Improving Private Sector Impact on Poverty Alleviation: A Cost-Based Taxonomy

The past few decades have seen an increasing role for the private sector in poverty alleviation. The variety of names used to describe these initiatives—corporate social responsibility, social enterprise, base of the pyramid, impact investing, not-for-loss business, and corporate philanthropy—obscures the similarity between them: they all sacrifice economic profits in return for social impact. This article uses economic theory to develop a cost-based taxonomy of private sector initiatives in poverty alleviation by taking into consideration which costs are being subsidized. This highlights the incentive effects, allowing the donor to increase the efficiency and impact of the initiative.