PRIVATE SECTOR ENGAGEMENT  
FOR DEVELOPMENT   
USAID is undertaking a major cultural and operational transformation to expand Private Sector Engagement  
Agency -wide. Through its  new Private Sector Engagement Policy, USAID is issuing an Agency -wide call to 
action and mandate to work hand-in -hand with the private sector to design and deliver our development and 
humanitarian programs in all sectors. This policy signals an intentional shift towar ds enterprise-driven development 
as a more sustainable way to empower people, communities and countries on their journey to self -reliance.  
EN
TERPRISE -DRIVEN DEVELOPMENT  
This policy comes at a time in which the private 
sector is playing an unprecedented role in creating and shaping opportunities that improve the lives of the people and communities USAID supports. The private sector creates nine out of 10 jobs in the developing world, providing the best pathway out of poverty. It is the driving force behind new innovations that solve problems. I ts scale and 
resources match the complexity of the challenges 
that countries face on the journey to self -reliance.   
At the same time, emerging markets have become 
increasingly attractive to private businesses and 
investors as places to sell their products, invest 
their money, and do business. Enterprise- driven 
development means aligning with the private sector as co -creators of market -based  solutions, with shared risk and shared reward. Engaging 
the private sector in this way can shape solutions that achieve sustained impact and carry forward long after USAID’s support has ended. Building on our history of working with the private sector in key areas of our work, we are committing to collaborate with the private sector and 
seek market -based approaches across all areas of our work  –  from economic growth, energy , 
agriculture and global health to gender equality, education, and addressing crisis and conflict.  Pr
ivate enterprise is the single most powerful force 
for lifting lives, strengthening communities, and 
accelerating self -reliance.  
— USAID Administrator Mark Green 
Private Sector Engagement (PSE) Concepts Defined  
-PSE is a strategic approach to planning and programming whereby USAID consults, strategizes,
aligns, collaborates, and implements with the private sector for greater scale, sustainability, and/or
effectiveness of development or humanitarian outcomes across al l sectors.
-The private sector  includes for -profit, commercial entities and their affiliated foundations; financial
intermediaries; business associations; large, medium and small businesses; American,
multinational, regional and local businesses; and for -profit approaches  which generate sustainable
income (e.g., a venture fund run by an NGO) .
-Market -based approaches or solutions are interventions that address development and
humanitarian challenges and also provide a return on investment for the private sector.
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3WHAT’S NEW ABOUT THIS POLICY?  
At its core, this policy signals an intentional shift to pursue market -based approaches  as a means to 
increase sustainability . For every development  or humanitarian issue, USAID will ask three questions:  
By
 asking these questions in this order, USAID will first focus on seeking more sustainable and 
enterprise- driven outcomes from the outset . Second, we will look for how and why the private sector 
may be interested in collaborating to address an issue, and what unique capabilities and resources priv ate 
sector actors might bring. Third, we will actively identify ways in which we can work with the private 
sector to understand and address barriers to investment and market development . 
OPERATIONAL PRINCIPLES 
Principle 1: Engage Early and Often. Early and ongoing engagement with local and international 
private sector actors is essential to achieving better outcomes. This engagement allows USAID to identify 
market -based solutions, understand the role of the private sector and its barriers to investment, and 
identify the private sector’s potential role in building country capacities.  
Principle 2: Incentivize and value PSE throughout planning and programming . Integrating PSE 
at every stage of strategic planning, desig n, and execution better positions USAID to understand private 
sector interests and capabilities, and continuously adapt to new evidence, opportunities  or 
circumstances.  USAID also recognizes that this  shift in focus requires USAID to increasingly prioritiz e 
outcomes over inputs and outputs. To effectively institutionalize and incentivize PSE, USAID will adapt  its 
talent strategy as well as operational and performance measurements of success to support and incentivize integration of financial a nd non- financial PSE approaches.  
Principle 3: Expand the use of USAID approaches and tools that unlock the potential of the private sector . From leveraging our convening power to connect investors and businesses, to providing 
a grant as a first -loss guarantee to extend affordable healthcare services to the poor, there are many 
ways to engage the private sector to achieve our intended outcomes and catalyze market -based 
approaches. This policy calls for consideration of the full breadth of USAID’s financial and non-financial 
resources and core competencies in PSE.  It also recognizes that as the Agency seeks to deepen its 
engagement with a broader set of private sector part ners, it may need to enhance its tools and 
approaches t o better align with the constraints and risks the se partners face. 
