No surprises on the G-20 front. Deficits and financial sector reform dominated the headlines coming out of last weekend’s Toronto Summit. Development appeared largely as an afterthought. Even though my heart and head are hopelessly hitched to development policy, I think the focus was about right. Ensuring robust recoveries in G-20 nations will do more to support growth in poor countries than endlessly rehashed debates about global aid flows. Leave that for the UN MDG Summit this September. That said, the G-20 did do something small worth highlighting. Tucked away unobtrusively in the communiqué, the G-20 formally launched an initiative that will identify new ways of catalyzing finance for small and medium enterprises (SMEs) in developing countries.
The basic concept is simple. Through the SME Finance Challenge, the G-20 is inviting investors, foundations, and NGOs to propose concrete ways of increasing companies’ access to growth and operating capital. The G-20 has teamed up with the Rockefeller Foundation and Ashoka Changemakers, who know how to run global prize competitions. A panel of five independent judges and three G-20 representatives will select the most promising proposals. The winners will attend the next G-20 Summit in Seoul to formally solicit funding, which is being mobilized now from the multilateral development banks and G-20 member governments. Canadian Prime Minister Harper kicked things off this weekend with a $20 million pledge. While the SME Finance Challenge may be modest in terms of ambition and funding, the G-20 deserves credit for pursuing a novel approach—letting the private sector lead on private sector issues.
If successful, this new G-20 Challenge may help to establish potent public-private partnerships. All the ingredients are there. In recent years, a number of private foundations and organizations have launched ambitious SME initiatives. One example is Goldman Sachs’s 10,000 Women initiative, which provides technical assistance and training to women entrepreneurs. At the same time, donors already have an exhaustive list of facilities focusing on regulatory systems, SME capacity, and access to capital. Despite this, partnerships between the two groups have been limited—especially on a strategic or globalized basis. In a forthcoming CGD working paper (draft here, PDF), I provide an overview of existing donor programs and offer a few ways that private foundations could establish partnerships with donor agencies in support of their organizational goals. The new G-20 SME Finance Challenge is another intriguing way to get that ball rolling. I’ll be very interested to see how it comes off when the G-20 gathers again this November in Seoul.