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68 4.2 INCLUSIVE private sector development 4.2.1 Introduction In crisis and post-crisis situations, the underpinnings of private sector activities—including a business-friendly policy environment, access to finance and markets, value chain linkages, capacity, and infrastructure—are usually damaged, destroyed, or in an early stage of development. As a result, markets tend to favour existing elites and to reinforce established patterns of inequality and social exclusion. When obstacles can be overcome, the micro, small, and medium enterprise sector is typically the most resilient part of the economy, with the potential to generate broad-based employment and income generation. This section addresses UNDP’s role in supporting the development of an inclusive private sector in crisis and post-crisis situations. It focuses on (a) inclusive market development, (b) inclusive financial sector development, and (c) the establishment of business development services. Each of these processes has the potential to create employment and income generation among crisis-affected people, enabling these individuals to contribute to economic recovery. These processes are complementary, and they are all relevant to livelihoods and economic recovery programming. Depending on the context, such processes can contribute to poverty reduction, food security, peace-building, and disaster resilience. While these processes are sometimes pursued as standalone projects, they can be—and often should be—incorporated into broader projects and programmes. And it is certainly the case that all of these processes call for interventions at multiple levels, from the macro level of removing policy and regulatory constraints to the micro level of strengthening capacity among targeted entrepreneurs and enterprises. Interventions in support of inclusive private sector development aim both to strengthen local market systems and to improve the position of those individuals and communities that are adversely affected by crisis scenarios. . Improved access to markets, finance, and information among the population as a whole can indirectly benefit target groups. Focusing exclusively on target groups can strain community relations and limit the development of effective markets. At the same time, measures are usually necessary in the early recovery period so as to ensure that vulnerable groups are not excluded from the growth process, i.e., that growth is inclusive, with targeted populations able to both participate in and benefit from economic recovery. A delicate balance is therefore required. The appropriate timing for initiating interventions to promote these processes is typically about four to six months after stability has been achieved. Given the time normally required to finalize programming arrangements, however, some quick-start, quick-win activities may begin immediately. Such activities may include, for example, the training of key policy makers and funding for financial service providers that meet minimum conditions. 40 UNDP’s inclusive market development framework has similarities with the Making Markets Work for the Poor (M4P) approach of DFID and SDC, the Opportunities for the Majority approach of the Inter-American Development Bank, and the Next Four Billion approach of the IFC. 4.2.2 Inclusive markets, inclusive finance, and business development services Inclusive markets are markets that extend choice and opportunity to poor and marginalized people as producers, consumers, and wage earners. The concept of inclusive market development—making markets work better for the poor—is central to UNDP’s private sector strategy. 40 This concept builds on the premises that accessible and competitive markets facilitate poverty reduction and that market-based economic engagement with the poor is essential for sustainable development. Programming for inclusive market development can be especially important for crisis-affected women, who typically expe- Livelihoods & Economic Recovery in Crisis Situations
69 rience greater vulnerability, fewer economic opportunities, less marketable knowledge and skills, and reduced access to financial products. The development of value chains is an important aspect of inclusive market development. A value chain, as defined by ILO, is the process of creating value from the conception of a product through to its final consumption. Such a process includes input supply, design, production, distribution, retailing, and support services. Value chain development for livelihoods and economic recovery in crisis or post-crisis situations focuses on value chains in which market demand is substantial and crisis-affected people are—or could be—strongly represented as entrepreneurs or employees. Interventions are then designed to strengthen the competitiveness of the value chain while expanding the share of value added that reaches target groups. Such interventions connect micro and small enterprises to larger companies with access to wider markets, creating forward and backward linkages where crisis-affected people can participate. In the United Nations’ vision of inclusive finance, all segments of a country’s population have access to appropriate financial products and services. (See Box 4.2.) Savings plans, credit, leasing and factoring, mortgages, insurance, pensions, and local and international transfers are examples of financial products and services that can enable poor and crisisaffected people to protect, diversify, and increase their income while empowering these individuals to make their own economic decisions. Global experience has demonstrated that microfinance can successfully enable poor and crisis-affected people to generate income in post-crisis situations in which a reasonable degree of political stability prevails, economic opportunities and demand for financial services are sufficient, and the client population is relatively stable. Financial services that reduce the need to carry cash (e.g., electronic transfers) can contribute to improved security. An inclusive financial sector is an enabling environment for a variety of financial service providers and a wide range of financial products and services are available to vulnerable groups. Box 4.2. The United Nations’ vision of inclusive finance “The vision of inclusive finance begins with this general goal: supported