Economic Growth

How private capital can provide a blueprint for impact when global aid is in decline

Private capital is a powerful, underused tool for scalable impact in emerging markets.

Private capital is a powerful, underused tool for scalable impact in emerging markets.

Image: Unsplash/Basma Alghali

This article is part of: Annual Meeting of the New Champions
  • With donor funding shrinking and global needs rising, private capital can play a catalytic role in emerging markets.
  • Frontier economies, often dismissed as too risky, are proving to be high-growth, high-impact investment destinations.
  • Strategic investment brings expertise, technology and operational best practices.

Investment is an overlooked multiplier that can unlock innovation, jobs and lasting change in emerging markets.

While philanthropy addresses urgent needs, shrinking aid and growing demand mean we must go beyond charity. Purpose-driven investment isn’t just effective, it’s essential.

Smart bets today can deliver competitive returns and compounding impact.

Over decades of mobilizing funds in frontier economies, we’ve seen firsthand how strategic investment delivers what philanthropy aims for: sustainable, scaleable solutions.

We know, for example, that investing in sectors such as fibre optic networks and private healthcare has an impact that extends beyond improving connectivity and health; it drives economic growth, empowers women, creates quality jobs and boosts productivity.

If we’re serious about driving lasting, scaleable change, it’s time to put the private sector – and the capital that fuels it – at the centre of the global development agenda.

With donor funding declining and a $4 trillion gap in achieving the UN Sustainable Development Goals, investment in emerging markets is a critical, yet untapped, force for change.

...capital investment in early-stage markets also introduces knowledge transfer, technology and operational best practices, creating a multiplier effect that can transform entire sectors.

Investment is a multiplier

Charity and aid are essential in emergencies, enabling access to basic public goods such as healthcare. However, such funding is usually time-bound or event-specific.

Venture capitalist Robin Butler of Sturgeon Capital notes that despite waves of aid, many communities continue to face the same structural challenges. His message is clear: “If you want to support developing economies, invest in entrepreneurs who can drive the next 10-20 years of growth.”

By channelling capital into businesses, investment sets off a lasting cycle of growth. Capital catalyzes job creation, drives demand for local products and supports entrepreneurs who can usher in new phases of growth.

When impact capital flows into businesses, it doesn’t just alleviate symptoms; it seeds real solutions. Investment has momentum as well as impact.

Unlike donations, capital invested is returned and can be redeployed, unlocking greater scale over time. It also can attract other types of capital, multiplying reach and accelerating outcomes, creating a virtuous cycle.

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Knowing where the opportunities are

Private capital has a catalytic role to play across lower-and middle-income economies.

Many of these fast-growing economies may not yet match developed nations in income or infrastructure but they’re rich in opportunity – from micro-entrepreneurs to scaling standout local businesses.

This is where investment can accelerate progress. While often dismissed as risky, these emerging and frontier markets are on strong growth trajectories, powered by youthful populations, entrepreneurial energy and rising consumer demand.

They are becoming innovation hubs in manufacturing, fintech, renewable energy, healthcare and edtech – i.e. growth markets that address critical social needs and are foundational for long-term prosperity.

Emerging markets' strengths, resiliency and tailwinds.
Emerging markets' strengths, resiliency and tailwinds. Image: Authors

As economists from the World Bank’s International Finance Corporation (IFC) noted in February 2025: “Private equity in emerging markets has quietly been offering large returns for investors – if you know where to look.”

IFC research shows its private equity investments outperformed the MSCI Emerging Markets Index – a widely used benchmark for tracking mid- to large-capital companies across emerging markets – by an average of 16% between 1990 and 2023.

A potential high return with sustained impact is a potent combination. As developing market investment advisor Javed Khan of Maple Frontiers says, “It’s about creating a more stable, prosperous society. Yes, that benefits your portfolio but it also benefits broader communities.”

Undoubtedly, risks exist but managed properly, these bets offer outsized rewards for those who take a long-term, strategic view.

Knowledge, innovation, scale

In terms of impact, capital investment in early-stage markets also introduces knowledge transfer, technology and operational best practices, creating a multiplier effect that can transform entire sectors.

According to Sruti Patel, a frontier and emerging markets equity specialist, “Investing in developing market growth hubs at key inflection points brings more than capital – it transfers critical knowledge.

“This partnership mindset helps local businesses avoid common pitfalls and scale more effectively, applying lessons already learned in developed markets. With shared insight, investors can drive truly sustainable impact.”

Education and healthcare are high-growth sectors in emerging markets, where rising demand aligns with scalable impact potential.

For example, investing in education technology can expand access to learning for millions, build a skilled workforce, fuel innovation, strengthen local industries and drive inclusive economic growth.

Abrar Mir, managing partner, Quadria Capital, one of Asia’s largest healthcare private equity funds, says: “In healthcare, that means backing visionary entrepreneurs who can deliver not only financial returns but also life-changing access, quality and innovation.”

Smart capital thrives in emerging markets

A primary barrier to investment in emerging markets is the perception of risk. Concerns about political instability, regulatory challenges or infrastructural deficits can deter the most adventurous investors.

Undoubtedly, risks exist but managed properly, these bets offer outsized rewards for those who take a long-term, strategic view.

Founder and managing director of Raisewell Ventures Jeep Kline shares her perspective: “Sophisticated investors always find ways to manage perceptions of risk.

“In traditional venture capital, the focus is often on the 1–2% of portfolio companies that generate outsized returns and drive the entire fund’s performance. But in emerging markets, it doesn’t have to be that way.

“Investors can take a broader approach to portfolio construction – accepting slightly lower returns per successful company while increasing the overall success rate across the portfolio. This strategy can still deliver returns consistent with the [venture capital] or [private equity] asset class, while also achieving stronger, more distributed impact.”

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Financing Sustainable Development

Local context is key

Many development tenets remain relevant for investing in emerging markets, and understanding the problem you are trying to solve is one of them.

Ruwani Hettiarachchi, chief of staff of investment platform ALTs Club and emerging markets investing professional, notes that rooting investment in deep local knowledge is key: “The outperformance to [any emerging markets] portfolio starts happening when investors can intelligently stratify risks and develop a sound, well-researched thesis backed by firsthand knowledge in emerging markets. This is a white space for asset managers and even global private equity.”

For private philanthropists and high-net-worth individuals, tools such as blended finance offer smart ways to manage risk.

As Leah Pedersen of Convergence, who leads on market acceleration, points out, “Blended finance – a financial structuring approach using public resources such as grants or first-loss guarantees – can unlock private capital for high-impact investments that might otherwise seem too risky.”

Philanthropy’s role is still essential. However, incorporating private sector investment can drive next-level impact.

We need a balanced approach – one that acknowledges challenges while embracing long-term potential.

The global community should seize this moment.

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