The use of subsidies by development finance institutions (DFIs) can often be controversial because of their ability to distort markets. It is vital to ensure that the subsidy is used efficiently, the level of subsidy is appropriate (provides value for money) and market distortion is minimised. It is instructive therefore to examine the practical approaches/frameworks that there are for effectively delivering subsidy to private sector entities for development purposes. The aim of this paper is to contribute to a practical guidance document for DFID on how to effectively deliver subsidies for development purposes. It will briefly outline the case for donor support for the private sector, with a description of the areas at which interventions can be made and a summary of the major market failures that donors seek to address in delivering such subsidies. It will then identify a typology of approaches to delivering subsidies and finally describe a framework for identifying the appropriate instrument and format of subsidy.
Miller, H. What practical approaches/frameworks are there for effectively delivering subsidy to private sector entities for development purposes? (2013) 15 pp.