Four ways to drive inclusive sustainable development in fragile markets

In 2023, the outlook for vulnerable communities living in fragile states, many of which are conflict-affected, is deeply troubling.

Home to a quarter of the world’s population — approximately 2 billion people — fragile and conflict-affected states are particularly exposed to global shocks. These countries suffer daily from the succession of crises impacting the world: COVID-19, climate disasters and a violent incursion in Europe and its subsequent economic fallout, which has caused extreme volatility and price fluctuations in the energy, food and commodities markets.

Those living in fragile markets such as Yemen, Somalia and Sudan feel the painful effects of these global crises acutely. Millions of families cannot be certain where their next meal will come from; children cannot access a decent education and the potential of their overwhelmingly youthful populations is being squandered due to a chronic lack of decent employment opportunities.

These dynamics result in food insecurity, public health crises and social instability, and are hindering the pursuit of the UN Sustainable Development Goals (SDGs).

However, despite the daunting scale of the challenge ahead, all is not lost. Achieving inclusive sustainable development is a surmountable task, but one that hinges on harnessing the power of partnership and multi-stakeholder collaboration.

Efforts to forge a path through the ongoing crises facing fragile markets must fuse the strengths and resources of international organizations and donors with the mandate, on-the-ground experience and existing networks of local private and third-sector actors.

Collaboration with domestic private sector organizations in fragile states enables impact delivery effectively and sustainably.

There are four principles that should guide collaborative partnerships to support sustainable development and inclusive growth in fragile states.

Providers should use local expertise to direct support to the most vulnerable through collaboration with domestic private sector networks and civil society organizations.

Civil strife and conflicts erase and inhibit development and fracture already weakened state institutions, limiting the functioning of government. As a result, attempts to organize coherent responses to crises become extremely challenging.

Fragile states often rely on international humanitarian programmes to address their immediate and urgent challenges. The World Food Programme, for example, is currently delivering one of the largest humanitarian programmes in history, feeding over 13.3 million Yemenis each month at its peak.

The impact of these programmes can be maximised by embracing the existing capabilities of local businesses and civil society organisations, such as leveraging supply chains or distribution networks to reach the most isolated and at-risk communities.

In Sudan, consumer financial services providers offer retail digital financial services at scale and are being used by humanitarian organizations for cash transfers to households in rural areas to great effect, increasing financial inclusion and improving humanitarian aid delivery in the country.

Bolster resilience to both local and global challenges by deploying public and private sector know-how and unlocking the transformative potential of development finance institutions.

To transition from a reliance on humanitarian aid programmes to self-sufficiency, fragile states need large-scale international investment in the domestic private sector’s capacity to serve the needs of local populations. Local businesses’ resilience and ability to deliver during times of crisis can be bolstered significantly by providing innovative financial solutions, such as blended concessional finance that boost working capital, enable investment in new production facilities or strengthen supply chains.

In Yemen, the International Finance Corporation (IFC) has partnered with HSA Group to provide a $75m financing package to secure essential food imports and ramp up production to tackle the country’s food security crisis, during a period of significant global instability. IFC’s investment in Yemen demonstrates the immediate positive impact that development finance institutions can have on the lives and livelihoods of vulnerable people and communities.

To promote sustainable economic development, organizations should leverage in-country strengths, capabilities and resources.

Sustainable economic development in fragile states can be achieved by identifying and nurturing the potential that resides in the country’s existing attributes, capacity and talent. This can be done by targeting economic interventions in nascent industries or sectors in the country where there is under-utilised experience that can be scaled and applied in new directions.

This is especially the case where investment in productive capacity takes place, which has a knock-on effect on employment opportunities, economic diversification and environmental sustainability. In particular, agri-tech initiatives across fragile markets like Somalia or Mali have huge potential to help support local production capabilities, tackle food insecurity and alleviate poverty — but this must be combined with targeted investment in entrepreneurs and ideas.

To generate solutions that will build resilience and support long-term growth, local people, communities and businesses must be placed front and centre of any development strategy.

Sustainable and inclusive growth must be fostered from within. Multi-stakeholder partnerships that put local businesspeople, entrepreneurs and civil society leaders at the heart of their approach will prove most successful. These efforts will pave the way for bottom-up, locally led and owned, sustainable social and economic development. That, in turn, will build cohesion across communities.

At a time of such global uncertainty, there is a greater need than ever in fragile markets for cooperation between the public, private and third sectors, and for collaborative sharing of experience, insights and knowledge from different parts of the world.

By uniting our collective efforts, we can tackle the immediate challenges facing vulnerable communities today, and chart the route to resilience, hope and prosperity in the years ahead.