How MDF Works

MDF is a multi-country private sector development program funded by the Australian Government, currently operating in Fiji, Timor-Leste, Pakistan, Sri Lanka and Papua New Guinea.

The private sector is the engine of economic growth. MDF supports businesses with innovative ideas, investment and regulatory reform that will increase business performance, stimulate economic growth and ultimately provide benefits for the poor – as workers, producers, and consumers.

MDF’s goal is to create additional employment and income for poor women and men in rural and urban areas through sustainable and broad-based pro-poor growth.

MDF begins by analysing who is poor and why. MDF also identifies growth opportunities in the economy which are relevant for the poor. MDF then identifies the bottlenecks to growth in each target sector, and the barriers which prevent the poor from benefitting from this growth. The poor may have limited access to necessary production inputs, services, and information; lack key skills; or face difficulties accessing markets or potential buyers.

MDF does not work directly with the poor as this is unlikely to lead to lasting improvements. Instead it partners with a variety of businesses willing and able to invest in changes that improve business practices. This could include offering more affordable products and services, expanding distribution, or providing better information. Working together, the partner and MDF develop a plan called ‘partnership agreement’ to introduce these changes to the market. A partnership agreement is a negotiated agreement to provide technical assistance and investment by MDF on a cost-sharing basis to help the partner innovate, scale up or implement reforms.

Each partnership agreement is implemented and managed directly by the partner. As a result, the partner develops an increased capacity to manage its processes and provide better market access or more affordable goods and services. In addition, because each activity becomes a part of the partner’s core business model it is commercially sustainable in the long-term, meaning that the poor will continue to benefit long after MDF comes to an end.

This change in behaviour of the partner improves the way the markets around the poor work. The partner’s competitors, suppliers and customers will see the benefits of changing business practices and begin to adopt similar, pro-poor practices – with or without assistance from MDF. In this way, MDF generates impacts that are long-lasting and far-reaching. Changing the behaviour of an entire sector, in a ‘systemic manner’, stimulates growth and provides greater opportunities for the poor.

While businesses experience increased productivity, poor producers and consumers gain improved access to essential products, services and markets to improve their livelihoods. As a result, companies employing poor workers grow faster while poor producers, such as farmers and small workshops, can produce more or higher value products.

In this way, sustainable broad-based economic growth creates more employment and income earning opportunities for poor women and men leading to a lasting reduction in poverty.