Spurring Growth in Fragile Markets
Sustainable Development in the 21st Century
Channeling private sector capital into fragile and frontier markets remains challenging. However, these impact investing resources are needed to build resilience, enable growth, and foster long-term development.
Experts at a recent World Economic Forum panel discussed the importance of creating enabling environments, de-risking investments, supporting small businesses, and engaging young people.
Here are the key themes from the discussion — and what businesses and investors need to know to make an impact.
Creating Enabling Environments for Investment
Its important to create an environment where private sector investments can thrive. Badr Jafar of Crescent Enterprises said:
“Capital is a coward at the end of the day.”
He explained that investors need regulatory and policy certainty to feel confident about entering fragile markets.
The World Bank’s Anna Bjerde agreed, noting:
“What we have seen is that a lot of investors, of course, are wary about regulatory and policy uncertainty.”
She emphasized that governments need to create predictable environments for investment and highlighted tools like blended finance, guarantees, and the IDA private sector window as ways to de-risk investments in lower-income countries.
Ernesto Torres of Citi, pointed out that partnerships between governments, multilateral institutions, and private actors are critical. He shared examples like Citi’s local currency lending program, which reduces foreign exchange risk for businesses in emerging markets, and highlighted the importance of regional initiatives like the African Continental Free Trade Agreement, which aims to unlock intra-African trade.
SMEs: Drivers of Resilience and Economic Recovery
Small and medium-sized enterprises (SMEs) enable transformative potential of in fragile markets.
SMEs make up over 90% of businesses globally. In many developing and frontier markets, they generate up to 80% of formal jobs, and they are closest to the communities that are being affected.
Jafar stressed that SMEs are often the first to respond to crises, providing critical goods, services, and employment.
However, SMEs in fragile markets face significant challenges, including limited access to finance and competition from free humanitarian aid. Jafar warned that when you “flood free goods into a market”, you can unintentionally harm local businesses, making it harder for these economies to recover. Instead, he called for investments that support SMEs as engines of growth and resilience.
Investing in Human Capital and Local Solutions
Somalia’s President Hassan Sheikh Mohamud outlined his country’s efforts to rebuild its education system and provide opportunities for its predominantly young population. He explained that if you want the security needed for economic development, you cannot leave close to 70% of the population — young people below 30 years old — with out gainful employment opportunities.
“If they don’t have gainful employment — public, private, whatever it is — then the option is the devil, the evil actors will attract them. And so what we are trying is that to create opportunities for the young people so that they can join the mainstream.”
Bjerde reinforced this point, explaining that education and skills training are critical for preparing youth for the job market.
“We see a lot of interest across the continent of Africa right now in vocational training, because people want to have the readiness of skills that match the job market.”
She also highlighted the importance of supporting local businesses and entrepreneurship, noting that up to 70% of new jobs come from SMEs.
Philanthropy as Catalytic Capital
Philanthropy remains a critical lever for driving impact in fragile markets. Jafar described it as “a forgotten child of the capital system,” pointing out that philanthropic capital is often more nimble and risk-tolerant than traditional investments.
“The quality of this capital is what makes it exciting.”
He outlined three key trends are reshaping strategic philanthropy:
- The largest intergenerational wealth transfer in history, with $90 trillion expected to be passed down in the next two decades.
- A new generation of donors who demand transparency, accountability, and measurable impact.
- Technological advancements, including AI and digital platforms, which enable more efficient data use and a shift from one-to-many giving models to many-to-one, where millions of smaller donors can collectively support a single cause.
Long-Term Sustainability Beyond Aid Dependence
Panelists emphasized that projects should focus on creating long-term gains rather than dependency. Bjerde explains:
“It’s very tempting sometimes in very difficult situations, to think about things like handouts, cash transfers, social safety nets, and we do a lot of those, and they’re good, but I like them the most when they’re combined with livelihood and revenue generating opportunities.”
She also stressed the importance of designing infrastructure projects with cost recovery in mind. A project that can pay for itself overtime can continue to operate and expand without ongoing external support.
From Charity to Investing in Resilience
The private sector needs to play a pivotal role in driving inclusive growth and resilience in fragile and frontier markets. As Jafar concludes:
I think the future of global giving will blur the lines between investment and charity, and I think that that again bodes well for helping to see more private sector actors engage, which is again critical if we’re going to move from the billions that we have today to the trillions that we need to address our global challenges and meet the SDGs in five years.
Watch the Full Session
Session Speakers
- Ernesto Torres, Cantu Head, International, Citi
- Mirek Dušek, Managing Director, World Economic Forum
- Hassan Sheikh Mohamud, President of Somalia, Office of the President of Somalia
- Anna Bjerde, Managing Director of Operations, World Bank
- Badr Jafar, Chief Executive Officer, Crescent Enterprises
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Disclaimer: This article uses various LLMs to transcribe, summarize, and proof-read. All content for the article was hand-curated and checked for quality.
