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Bilateral Official Finance for Private Sector Development and the Role of Non-Government Organizations

The study examines the official bilateral donors’ current aid practice for private sector development (PSD). In particular, it reviews the donors’ major instruments and channels for aid delivery and the extent to which official flows have catalytic effects on private direct foreign capital flows. The major donor instruments for PSD are investment support, an enabling-environment support, privatization and commercialization, and business partnership programmes, while the major participants in the alternative channels are NGOs, governments of poor countries, firms in the recipient countries and donors’ own firms. The paper concludes that despite the prominent position occupied by NGOs in aid delivery, there is still a pertinent role for the governments of poor countries in the delivery of PSD aid, especially when the provision of public services (or social goods) is involved and the free-rider problems