Professional Documents
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ISBN 978-3-00-032960-9
Acknowledgements
To begin with, we would like to thank everyone who
contributed to this publication.
Partners
We would like to extend a special thanks to our partners.
The German Federal Ministry for Economic Cooperation and Development
(Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung)
financed this publication and provided expertise on content together with
the Gesellschaft für Technische Zusammenarbeit.
The International Chamber of Commerce supports the communication of
the publication. Publication information
Copyright © endeva
Additional acknowledgements www.endeva.org
Several sections in the publication were written by experts. This publication was financed in part
We would like to express our gratitude for providing their expertise. by the German Federal Ministry for Economic
Cooperation and Development
We are grateful to:
(Bundesministerium für wirtschaftliche
Martin Herrndorf Zusammenarbeit und Entwicklung).
(section on financing, IT sector profile, Mexico country profile)
Published by:
Fritz Jung and Jonas Naguib
endeva
(sections on “Partnerships between German development organizations
Brunnenstraße 192
and the private sector” and “The develoPPP.de program”)
10119 Berlin
Prof. Dr. Genia Kostka Germany
(China country profile) Tel.: +49 30 4738 3959
Email: info@endeva.org
Aline Krämer
www.endeva.org
(Siemens AG case study, Nokia case study,
MicroEnergy International case study, Brazil country study)
Authors:
Tobias Lorenz Christina Gradl – c.gradl@endeva.org
(water sector profile) Claudia Knobloch – c.knobloch@endeva.org
Jakob Schmidt-Reindahl
Layout & typesetting:
(INENSUS case study)
derMarkstein.de, Berlin
Louise Kantrow
(section on “The role of business in achieving the MDGs”) Translation:
Libby Bunn, Berlin
Leonie Vierck
www.eco-accents.com
(SAFO case study)
Proofreading:
Ann Marie Bohan
Reviewers
Experts from the realms of business, academia and development work Cover photo:
contributed with comments and suggestions. Their ideas and advice Siemens AG
gave the publication structure and clarity. A woman in Kenya uses an OSRAM lamp
charged by solar power. This business idea
Our gratitude goes to: arose from the Siemens ideas competition
Michael Anthony (Allianz SE), that is described on page 35.
Katharina Averdunk (endeva),
Dr. Andreas Blüthner (BASF SE), Dr. Michael Grewe (BMZ), Printing:
Martin Herrndorf (endeva and the University of St. Gallen), Lokay Druck
Prof. Dr. Genia Kostka (Frankfurt School of Finance & Management), Printed on FSC-Paper
Aline Krämer (endeva and the TU Munich),
Jonas Naguib (GTZ), Daniel Philipp (MicroEnergy International), Publication date of the
Christine Polzin (SERI), Isabel Reingruber (SAP AG), English translation (with updates):
Heiko Schwiderowski (DIHK), Nicolai Tewes (Allianz SE), December 2010
Piera Waibel (University of Zurich)
Publication date of the German version:
November 2009
ISBN 978-3-00-032960-9
How
P r e fac e
Photo: BMZ
Photo: ICC
For many years, German development organizations have The eight Millennium Development Goals (MDGs) are the most
been working hand-in-hand with the private sector. With- comprehensive and universally agreed development goals, em-
in the framework of the Federal Ministry for Economic Co- bodying the international community’s pledge to create a better
operation and Development (BMZ) program “develoPPP. and healthier future for billions of people in developing coun-
de”, more than 3,000 development partnerships in over 70 tries by 2015. The goals strive to substantially reduce poverty and
partner countries have helped make business ideas stem- hunger, empower women, increase access to education, health-
ming from private companies a reality and, at the same care, clean water and sanitation, reduce the incidence of a num-
time, employment and income have risen in our partner ber of deadly diseases, protect the environment and forge strong
countries and poverty has been reduced. But in many global partnerships for development.
countries, the poorest of the poor are still excluded from
economic development. Over the last decade considerable progress has been made in
achieving the MDGs but significant challenges remain. Reaching
Under the catchphrase “base of the pyramid”, business the MDGs calls for collaboration among all stakeholders. When
models that begin at the intersection between the private the 2015 targets for the MDGs were set in 2000, the private
sector and development organizations have started to sector’s contribution to meeting these targets was not as well-
emerge over the years. They can bundle the interests of the understood and accepted as it is today. In that same year, the
private sector and development organizations: new mar- International Chamber of Commerce launched the World Busi-
kets for companies – new products and services and new ness and Development Awards to showcase creative initiatives by
sources of income for poor sections of the population. corporations who apply their core business expertise to achieve
the MDGs. Today, the role of the private sector as an engine of
There is a lot of potential here from the company perspec- growth and development is widely recognized, as are benefits
tive. Together with partners from civil society and develop- that business can bring: creating jobs, building skills, developing
ment organizations, projects can often be carried out faster technologies.
and the risks of failure can be easier to overcome.
