Facilitation tool: small-business expansion sub-awards

PRIME targets a population that is in transition: in and out of food security between drought cycles, and gradual movement away from pastoral livelihoods.

In this remote market, the likelihood of external investors moving in or businesses expanding on their own is low. A development agency such as Mercy Corps would ideally play a facilitator’s role here in helping businesses secure capacities and finance to spur their expansion. However this is not an option for most businesses serving pastoral areas, particularly those seeking no-interest loans. Mercy Corps adapted to the situation by engaging the private sector as development partners and using sub-awards as co-investment mechanisms. By 'buying down' no more than 50 per cent of the risk for businesses to expand and innovate in pastoral areas, PRIME is creating a pathway to profitability and growth for specific key value chain firms, and setting an example and incentive for other investors to crowd-in to the market. For this reason, PRIME approaches sub-awards as a risk-sharing partnership.

This brief discusses the risk sharing partnership and lessons learned.