(Photo by iStock/AerialPerspective Works)
More and more people in the social sector seem to believe that the government is the best or even only way to scale. In arguing that “Scale Really Matters,” for instance, Kevin Starr recently argued that government is “the only realistic doer at exponential scale,” and “the only realistic payer at scale.” But a variety of others take this approach, from “Accompanying Governments to Scale” to “Scale That Lasts” (on moving from government partnership to full country ownership); especially in a time of aid contraction, it’s common to see the argument that NGOs should take a “low-ego, low-logo approach and let the government both lead and shine.”
If government is one very important pathway to scale, however, the private sector—for-profit and not-for-profit alike—is another. And because there is more than one road to scale, it would be unwise to over-index on a single solution. It’s worth remembering, after all, that some of the most consequential anti-poverty technologies of the last thirty years—for example, mobile money, micro-insurance, pay-as-you-go solar, and digitally enabled pest detection—were neither developed nor scaled by a government.
In short, the pathway to scale depends on the nature of the problem, the context, and the actors involved.
From Mines to Cell Phones
In 2003, the Aga Khan Fund for Economic Development (AKFED) made a bet that few governments or aid agencies would: that a private national telecommunications network would be foundational to a modern economy, and that the private sector, not Big Aid and not a cash-strapped finance ministry, would be the one to build it.
That bet paid off. An AKFED project company, Roshan, cleared land mines to build cell towers (and rebuilt them repeatedly after insurgents blew them up), in a country where 99 percent of people lacked a phone. In the years that followed, Roshan would become the largest taxpayer in the country, employing 40,000 Afghans directly and indirectly, and providing opportunities to women who had few opportunities to work outside the home. It was a transformative investment by a private company committed to the long-term development of the country. Roshan went on to launch a national payments platform, M-Paisa, Afghanistan’s adaptation of Kenya’s mobile-money breakthrough, M-Pesa, facilitating person-to-person payments, commerce, and micro-insurance. Its Malomat service delivered real-time crop prices to farmers and its telemedicine program linked rural people to Afghan doctors and specialists outside the country.
Within only a decade, more than 90 percent of Afghans had access to a mobile phone. And equally importantly, a reliable and affordable network. None of this required big investments from a cash-strapped government or overstretched donors. What was required was government trust in a responsible private partner that was willing to take risks in a frontier market and use the power of markets to invest in economic, social, and human development.
Crucially, this had to be a private actor willing to deploy patient capital, take on risk, work with government and civil society, and invest in a long-term vision to build a world-class telecommunications network. This enabled thousands of other micro and medium-sized enterprises to build businesses on the network. What emerged were the conditions for broad-based economic development. In the years that followed, millions of Afghans had connectivity and access to health and education services, a payment platform, and multiple forms of media.
Finding the Balance
A responsible private sector can co-create with governments to do what the public sector cannot do alone. For example, government institutions generally do not outperform the private sector in payments, hardware and software development, and innovation at speed and scale. Of course, governments are vital in developing enabling conditions for businesses to start, grow, and scale, and drafting regulations that keep them honest. They must also ensure businesses pay taxes so infrastructure and public goods can serve a broader population.
But the task is to find the right mix between what governments do well directly, how to enable the private sector and civil society to thrive, and how to build institutions that survive regime change. Governments need to develop the muscle to govern, build legitimacy with their own people, and develop a domestic tax base; if they do not, they will over-rely on external assistance and become vulnerable to collapse. Afghanistan, for example, is a cautionary tale of over-reliance on international funding, overreach of foreign actors, and under-investment in the institutions of the state.
I suggest three questions to determine the appropriate role for government and private institutions in solving for large-scale economic and social challenges.
Is the good a public good, or is it rivalrous and excludable? Primary education, immunization, road safety, water, and sanitation have weak private markets because beneficiaries cannot easily pay or be excluded. Government is the natural payer and often the natural doer. When it comes to goods like handsets, solar lanterns, mobile payments, or a crop-insurance policy, each has a willing buyer at the right price. Markets are a powerful engine to create access and enable competition and distribution at scale.
Does the solution depend on a network, a platform, or competition between providers? If the answer is yes, the private sector almost always scales better and faster. Android did not need a state-owned operating system; what it needed was entrepreneurs competing to build cheaper handsets and better apps. The same applies to M-Pesa, micro-leasing, and last-mile logistics. Governments regulate platforms well; they rarely build them efficiently and effectively.
Where does state capacity actually exist, and where does it not? Starr and others press this point vigorously, and with good reason. But it cuts both ways. Where states are weak, fragmented, or hostile to their own people, designing exclusively for a government doer is not pragmatic; it is wishful thinking at best. In Afghanistan in 2002, no plausible reading of the state suggested it would build a national telecoms network in five years or that the government would lead girls’ education or enable women-owned enterprises. AKFED, as a leading private sector actor embedded in the country, believed it could build something transformational, economically and socially. It could and it did. Not-for-profit schools committed to girls education, alongside microfinance institutions supporting entrepreneurship, which created pathways for women to participate in the economy after decades of exclusion.
While we often think of NGOs as depending entirely on philanthropy, many are private, not-for-profit enterprises responding to market needs and generating revenues but not profits. Aravind Eye Care, Jaipur Foot, and the Bangladesh Rural Advancement Committee (BRAC) operate schools and clinics, for example, at massive scale serving segments of the population that neither markets nor the state reliably reach. They often provide essential services at a fraction of what governments spend due to specialized knowledge, technology, access to volunteers, and economies of scope and scale. Aravind performs more than half a million eye surgeries a year, mostly free or heavily subsidized, cross-financed by paying patients. No ministry built that. It was built with relentless emphasis on quality and inclusion, a deliberate design choice and a delivery-model innovation that deserves to be called out.
None of this is an argument against “the Big Shift” away from “Big Aid” and towards strengthening government capacity and efficiency in providing public goods. But before we decide government is the scaler of choice, we need to be clear about the problem we’re trying to solve. In many instances, government is the natural scaler. But where governments are weak, corrupt, or ineffective—or when the nature of the good is better provided by non-governmental, private institutions—we should not force-fit a solution. One size does not fit all: problems, actors, and context all matter.
It is important that we don’t replace one orthodoxy with another. We want to invest in robust governments that can and must do more with the resources they have and create space for private institutions to provide public goods and services when governments cannot or do not. Low-cost private schools in South Asia and Africa emerged to fill a vacuum where public schools were absent or where public education left students unable to read after five years of school. They were not designed to compete with quality public schools; they emerged to fill a void.
Private institutions can be exemplars. They can innovate and develop new business models cost-effectively that stimulate the public sector to do better. They can work as partners to public institutions and develop new ways to build teacher capacity and deploy new technologies to reach more students in less time. They can do this profitably and create new ways of educating girls or reaching rural patients using telehealth or mobile learning. Underserved people are not served by orthodoxies. They are served by whoever can deliver a good or service of value, affordably and durably, at the scale of the need. Sometimes that is a minister. Sometimes it is a business with a cell tower, and sometimes it’s an investor willing to build what a country has not or will not do on its own.
Read more stories by Aleem Walji.