Over the past year, I have been giving some thought to how the UK government might make useful contributions to lasting escapes from poverty. A key concern that I have is that much of the UK development offer is about being seen to spend (or not spend) money on the kinds of things that certain critical domestic audiences might like (or not like) to see. There is far too little time and space provided to understanding how the UK development offer might support or not the kind of economic transformation essential for sustained poverty reduction.

I was reminded of these concerns last week in the wake of a critical report from the UK’s Independent Commission for Aid Impact on British Investment International’s (BII) investments in India. It lays two key charges on BII: that it continues to be insufficiently focused on poverty; and that it is heedless of reputational risks, citing specific BII investments in a venture fund called Quotient.

According to the ICAI press release: ‘the watchdog found recent taxpayer-aided funding from BII going to an Indian fund that invested in a cosmetics company and social media platforms, including one where ICAI discovered content featuring glorification of Hamas’s attacks on Israel, abuse of women and offers of sexual services.’ It goes on to raise concerns about other investments from the same fund that do not receive any UK funding, ‘but create reputational risk “by association”, [including] dating sites.’

The ICAI judgment was followed by further criticism on social media (including from Bond, which now implied that BII directly funded dating websites) and the Daily Telegraph.

Why manufacturing lipstick (or kettles or mopeds) can still support poverty reduction

As the UK’s development finance institution, BII uses UK aid money to invest in companies that can support BII’s mission of contributing to more productive, sustainable and inclusive economies. It prioritises investments in firms that can help to shift the resources in an economy (capital and labour) from less productive to more productive uses. It supports the overarching goal of poverty reduction, because no country in the world has managed to achieve lasting escapes from poverty without transforming their economies in this way.

According to BII, the cosmetics company under scrutiny, Sugar Cosmetics, ‘is a woman-led manufacturing business with women comprising about 70 per cent of its workforce in a country where the average female labour force participation rate is 28 per cent’. It currently has almost 700 employees likely working in a range of roles including manufacturing, administration and retail positions (there will also likely be additional jobs being created through the sourcing of various inputs for the manufacturing of cosmetics, but this is less clear from public information).

Investments in firms that manufacture consumer goods are a good bet on India’s future development. Manufacturing has historically played a critical role in inclusive economic transformation because of the scope for raising productivity and creating good jobs. Paid employment in manufacturing jobs has contributed to female economic empowerment and independence.

The particular sin in this instance appears to be that selling lipstick and mascara to the Indian middle classes does not fit neatly with the preferred image of poverty reduction, even if it creates good jobs in the process. In this respect, I find it useful to conduct a thought experiment. Let’s imagine that BII was funding a factory that manufactured other basic consumer goods, like kettles or mopeds – I suspect it would have escaped censure. This is because we know from all the evidence that the goods being manufactured need not necessarily be consumed by poor people to have a positive impact on poverty reduction (think of China’s unprecedented poverty alleviation through selling manufactured goods to relatively rich consumers in the West).

Risking reputation with whom?

The second key charge levelled at BII relates to its investments in the social media platform ShareChat. According to BII, ‘ShareChat offers services in 14 regional languages, helping the digital inclusion of millions of non-English speaking Indians’ who were previous excluded from social media platforms. Promoting digital inclusion for all is a key theme of the UN’s roadmap for a safer, more equitable digital world.

The ICAI report draws attention to the potential reputational risk arising from investments in a platform that includes content featuring abuse of women, offers of sexual services and glorification of Hamas’s attacks on Israel. BII notes in its defence that ShareChat hires more content moderators than Twitter (where the ICAI report has been widely circulated and discussed).

While one should obviously not condone the offensive content on ShareChat, all UK aid investments involve trade-offs between risk and return. Investments in digital inclusion will inevitably include some nasty people (as well as lots of well-meaning ones). I think most voters would understand that the UK’s investment in the platform does not imply UK endorsement of those positions or that content. Concerns over the mere association of BII with a dating app that it did not actually fund feels a little prim, frankly (the app in question hardly screams salaciousness).

The risk of growing irrelevance to partners

BII is by no means perfect (which aid financed organisation is?). There are other investments in BII’s India portfolio that will also likely have greater impact (the investment in question only constitutes just £8 million of a £2.2 billion portfolio). While I also don’t like this particular report, ICAI does a lot of excellent critical work holding the UK organisations that use UK aid money to account.

But these kinds of criticisms persistently levelled at BII raise a wider point. ‘We’ – by which I mean the UK development sector – want to see poverty reduction happening on our terms to meet our needs, and don’t feel comfortable with organisations that do not fit that vision. We feel much more at ease with poverty alleviation being nobly driven from the bottom up by ‘local communities’, supported by the generosity of ‘the British people’. We want to see our aid as a form of welfarism directly helping and supporting clinics and livelihoods to meet basic needs. It is a vision that has barely changed since the publication of a UK White Paper 50 years ago calling for more help for the poorest (the parliamentary debate is worth reading to see just how little has changed).

We feel much less comfortable with getting mixed up with the messy business of private industry: indeed, we feel distinctively uncomfortable with industrialists making money, despite all the evidence that this has always been essential to every successful episode of inclusive economic development. We want to preserve a safe distance between our aid spending and the middle classes enjoying the same kinds of social media, dating apps or make-up that we do at home.

It is of course a legitimate political choice to prioritise and approach the UK’s aid spending in this way: it is after all UK taxpayers’ money. But I personally would like to see the UK development sector placing more weight on development impact and less weight on the risks of offending the moral sensibilities of certain sections of British society. I worry that, unless we focus more on how development actually happens (rather than how we want it to happen), we face a different kind of reputational risk with partners – one where many influential voices see the international development sector drifting into irrelevance as it revels in its own glorious integrity.