USAID-PRIME Partnership

 

A growing school of thought proposes that small- to medium-size enterprises (SMEs) in developing countries are key drivers of long-term stability and growth. By providing jobs, paying taxes, and producing, buying and selling local goods and services, SMEs act as the backbone or engine of an economy.

Unfortunately, SMEs struggle to grow in many developing countries, and as a result, microbusinesses and large conglomerates dominate the country’s economic pyramid. While the excitement for SMEs is there, both from public and private sector actors, most government-led SME projects are underperforming, and few if any investments are being made into SMEs in developing countries by private investors. RENEW is pioneering an innovative public private partnership model that stimulates direct investments into promising SMEs. RENEW recently partnered with Mercy Corps, an international non-governmental organization operating in Ethiopia since 2004, to implement a novel approach that leverages the private sector to create sustainable economic development.

Joining the resources of the U.S. President’s Feed the Future and Global Climate Change Initiatives, the U.S. Agency for International Development (USAID) launched the Pastoralist Areas Resilience Improvement through Market Expansion (PRIME) project in 2012 to respond to increasing pressures on pastoralist livelihoods. Mercy Corps leads the implementation of the project valued at $52M along with international and Ethiopian partners. Under the Mercy Corps-led consortium, the project aims to stimulate increased production, productivity and marketing through more competitive livestock and livestock products markets; increase communities’ ability to adapt to a changing climate; significantly improve alternative livelihood options through essential skills transfer and contribute to the wider knowledge on pastoral development. PRIME is operating across 30 woredas (counties) in three strategic clusters in the Afar, Oromia, and Somali regions of Ethiopia. PRIME has allocated resources to encourage private equity investment in livestock and other related sectors in the targeted regions of Ethiopia. The goal of this activity is to leverage private sector equity financing for investment in promising Ethiopian livestock sector-related ventures facing capital constraints. The PRIME project will use facilitation and co-investment rather than direct implementation and handouts as the project modality, because project leaders believe this approach has the best potential for sustainable growth in line with the Ethiopian Government’s Growth and Transformation Plan.

The public private partnership model – where the interests of the development community so clearly align with the local private sector and the investment community – represents a new field of development that is rapidly growing. The type of financing RENEW and PRIME are helping mobilize – broadly called impact investments – is growing as an investment class, offering investors opportunities to create sustainable social impact and financial returns through investments in companies that operate in high impact and fast growing countries such as Ethiopia. These trends, along with Ethiopia's rapidly expanding private sector, could help position PRIME to be a flagship project in the development sector.