Private investment in clean energy, inclusive agribusiness and financial inclusion: evidence of impact

Private investment in clean energy, inclusive agribusiness and financial inclusion: evidence of impact

This report, commissioned by DFID, seeks to identify what evidence exists that private investments made in clean energy, inclusive agribusiness and financial services lead to good development outcomes for the poor, especially women – with a particular focus on Asia. This paper is a rapid literature review, before deciding on whether or not to commission more detailed work. DFID is particularly interested in (a) specific suggestions that are made for how to strengthen the investments – for example, through complementary TA – so as to improve the likelihood of strong outcomes for the poor, especially women (b) gaps in the evidence base.
 
The evidence of links between clean energy and good development outcomes for the poor was strong, although the review identified only very few rigorous impact studies. The literature highlighted the need for certain conditions to be met in order for those positive outcomes to be achieved. Financial sustainability was cited as a primary driver of development outcomes. Several studies indicated the importance of public sector intervention in clean energy investment alongside the private sector, to increase provision in poorer and rural areas and to ensure that proper standards are followed in the construction and operation of plants. For small-scale clean energy projects, the evidence indicated the importance of activities to promote their uptake, including financial services. Clean energy was seen to be of particular benefit to women but women are not properly represented in the design and implementation of small-scale clean energy projects.
 
The evidence of links between inclusive agribusiness and good development outcomes for the poor was largely case study-based and anecdotal. The literature identifies many factors affecting the impact of inclusive agribusiness on the poor, including the assets available to the poor in value chains (including land and water) and the process of land acquisition. The literature identified elements of the design of successful inclusive agribusiness including the presence of producer organisations; innovative partnerships to help link producers to markets; pre-commercial investment to transfer assets and building capacity; and giving producers (especially women) a voice in governance and investment. Given the need for careful design, several sources emphasised the importance of ‘patient’ investment in this sector.
 
The evidence for the impact of financial inclusion on the poor was considerably more robust than in the other two sectors, and many more rigorous impact evaluations were available. The evidence is strong for positive impacts for the poor through several different channels for private investment including savings products, improved banking technology and access to credit. In terms of barriers to successful financial inclusion, there is evidence
that farmers’ credit constraints are an important bottleneck in expanding agricultural output, and interventions that ease these constraints may be effective in reducing rural poverty and increasing agricultural production. The overall evidence on the impact of financial inclusion is mixed, as some studies show no effect on women while others associate it with positive impacts.
 
The review showed that there is very limited robust evidence on the impact of particular private sector investments in these sectors. The evidence shows clearly that private sector investors, even when supported by development finance institutions (DFIs) rarely report on the impacts of their activities. Some of the more progressive companies and investors report on their reach to beneficiaries and some include an analysis of their beneficiaries by gender, but the review found no evidence of systematic reporting of impact by any private sector investors in clean energy, inclusive agribusiness or financial services.
 
 
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