multilateral actors carry primary responsibility for the protection and promotion of women’s rights and gender equality, the role of the private sector is shaping and influencing women’s access to their rights, or the violation of these rights, in very important ways that cannot be ignored.

From a feminist perspective, the increasing role of the private sector in development is presenting serious obstacles and challenges for the advancement of women’s rights and gender equality:

  • Corporate actors are emphasizing women as a key constituency of consumers, economic agents and small-scale entrepreneurs. Women’s economic empowerment is often understood as equal to women’s entrepreneurship. Private sector interest in “investing in women and girls” has become a recurrent trend with actors such as the Chief Executive Officer of The Coca-Cola Company stating “empowering women is one of the most important ways to accelerate growth across the global economy.”
  • Often private sector led initiatives like micro-credit and micro-entrepreneurship programs are seen as “magic wands” that will empower women without dealing with the deeper gender power structures that are at the root of gender inequality.
  • Without broader social changes, women’s entrepreneurship alone would not solve the equation. Transformative solutions require addressing the rules and design of global trade and finance systems, tax evasion and illicit financing flows; as well as the structural drivers of inequality like violence against women, the right to bodily, sexual and economic autonomy at different levels.
  • The “investing in women and girls” discourse that is appearing as a trend in several corporate sector circles is largely focused on individuals. The promise is that individual women entrepreneurs can help reinvigorate entire economies. But the concept of women’s rights is largely missing, as is the ethical imperative of ensuring women’s human rights , and the obligation of both state and non-state actors to protect and promote these rights.
  • While the private sector is a significant source of employment for many women, in the pursuit of greatest return on investment, many corporations continue to benefit from contexts of low wages and de-regulation, particularly in their operations in developing countries (as evidenced in the overwhelming majority of women workers in the garment industry in Central America or South-East Asia).

Apart from these challenges, a strong accountability and compliance with Human Rights standards are needed. Currently, there are no binding governance and accountability mechanisms in place to ensure that Public-Private Partnerships will align with national and local development needs.

The call for a binding international agreement to hold corporations accountable has been iterated around the world by many, including Joseph Stiglitz who said “soft law—the establishment of norms of the kind reflected in the Guiding Principles on Business and Human Rights—are critical; but they will not suffice. We need to move towards a binding international agreement enshrining these norms.”

The UN must ensure that multi-stakeholder partnerships - particularly within the context of the post-2015 agenda- will be held accountable to delivering development results that are equitable and rights-based, aligned to national and local needs, and do not constrain the right to development and national policy space for developing countries.

This article is loosely based on a presentation done by AWID at the UNDP conference on International Development Cooperation: Trends and Emerging Opportunities that took place 19-20 June, 2014 in Istanbul, Turkey.