One of the most important innovations in this arena has been
I hope you learn a lot from this publication and that it the emergence of inclusive business models which are conceived
sparks lots of new innovative business ideas that form the as sustainable business solutions that increase access to goods
basis for new development partnerships. and services and create new sources of income for low-income
communities. These models involve doing business with low-
income populations anywhere along a company’s value chain:
they are incorporated into the supply, production, distribution
Susanne Dorasil and/or marketing of goods and services. This generates new jobs,
incomes, technical skills and local capacity. Likewise, poorer
Head of Department for Economic Policy; Finance Sector
consumers can benefit from products and services that are not
Federal Ministry for Economic Cooperation and Development (BMZ)
only more in line with their needs but are also affordable. By
focusing on business viability, these new models have the capac-
ity to be increased in scale, thus including thousands of people
living in poverty. The emphasis is on “core business” rather than
on philanthropy.
Jean-Guy Carrier
ICC Secretary General
4 endeva | Inclusive Business Guide
Water
20 billion * $ always means US dollars in this publication
ICT
51 billion
Health
158 billion
Transport
179 billion , Global income pyramid
Housing
332 billion
Annual 30,000
per capita
Energy income in $
433 billion (measured in
2002 PPP) 20,000
10,000
Other
932 billion
0
10 20 30
Source: IFC, WRI (2007)
The Next 4 Billion Portion of world population (%) Source: Branko Milanovic, World Bank (2002)
5 endeva | Inclusive Business Guide
In brief
The “How” The “Where”
Innovative business models find ways to overcome these Some regions and sectors are particularly interesting in terms of
challenges. The first promising approaches in tackling inclusive business. That said, each company has to select its tar-
these obstacles have emerged along the entire , business get market individually in line with its competencies. The pro-
development process, starting with development through files in this publication can provide only an initial impression of
to implementation all the way to growth. the structures and existing activities on the respective markets.
For the development of new business ventures, the right Countries with large low-income sections of the population offer
market expertise is often lacking. There is no informa- the opportunity for a significant market. Many companies from
tion available and no experience to speak of. Companies within and abroad are already active in these countries. The fol-
are well-advised to work closely with the target group and lowing countries are profiled: Brazil, China, India, Mexico, Rus-
involve people who know the ins and outs of the local sia and South Africa.
context to help identify opportunities, analyze the market,
find solutions and develop products. Sectors where the low-income target group is already a consumer
include products and services to meet basic needs and those that
During the implementation phase, the necessary resourc- increase productivity. As producers, people living in poverty can
es – financing, partners, local skills – are brought together primarily be found in agriculture. Competitive advantages for
and the model is tested. But because inclusive business companies exist in sectors where they increase efficiency through
projects often require a number of changes to the existing technology and expertise, thus being able to offer added value.
business, companies have to plan in longer time frames The following sectors are profiled: energy, financial services, food
and more flexibility for financing and project organization. and agriculture, health, housing and construction, information
And, companies have to learn to work together with non- and communication technology, and water.
traditional partners.
During the growth phase, inclusive business projects fre- And beyond
quently pursue several equally important goals of an eco-
nomic, social and environmental nature, all at the same Evidence shows that inclusive business can truly make a signifi-
time. This requires more extensive measuring of success cant contribution to fighting poverty. Aravind Eye Care System
and more clear-sighted alignment. To expand the venture gave two million people in India their sight back over the last
within a country or beyond, the business models have to 30 years, Manila Waters connected 1.5 million poor households
function as independently of local conditions as possible. to the central water supply in the capital of the Philippines in
These models have to be highly standardized and clear-cut. ten years, 155 million people have been extended microloans.
According to a study of the World Bank, almost every other
borrower in Bangladesh has been able to escape poverty. How
, people living in poverty benefit from freedom of choice and the
Business development process:
3 phases × 4 steps to inclusive business
ability to participate is not to be underestimated. Being able to
make their own decisions about what they buy and sell also gives
them the opportunity to articulate their needs.
