Investing in the Future of Development
November 11, 2016
By Sarah Tang
Since the beginning of the United States Agency for International Development (USAID) which was created by President John F. Kennedy in 1961, the landscape of development has changed along with the globalized economy and the emergence of several new countries. In today’s globalized economy, the boundaries between the private and public are no longer distinct, and the same holds true for the field of development. The Global Development Lab, USAID’s newest bureau, was established under USAID Administrator Rajiv Shaw in April 2014. The Lab’s mission is twofold: to produce breakthrough development innovations by sourcing, testing, and scaling proven solutions to reach hundreds of millions of people, and to accelerate the transformation of the development enterprise.
The Lab works primarily on partnering with the private sector to harness its financial power and capabilities and channel it toward development efforts. Through a series of different centers, including the Center for Development Innovation, the Center for Development Research, and the Center for Digital Development, the Lab seeks to knit together science, technology, innovation, and partnerships to the development sector. In its past year and a half of existence, the Lab has grown to over 150 employees. Some of the Lab’s major projects have included its venture capital branch, Development Innovation Ventures, where social enterprises can apply and receive tiered funding upon progress and results, as well as the Global Innovation Exchange, an online “one stop shop” for innovators, funders, and organizations to interact and collaborate.
The emergence of the Lab and its goals represent a greater transition of how international development is being approached. While the responsibility of promoting giving and development remains in the government’s hands, with less than 1% of the federal budget going to foreign aid, the government does not have the financial capability or power to fuel impactful change. Instead, international development and the larger social impact space is turning toward cross-sectoral collaboration and collective impact. What the public sector lacks is what the private sector can provide, and this demand and supply equilibrium is precisely where the emerging field of corporate social responsibility has arrived. Several forms and iterations of collaboration have taken place in the past years ranging from impact investing to public-private partnerships and multi-stakeholder initiatives that deviate from the typical philanthropy or charity models .
Social entrepreneurship has grown rapidly in the past decades, particularly in the international space, and lies at the forefront of impactful change in the developing world. Social entrepreneurs are defined as people who drive social innovation and transformation who combine the profit-driven, business entrepreneur mindset with a social cause or mission.
Several enterprises and start-up businesses have adopted this model to meet various needs of people across Africa, Southeast Asia, and Latin America. These start-ups offer innovative products such as clean cook stoves, mobile energy payments, and education technology devices. The impact of these enterprises are twofold: they not only distribute these products to people in need, but also the profits made from sales are invested back into the companies and give it the ability and financial power to scale its impact.
One such example is Off Grid Electric, a small start-up that began with a distributed solar model to provide electricity to households. After receiving investments from other groups and grants from USAID’s Development Innovation Ventures, the company’s products reached 50,000 people per month across Tanzania. The number continues to grow as Off Grid Electric seeks to expand to reach everyone in the off-grid world. By supporting and investing in these innovations, these enterprises have the ability to eradicate poverty and bring about dramatic change around the world.
Additional Blog Posts
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.