Public/Private Alliances Transform Aid

By Natsios, Andrew S. | Stanford Social Innovation Review, Fall 2009 | Go to article overview

Public/Private Alliances Transform Aid

Natsios, Andrew S., Stanford Social Innovation Review

The dual goals of scalability and sustainability have eluded many development projects. In recent years, however, the United States Agency for International Development (USAID) has reached out to corporations, nonprofits, and even private citizens to build alliances that are making large-scale, long-term change. In this article, the former head of USAID describes the public-private partnership model that his agency forged, the successes that the model has won, and the struggles that it continues to face.

In 1994, 800,000 Rwandans were murdered in the last genocide of the 20th century. When Paul Kagame became president of Rwanda, the nation's economy was still in shambles, with few resources other than its people and its coffee crop. But Rwanda's coffee beans were of such poor quality and unappealing taste that they were sold at the lowest possible prices. Traders made most of the modest profits, leaving growers impoverished.

To make Rwanda's coffee crop more profitable, the United States Agency for International Development (USAID) and the Rwandan government organized an unusual alliance between coffee farmers and several international coffee companies, including Starbucks Corp. and Green Mountain Coffee Roasters Inc. The alliance trained the farmers to process specialty coffee beans that would fetch premium prices. USAID played a central role in linking the coffee farmers to U.S. coffee retailers, as well as in training farmers in how to grow and process the coffee to meet high specialty coffee standards. USAID also helped coffee farmers secure bank loans to buy or upgrade equipment.

By 2006, exports of Rwandan specialty coffee had grown to $8 million, and coffee farmers' per capita income had more than quadrupled, from $75 per year in 2001 to $400 per year in 2006. Starbucks and Green Mountain Coffee ranked Rwandan specialty coffee as the best of the best.

Like USAID in Rwanda, other donor government aid agencies are increasingly working with corporations and nongovernmental organizations (NGOs) to encourage economic development in poor countries. At least 10 bilateral aid agencies (that is, government agencies in a single country - such as USAID and the Department for International Development, the British government's aid agency that give aid to other countries) and multilateral aid agencies (that is, aid agencies - such as the World Bank and the United Nations Development Programme - that directfunds from several different governments and organizations to different countries) have established institutions to make diese cross-sector links.

USAID embarked on its own large-scale experiment in publicprivate partnerships with corporations, foundations, NGOs, churches, universities, and ethnic diasporas in May 2001. These private entities contribute their own financial resources, expertise, logistical capacity, and technologies. They are not USAID contractors. Instead, they are partners in a new form of alliance that may help solve two classic problems of foreign aid: How do we design development projects that thrive even after government funding ends? Andhow can we expand small yet successful projects to scale so that they can help millions of people?

Eight years later, with 680 alliances valued at $9 billion in combined resources, USAID has learned many valuable lessons about how government aid agencies can get the most out of their alliances with private sector partners. We found that we must not only remove barriers to cross-sector cooperation - including low risk tolerance, excessive bureaucracy, and narrow notions of possible partners but we must also create the right incentives for building alliances. As other government aid agencies increasingly rely on nontraditional partners to stimulate economies, alleviate poverty, preserve the environment, and protect human rights, they may learn much from USAlD's experiences.


Over the past 25 years, diree seismic shifts have encouraged government aid agencies to join forces with corporations and NGOs. …

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