Implementation
Development
Source: endeva
6 endeva | Inclusive Business Guide
Content
Introduction ........................................................................................................... 08
p 1 page 13 Fighting poverty through business ......................................................................... 11
Vodafone Group, Kenya
p 2 page 17
Building growth markets ................................................................................................ 18
INENSUS, Senegal
Strengthening supply chains ....................................................................................... 20
p 3 page 19
Grameen Bank, Bangladesh, SKS Microfinance, India
Protecting the environment, securing the future ........................................... 22
p 4 page 21
Natura, Brazil Overcoming challenges .................................................................................................. 24
p 5 page 23
2 The “How” ........................................................................................................................ 30
Alfred Ritter GmbH & Co. KG, Nicaragua
p 6 page 27
Development ......................................................................................................................... 33
Tiviski camel milk dairy, Mauritania
p 7 page 35 01 Identify opportunities .......................................................................................... 34
Siemens AG
02 Analyze the market ................................................................................................ 38
p 8 page 37
Nokia
03 Find solutions ............................................................................................................ 40
p 9 page 39
MicroEnergy International 04 Develop the product ............................................................................................ 44
p 10 page 41
Smart Communications,
Philippines Implementation ................................................................................................................... 47
p 11 page 43
05 Secure funding ......................................................................................................... 48
SAFO / BASF SE
p 12 page 45 06 Engage partners . ..................................................................................................... 50
D.Light Design, India
07 Leverage local capabilities . ............................................................................... 52
p 13 page 49
ATOS, Egypt
08 Test the model . ......................................................................................................... 54
p 14 page 51
Allianz
SE, India Growth ....................................................................................................................................... 57
p 15 page 53
Barclays
Bank, Ghana 09 Understand the impact ....................................................................................... 58
p 16 page 55
10 Adapt the model ..................................................................................................... 60
Bosch & Siemens Hausgeräte, Indonesia / Philippines
p 17 page 59 11 Expand locally . .......................................................................................................... 62
Manila Water Company, Philippines
p 18 page 61
12 Transfer to other countries ................................................................................ 64
Aravind Eye Care System, India
p 19 page 63
ITC Limited, India
p 20 page 65
VisionSpring
7 endeva | Entwicklungsgeschäfte
I n h a lt s v e r z e i c h n i s
3 The “Where” .................................................................................................................... 66 Topics
Mexico .................................................................................................................................... 71
External contributions
Russian Federation .......................................................................................................... 72
p 1 page 16
Health . .................................................................................................................................... 78
Water ....................................................................................................................................... 81
Outlook . ............................................................................................................................ 82
Endnotes ..................................................................................................................................... 87
both sides stand to benefit. Access to mar- • The markets at the top of the income pyramid
kets enables these people to make produc- are largely saturated. It makes sense for compa-
tive use of their capital and improve the nies to think about the business opportunities
quality of their lives with the money they open to them in lower income segments. It is
earn. Vast opportunities for innovative also important for companies to position them-
business models exist where companies selves at an early stage in these markets to se-
make this possible. cure competitive advantage.
Companies and entrepreneurs can make a • Raw materials for the manufacturing and food
significant contribution to human devel- industry are becoming ever more scarce and ex-
opment. They have the technologies that pensive. Safety and quality in the supply chain
can help boost productivity and improve are becoming increasingly important as factors
the quality of life in developing countries critical to success. Developing countries offer al-
and leapfrog to more sustainable ways of ternative supply sources.
consumption and production. Relevant
domains include renewable energies and • More and more developing countries offer a
energy efficiency, water treatment and stable environment for investment and trade.
emissions prevention but also medical Many governments are working on reforms to
and pharmaceutical technology or food reduce the time and cost of trade processes and
chemistry. They have the product devel- improve reliability for business.
opment and production processes to cre-
ate products that meet the abilities and • Business models that improve the opportunities
needs of producers and consumers living for people living in poverty are meeting with
in poverty. And they have the manage- more support. Donor countries, foundations
ment know-how to grow successful mod- and “social investors”, who want to encourage
els and expand their reach. Fairtrade is social change with their capital, support busi-
but one example where process and man- ness people not only with specially tailored fi-
agement innovations have benefited mil- nancing programs but also with local contacts
lions of people living in poverty. and expertise about business models of this
kind, thus removing barriers to implementa-
tion.
