How to close the $2.5 trillion annual funding gap

A woman displaced by the war in Yemen cooks on a street in Hodeida

Image: REUTERS/Abduljabbar Zeyad

Tara Nathan
Executive Vice-President and Founder, Community Pass, Mastercard
Robert G. Eccles
Visiting Professor of Management Practice, Said Business School, Oxford University
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This article is part of: World Economic Forum Annual Meeting

Billions of people cannot meet their basic needs for food, shelter, and health. Resource scarcity and a lack of access to basic services disproportionately affect the poor and marginalized. Genuine inclusive economic growth remains elusive. The 17 Sustainable Development Goals (SDGs) outline a global strategy to “transform the world.” But without a tactical plan for execution, these goals are simply lofty aspirations. Unless the private sector is actively involved, we will fail to reach our targets.

How can the public and private sectors engage with each other?

The United Nations has called out a $2.5 trillion annual funding gap which must be closed in order to deliver upon the SDGs. It is widely believed that the private sector can and should fund a significant percentage of this gap.

Instead of focusing exclusively on the funding gap, we should investigate a growing efficiency gap. In this context, how can the private sector be not only a funder but also an implementer of more efficient solutions? Companies are structured to maximize efficiency in order to remain profitable. As such, for companies to step into this implementation role, we must create the right enablers. This means focusing on at scale or scalable projects, establishing streamlined go-to-market models, and creating favorable economics.

Unfortunately, today’s discourse around private sector engagement still falls under two categories - either philanthropic or commercial. There is a tendency to equate philanthropy with a humanitarian motive and commercial engagements to avarice and greed.

However, practically, we understand that philanthropy cannot scale to required levels. Submitting responses to “Request for Proposals” (RFPs) - and consequently winning them - often proves too operationally complex to navigate and not commercially sustainable.

This dichotomy is reductionist and impedes our ability to tackle the world’s most pressing problems. We need a new model.

We would like to propose one: the advisory engagement model. We believe this better describes the ideal relationship between the public and private sectors. In this model, the public sector benefits from private sector expertise, and the private sector sustainably engages in the development agenda through relevant, appropriate commercial constructs.

How does the proposed model work?

In contrast to philanthropy - “money for reputation” – or a commercial model - “solutions for money” – the proposed advisory engagement model evokes true “partnership” and relies upon a basis of trust between the private and public sectors. Just as humanitarian and development organizations have spent decades navigating the complexity of field operations and understanding the needs of people of concern, companies have similarly developed deep expertise in digital technology, data security, privacy, and regulatory compliance. These are all capabilities that could be applied to great effect in the humanitarian and development sectors. But somehow the matching of these capabilities against dire needs is yet to happen at scale.

We need to flip the terms of reference:

· The public sector must appreciate the short-term pressures that companies face from their shareholders, and it must support them in building business models viable over the long-term. At the same time, the private sector must come to terms with the complex multi-stakeholder environment in which the public sector operates. The public sector faces its own short-term pressures in its constant need to solve pressing social and environmental problems.

· Trust is everything. We must cast aside suspicions of motive and objective.

· Both sides must adopt more flexible administrative, legal, and operational processes that reflect simplicity, speed, and the ability to adapt according to changing situations on the ground.

· We must align on outcomes and performance metrics that meet the needs of both sides.

To “transform the world” and better address the needs of the underserved, humanitarian and development organizations should turn to the private sector when faced with a problem outside of their core strengths or where the private sector can deliver more effectively or efficiently. In return, the private sector develops a better understanding of market needs by working closely with organizations on the front line. Most important, it opens up the potential for innovation and the creation of longer-term, sustainable solutions.

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