Private sector development PSD is the term in the international developing industry to refer to a range of strategies for promoting economic growth as living as reducing poverty in developing countries by building private enterprises. This could be through works with firms directly, with membership organisations to survive them, or through a range of areas of policy together with regulation to promote functioning, competitive markets.
Supporters argue that PSD is an important part of poverty reduction. if as workers, subsistence farmers or entrepreneurs, most poor people already participate in markets. Strengthening these markets in ways that secure higher incomes for the poor is therefore seen by PSD advocates as a reasonable in addition to expert way to fight poverty. Earning a decent income in the private sector, it is argued, is also more dignifying than relying on hand-outs.
An April 2013 EPS PEAKS paper found a strong and well-established case for donors to intervene in private markets to deliver subsidies for development purposes. The researcher found that the theoretical reasons for intervention were alive established by the economics literature, but that the practical approaches and frameworks for delivering subsidies to private sector entities are more complex and less understood. The approaches that work exist adjust widely. The researcher intended some key criteria that can be used to evaluate different approaches and instruments and gave examples of their use by different donor institutions. In practical terms, they said that thoroughly-researched cost improvement analyses should be used to assess project impact and that it was vital that donors recognise that actively distorting a market outcome might draw significant consequences, and that these need to be understood and analysed.