9 endeva | Inclusive Business Guide
I n t r o d u c ti o n
This farmer in Guinea has every
reason to be proud of his plants.
Whether or not he can sell them for a
profit depends on his market access.
In fact, doing business to combat poverty isn’t exactly How companies can take better advantage of inclusive business
business as usual. Even though companies won’t have to and tackle the specific challenges they face is explained in this
change everything from one day to the next just because publication in three parts:
they are doing business on a new market, most will still
be confronted with a few challenges they may be unac- • The “What” describes the concept and target market and dis-
customed to: cusses its unique structural features.
• The market structures they need to do business are lack- • The “How” explains the process that starts with identifying op-
ing. The ideal basis for efficient trade is a good infrastruc- portunities through to implementing a successful model in
ture, readily available information and enforceable rules. other countries; it describes how inclusive business is different
Even though market conditions in many developing from business on developed markets and provides several real-
countries have improved, they are still relatively poor in world examples of implementation for each step.
most slums and villages. This increases transaction costs
and risks. • The “Where” describes the most important countries and sec-
tors with potential for inclusive business.
• To date, only a few success stories have been reported for
inclusive business in a handful of industries, meaning a This introductory publication covers a wide range of issues. A
lot of experimentation is necessary before arriving at a list of literature for further reading is provided at the end of each
working model for each specific company. chapter*. The “Inclusive Business Guide” is by no means a gen-
eral guideline for foreign trade. Issues that come up in day-to-
• As a result of the difficult conditions and lack of experi- day business with foreign markets or new target groups, such as
ence, developing businesses to fight poverty is often a customs duties or legal requirements, are not discussed here. Our
time-consuming process and fraught with more costs, hope is that the content will inspire many new business ideas.
risks and uncertainties than normal.
Let’s get started!
• Many companies find solutions with non-traditional
partners. These often include public or civil development
organizations or in-country aid organizations (hereinaf-
ter referred to as “development organizations”) or coop-
eratives and government institutions. These new kinds * Literature references to books and magazine articles state the full reference information. Online publica
tions are cited only with the author(s), year and title and are indicated by a www. To find these publications,
of partnerships need to be tested and fine-tuned.
the name of the source document just has to be entered in a standard search engine.
1 The
“What”
1. When people living in poverty are included The idea behind inclusive business is that devel-
in business either as producers or consum- oping business and fighting poverty can go hand
ers, opportunities can emerge on both sides. in hand. In other words, doing business with the
Inclusive business thus helps fight poverty poor to combat poverty.
on the one hand and increases competitive-
ness on the other. Inclusive business integrates people living in poverty
into the value chain as consumers or producers, thus
2. The consumer market at the bottom of the making a positive contribution to the development of
global income pyramid is made up of four companies, the local population and the environment.
billion people. Not only is this market enor-
mous, there is great willingness to pay for This strategy can be successful because people liv-
more productivity and a better standard of ing in the slums and villages of developing coun-
living and it harbors considerable potential tries have difficulty accessing the market. By giv-
for innovation. ing them access, new opportunities often emerge
for both sides.
3. The supply chain can be strengthened by
teaming up with the producers of natural
raw materials and handcrafted products
as well as local service providers: not only
because the supplier base is broadened, but
also because it leads to product diversifica-
tion, better quality and unique selling propo-
sitions such as fair production conditions or
traditional ethnic handicrafts.
T h e “ W h at ”
Fighting poverty through business
Key messages M-PESA is a mobile money solution. In Until now, development work and business devel-
the spring of 2010, 9.5 million Kenyans opment were two completely separate worlds. In-
• People living in poverty have were already using their cell phones to novations and profits belonged to the realm of the
a lot of untapped potential pay for their groceries in supermarkets or company. In development work, money was spent
as producers and consum- to transfer money to their families. Even to improve the lives of those living in extreme
ers – this shift in perspective Vodafone who owns the M-Pesa provider, poverty. There is rationale for both. But there is
can be mutually beneficial. Safaricom, has been surprised by the rap- also a place where the two overlap, where business
id growth since the service was launched development and social development intersect.
