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Investments that create more jobs with decent working conditions
A job with decent working conditions lifts people out of poverty. In sub-Saharan Africa, there is a growing young population and the number of people of working age is increasing by 20 million year on year. To create viable societies, sustainable investments will be essential in order to increase the number of jobs with decent working conditions in the formal sector.

Investments that are financially viable
There is a lack of access to capital for companies and financial institutions in developing countries. Financially viable and sustainable companies ­create jobs, tax revenues and contributes to transfer of know-how. Healthy businesses and a sustainable private sector are a prerequisite to build back better.

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More jobs for reduced poverty

Contributing to the creation of more jobs in developing countries is crucial for poverty reduction. Nine out of ten jobs are created in the private sector.

Informal jobs should be lifted to formal ones

More jobs and better opportunities to start up businesses are vital for reducing poverty and increased empowerment. Low- and middle-income countries tend to have substantial informal labour markets. They are characterised by small businesses and workers on a daily wage, who often work for low wages in substandard conditions, with no job security or overtime pay. In Africa, only 17.8 percent of the population is covered by a social safety net or insurance. This means that anyone who loses their job will be hit hard by the loss of their income, and it will take them longer to get back into the job market.

Women tend to work in the informal sector to a greater extent. Sectors in which women are overrepresented, such as the healthcare sector and tourism, were also severely affected by the pandemic. Women also tend to take on a greater share of unpaid work and are the main caregivers for the family’s children and the elderly. Women also have considerably lower access to capital compared with men. The World Bank states that the probability of a woman losing her job as a result of the pandemic is eleven percent higher than for a man.

Converting informal jobs into formal ones will require investment and capital for companies. A larger formal labour market and a regulated and private business sector will be vital for generating tax revenues, improving opportunities for employees to join a union, and driving change for better working conditions and greater gender equality.

A large modification of the labour markets is needed in developing countries, where the informal sector stands for around 80 percent of all jobs. It is therefore important to in parallel continue to work with operators like microfinance institutions to enable for entrepreneurs, agriculturists, and other groups to continuously finance their businesses.

Financial inclusion is a prerequisite for a stronger economy

In developing countries, the lack of capital and access to financial services for both individuals and companies represents a major challenge. Globally, 1.7 billion people have no access to a bank account, and 200 million companies have no access to capital, the majority in Asia and sub-Saharan Africa. During the Covid-19 pandemic, we saw how the reduction in financial flows both within and between countries led to an even greater shortage of capital. Although global financial flows recovered during 2021, international investment in developing countries is expected to continue to decline.

Financial inclusion is about ensuring that individuals and companies have access to financial services and products at affordable prices which meet their needs. A major challenge is that small and medium enterprises, which account for 80 percent of all jobs in developing countries, have limited opportunity to grow due to a lack of funding and poor access to capital. Another challenge is that groups such as women, young people and people in rural areas have particularly poor access to financial services.

An important task for development finance institutions is to contribute long-term capital to cover the lack of capital. Financial institutions enable financing for all types of businesses and are therefore an important driving force for increasing financial inclusion. Banks perform a socially important role by acting as intermediaries in the economy and linking savings to investments. Strengthening the ability of banks to offer financial services such as bank loans to businesses, entrepreneurs and private individuals can have major development effects in the form of poverty reduction and economic growth.

Gaining access to a bank account empowers people. It enables families and businesses to set long-term goals and to have access to savings or an insurance that can be used for unforeseen events. When people gain access to a bank account, they are more likely to start using other financial services, such as insurance or savings, which in turn can lead to them starting or expanding a business or investing in education and health.

Microfinance institutions are also important in promoting financial inclusion in developing countries. These institutes provide microloans to entrepreneurs, small businesses and low-income earners, who can then use the loans to purchase revenue-generating assets, such as a sewing machine. Offering microloans is an important complement to bank loans because banks often require a different type of security, credit history or only offer larger loans.

Digitalisation is driving development

Digitalisation has increased dramatically worldwide in recent years. In sub-Saharan Africa, internet use has increased tenfold since the early 2000s, compared with a threefold increase in the rest of the world.

Digitalisation is creating opportunities for both individuals and businesses, and has a positive impact on productivity, jobs and growth. Although the digital infrastructure across much of sub-Saharan Africa is still inadequate, investments have improved access to mobile broadband for over 80 million people. Tech hubs are emerging in many African countries, such as South Africa, Kenya, Egypt and Nigeria, which form the basis for the continent’s emerging IT industry.

However, there are major differences both between and within countries in the region. Countries with higher incomes have progressed further in their digitalisation journey. People living in rural areas are 40 percent less likely to use mobile internet compared with their counterparts in urban areas. The digital gap between both men and women and young and old, is widening. Only 23 percent of women in sub-Saharan Africa have access to the internet, compared with 34 percent of men.

Despite these challenges, interest in and awareness of new technology and its significance for sustainable development is growing in many sectors. More than 50 percent of all mobile payment services around the world are located in sub-Saharan Africa and play an important role in promoting financial inclusion. In rural areas, these types of services have been able to bridge the gap to physical financial institutions, which are often based in cities. In order to take advantage of the opportunities that digitalisation entails, and to reduce the global digital gap, further investments will be needed in digital infrastructure, such as mobile internet and electricity, as well as in capacity-building and sustainable business models.

Investments that create more jobs with decent working conditions
A job with decent working conditions lifts people out of poverty. In sub-Saharan Africa, there is a growing young population and the number of people of working age is increasing by 20 million year on year. To create viable societies, sustainable investments will be essential in order to increase the number of jobs with decent working conditions in the formal sector.

Investments that are financially viable
There is a lack of access to capital for companies and financial institutions in developing countries. Financially viable and sustainable companies ­create jobs, tax revenues and contributes to transfer of know-how. Healthy businesses and a sustainable private sector are a prerequisite to build back better.

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