Donors have been focusing on reinforcing the links between public and private finance, and domestic and international resources, particularly through promoting the use of public resources to leverage private finance. While access to finance is one of several problems MSMEs face in partner countries, there is a need for assessing the different roles that public and private resources play in development.
External private finance has several key limitations: (i) it predominantly flows towards higher income countries, (ii) it has proved very difficult to target towards MSME’s, certainly those operating in the informal sector, (iii) its for-profit nature means its contribution to sustainable development in partner countries is often dependent on public sector involvement.
In stead donors could focus on how international public flows can help reduce the barriers to private sector investments through investing in essential services, such as health and education and social infrastructure. The issue of how public regulation, incentives and subsidies can be used to direct, increase and improve private investment would be better resolved at national level.