by a sound policy, legal and regulatory framework, each developing country should have a continuum of financial institutions that, together, offer appropriate products and services to all segments of the population. This scenario would be characterized by: (a) access at a reasonable cost of all households and enterprises to the range of financial services for which they are ‘bankable,’ including savings, credit, leasing and factoring, mortgages, insurance, pensions, payments and local and international transfers; (b) sound institutions, guided by appropriate internal management systems, industry performance standards and performance monitoring by the market, as well as by sound prudential regulation where required; (c) financial and institutional sustainability as a means of providing access to financial services over time; and (d) multiple providers of financial services, so as to bring cost-effective and a wide variety of alternatives to customers.” —Excerpt from United Nations, Building Inclusive Financial Sectors for Development, 2006 UNDP has a comparative advantage in supporting inclusive finance because of (a) its presence or early entry in crisis and post-crisis settings, (b) its focus and expertise in capacity development, and (c) its partnership with the U.N. Capital Development Fund (UNCDF). UNCDF provides investment capital, capacity building, and technical advisory services to promote microfinance and local development in the least developed countries. UNCDF’s flexible, high-risk, and innovative investment capital is especially important in crisis and post-crisis settings, in which the development of inclusive finance often requires external Livelihoods & Economic Recovery in Crisis Situations
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UNITED NATIONS DEVELOPMENT PROGRAMM
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UNITED NATIONS DEVELOPMENT PROGRAMM
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ii Table of Contents CHAPTER 1 READ
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iv Table of Contents BOXES 1.1 Area
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Kenyan Women Selling Products (Phot
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2 1.1 About this Guide 1.1.1 What t
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4 and local economies—contribute
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6 UNDP’s experience has shown tha
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8 1.3.2 Three-track approach to pro
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10 equality and women’s empowerme
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Community Meeting with Future Strat
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14 2.1 What information does a live
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16 Markets for goods and services
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Page 30 and 31: 20 A livelihoods and economic recov
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Page 36 and 37: 26 3.1 Emergency employment creatio
Page 38 and 39: 28 Figure 3.1 Flow chart for choosi
Page 40 and 41: 30 The implementing partner recruit
Page 42 and 43: 32 Figure 3.2(a) Matrix for calcula
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Page 46 and 47: 36 Emergency employment projects pr
Page 48 and 49: 38 References and suggested further
Page 50 and 51: 40 big risks (reputational and secu
Page 52 and 53: 42 cially important when a financia
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Page 56 and 57: 46 monitoring the number of enterpr
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Page 62 and 63: 52 Box 3.5. Summary of timesaving a
Page 64 and 65: 54 tion and transportation infrastr
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Page 70 and 71: 60 4.1 VOCATIONAL AND SKILLS TRAINI
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Page 80 and 81: 70 grant sources. UNCDF and UNDP ha
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Page 102 and 103: 92 government officials. Such decis
Page 104 and 105: 94 • Support to national justice
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Page 108 and 109: 98 • Strengthening the capacity o
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Page 112 and 113: 102 6.1 Gender Equality and Women
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Page 122 and 123: 112 Box 6.3. Kenya National Youth T
Page 124 and 125: 114 6.3.2 Programming livelihoods f
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118 in ways that do no harm—bears
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Ex-Combatant running a successful r
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122 Box 7.1. Fundamental principles
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124 policymakers to support program
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126 References and suggested furthe
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128 References and suggested furthe
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130 mobilization. When formulating
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132 For outputs, including both pro
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Men and Women Cleaning the Rubble a
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136 GUIDE ON LIVELIHOODS AND ECONOM
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138 UNDP. “Role of UNDP in Crisis
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140 Community infrastructure consis
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142 Inclusive economic growth aims
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144 Payments for ecosystem services
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146 ACKNOWLEDGEMENTS The developmen
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148 • Inclusive Economic Growth a
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150 York; Casper Sonesson, Policy A
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152 DAC DCED DDR DEX DFID DIM DPA D
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154 POSC PPP PRA PRS PRSP PSD PSD P
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156 ANNEX: Discussion Papers on Liv
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Livelihoods & Economic Recovery in
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