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Businesses & poverty alleviation

Photo to the left: Jonsjordsamlingen/Norsk Industriarbeidermuseum

There are no examples of countries that have achieved lasting improvements of living conditions without economic growth. Norwegian history is a case in point. Poverty was only eliminated after a long, continuous period of economic growth following World War II, when the social conditions improved for the majority of the population.

As a measure of a country's poverty level national income or GDP per capita is often used. A higher income enables more public goods and a generally higher level of welfare. Income per capita has been shown to have a clear correlation with the population's life expectancy, child mortality and educational standards.

The importance of businesses for sustainable economic development

Investments in businesses are fundamental for economic growth and long term, sustainable poverty alleviation. Businesses provide income, jobs, goods, and services to enhance people’s lives and help them escape poverty. Among the world's poorest people, having a job is seen as the most important tool to get out of poverty. A functioning business sector is crucial to achieve this. 90 percent of all jobs are created in the private sector in developing countries.

Private businesses also account for most of a country’s tax revenues and thus contribute to finance public goods, such as better health and education.

Many developing countries also have a one-sided economic structure. It is therefore important that the economy becomes more diversified, so that the business sector becomes more robust to, for example, fluctuations in the price of a single commodity. Small and medium enterprises are particularly important to achieve a more diversified economy.

Biggest obstacles to sustainable growth

The private sector in developing countries is limited by the lack of electricity and capital, especially in the least developed countries. For developing countries' economic development, it is essential that the energy supply and the supply of financial services is developed, in the same way this was essential to build up Norway´s and other developed countries´ own economies during the last century.

Norfund's role

Norfund invests in small and medium-sized businesses and concentrate on sectors that are important for development: renewable energy, financial institutions, agriculture and agribusiness. This creates values and income, and help build up the local markets so that they can manage on their own over time.

Norfund, along with the other Development Finance Institutions (DFIs), is currently the most important development policy instrument for creating a profitable business sector and attracting more private investment to countries that lag behind in the international development process.

Norfund - Fridtjof Nansens Plass 4, N-0160 Oslo - Phone +47 22 01 93 93 - Fax: +47 22 01 93 94