Principle 4: Build and act on evidence  of what  works and what does not in PSE: USAID will 
develop a knowledge base on what types of PSE work best under different circumstances . Fundamental 
to the success of operationalizing PSE, USAID will work with partners to  establish metrics that measure, 
value, and incentivize PSE which delivers increased sustainability and deeper impact . 
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4UNDERSTANDING OUR VALUE PROPOSITION  
Effective PSE leverages USAID and the private sector’s comparative advantages to deliver more effective 
and sustainable outcomes.  
USAID Offers   Private Sector Offers  
Enabling Environment Support  
Working with governments, USAID can help create a 
stronger enabling environment for inclusive market 
growt h through support for policy & regulatory reform, 
fair & open compet ition, adoption of standards, and 
government capacity -building.   Unique Expertise and Capabilities  
Businesses and investors can bring innovation and 
technologies, entrepreneurship, industry expertise, 
market -based solutions, managerial and operational 
expertise including risk management, distribution 
network s, and investment capacity.  
Sector Expertise and Knowledge  
USAID has wide -ranging technical expertise across 
development and humanitarian sectors. It also offers 
deep understanding of developing markets, providing 
insights and market intelligence that can inform and 
shape private sector investment.  
Risk Mitigation and Flexible Authorities  
USAID can use its funds, authorities, and technical 
expertise to de- risk investments and crowd in public and 
private investors to support investments that further 
development goals.  Ability to Influence Policy  
The privat e sector’s ability to deliver what host country 
governments seek to achieve—such as jobs, investment, 
and tax revenues —gives businesses and investors a 
strong, knowledgeable voice to inform policy.  
Scale and Sustainability  
The private sector’s vast financial resources and market -
based approaches have the potential for achieving scale 
and sustainability in tackling systemic societal 
challenges.  
Reputation and Credible Convening Power  
USAID can lend authority to private sector investments 
and convene actors around business opportunities that 
address challenges.  
Strong In- Country Networks and Relationships  
USAID has relationships with national and local 
governments, businesses, and civil society that are 
useful to the private sector in making plans for market 
entry, collaboration, and co -investment.  Efficiency and Effectiveness  
With improved project systems and processes, the 
private sector can bring more efficiency and 
effectiveness to achieving outcomes.  
Flexibility and Pace  
The private sector is often inherently more flexible, as 
they have a financial incentive and interest to move 
quickly and to respond immediately to opportunities and 
develop new markets.  
ROLE OF USAID IMPLEMENTING PARTNERS  
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5WHAT’S NEXT?  
This policy makes a bold statement and represents a 
major shift for USAID  and its implementing . It is also just 
the first step in the process of institutionalizing PSE as a 
core tenet of USAID’s operating model . Following on this 
policy, USAID will st rengthen its tools and resources to 
ensure staff are prepared to engage the private sector in 
new ways. For example, USAID will:  
-Shift away from an over -reliance on traditional
procurement- focused models,  and begin to pri oritize
collaborative solutions  which unlock private
investment.
-Seek to increase the evidence on what works and
what doesn’t when engaging the private sector to
achieve development outcomes.
-Evaluate potential of models that focus on both
financial returns and impact, through blended pub lic
and private capital.
-Adapt its talent strategy , as well as operational and
performance measurements of success to supportand incentivize integration of financial and non-financial PSE approaches
-Go beyond measur ing the leverage of engaging the
private  sector , and seek to me asure their
development impact without creating burdensomereporting for the private sector.
To
 learn more, contact: partnerships@usaid.gov RELEVANT ACROSS SECTORS  
USAID  recognizes that supporting cou ntries 
in achieving their development goals 
requires the unique contributions of all 
sectors:  governments, civil society, 
philanthropy,  faith-based organizations,  
academia and the private sector.  
In fact, many philanthropic and 
development -focused organizations have 
been frontrunners in embracing market -
based approaches and integrating the 
distinctive capabilities of the public and the 
private sectors to achieve greater 
development impact , including : launching 
impact investment and venture funds, 
business franchising models, and targeted 
value chain interventions leveraging unique 
corporate capabilities , as well as holding the 
private sector to account for making 
responsible, inclusive business investments 
which make a positive soc ial and 
environmental impact on communities in 
which they operate .   
For this reason, USAID believes that all 
sectors have a vital r ole to play in 
implementing this policy and engaging the 
private sector to address humanitarian and 
development issues in our work together.  
Over time, USAID expects that 
implement ation of this policy will diversify 
USAID’s partner base to include more 
private enterprises (e.g., financial investors 
and businesses of all sizes from across 
many industries), in addition to strong 
continued collaboration with traditional 
development  partners.  
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