In 2018, the ILO estimated that approximately 42% of the global workforce, 1.4 billion people, were in vulnerable employment, for developing countries this proportion was 76%. The 2020 Covid-19 crisis will significantly reduce the number of people in jobs and proportionally increase the number in vulnerable employment. As market demand comes to a sudden halt, developing country firms that are linked into, and supply global value chains face major challenges. Looking forward, lead firms are also likely to shorten their supply chains, potentially cutting high productivity and high-income jobs in manufacturing in poorer countries.

This presents an opportunity for Development Finance Institutions (DFIs) to strengthen firms in their target markets, through strategic, practical and financial means. In the short-term, finance and specialist guidance could be provided to more productive firms at risk of closure to ensure that higher productivity jobs are maintained, as these will act as the engine driving economic recovery. In the medium term, investments could target diversification opportunities that play into regional supply chains, making markets and jobs more resilient to international shocks. Finally, longer term investments could target economic transformation opportunities driving high value employment and economic growth. This involves transitioning of workers form informal to formal sector and making the most of a digital economy.

However, some key issues need to be investigated. For example, how will DFIs balance the need to preserve jobs with increased investment risk? Can they play a role in identifying and developing sectors that will drive the diversification and transformation process? Finally, what can DFIs do to develop the technical capabilities that would be required to sustain such processes?