• The benefits companies in 2006. In Kenya, however, bank trans- The business models located at this interface are
reap from inclusive business actions are expensive and many people called “inclusive” business models.
include the establishment of don’t have bank accounts. Fast, easy, no
new, growth-intensive supply account required and, most importantly,
and sales markets, enhanced cheap – it’s no wonder that demand for M-
reputation, employee reten- PESA was so high.
tion and further training as
well as capacity for innova-
tion.
M-Pesa is not a charity project. It is good for business and it is good for
society. We can help improve quality of life for millions of people – there is
no better thing a company like Vodafone can do.
Arun Sarin, CEO Vodafone 2
Changing perceptions:
from helpless victims to capable actors
Inclusive business requires us to rethink The flip side of this reality is typified by dynamic
our perceptions of people living in pov- economic activity, by buying and selling, by pro-
erty: from seeing them, not as needy vic- ducing and consuming. Yet despite all of their
tims, but as empowered and capable ac- hard work and creativity, many people are still
tors. People in developing countries are trapped in poverty. They lack not only income
often portrayed as helpless, waiting with and capital but also, and more importantly, real
big, round eyes and hands outstretched opportunities for growth and development. This
for our handouts of food and water. Noth- lack of opportunity is to a great extent due to a
ing could be further from our minds than lack of markets.
to consider these people customers and
business partners. From this perspective, Structures that facilitate efficient trade simply do
it would seem downright unethical to not exist, making it difficult for farmers to sell
want to sell them something, stripping their harvest or for artisans to find markets for
them of the last shirt off their backs, so their goods. Many products and services are either
to speak. Characterizing them as needy is not available or are of poor quality and too ex-
useful to win financial and political sup- pensive.
port for development measures. But this
perception reveals only a fraction of the
reality of people living in poverty.
Base (or Bottom) of the Pyramid (BoP) – re Inclusive business – refers to the inclusion of Pro-poor value chain development – a
fers to the idea of acquiring people living in people living in poverty into business pro method used by development organizations
poverty as consumers, thus fighting poverty cesses along the value chain. This term is used to integrate producers, especially small farmers,
and tapping into a huge market. The focus by the alliance between the World Business more effectively into value chains.
is usually on the marketing aspect. The Inter Council for Sustainable Development (WBCSD)
American Development Bank (IADB) calls this and the Dutch development organization, SNV, Responsible supply chain manage-
“opportunities for the majority”. as well as by the United Nations Development ment – summarizes management methods
Programme (UNDP) within the “Growing Inclu for sustainable supply chain organization. One
sive Markets Initiative”. The non-profit organi focus is on the fair inclusion of microproducers,
zation, Ashoka, uses the term Full Economic for example, for agricultural products.
Citizenship (FEC) for this concept.
13 endeva | Inclusive Business Guide
T h e “ W h at ”
Photo: IDRC/Sy. Djibril
Photo: Vodafone
Herders in Senegal use cell phones and GPS systems to track their herds. M-PESA turns cell phones into a mobile money solution.
The inclusive business model also frequently Stresses the inclusion of people living in poverty as:
appears in connection with the following two
concepts: Producers Consumers
Source: endeva
14 endeva | Inclusive Business Guide
Once this shift in perspective has taken Companies can boost their competitiveness in a
place, opportunities suddenly emerge variety of ways:
when the poor are incorporated in the
value chain: New markets: Establishing growth-intensive sales
and supply markets expands the supplier and cus-
• As customers, they buy goods and ser- tomer base, thus creating prospects for cheaper
vices to take care of their basic needs and higher-quality production, increased rev-
and boost their productivity and qual- enues and more profits. These markets are expect-
ity of life. ed to grow rapidly because of strong population
growth and increasing income in many develop-
• As suppliers, they produce agricultural ing countries.
products and handicrafts and provide
services, for instance, in the tourism in- Enhanced reputation and PR: The contribution that
dustry. inclusive business makes to society as a whole im-
proves the image of the company and the trust
Business models that open up these kinds placed in it by customers, suppliers, governments,
of possibilities also create income and investors and the general public. This underscores
business opportunities for third parties: the company’s CSR activities.
employees, business partners and micro-
entrepreneurs are needed to keep a busi- Employee retention and training: For many employ-
ness running. By working together with ees, their employer’s commitment to pursuing so-
the local population, companies can take cial goals is important and strengthens their iden-
advantage of local expertise and social tification with the company. Having employees
networks. work in an inclusive business environment can
also be beneficial for job and management train-
If a company is successful in combating ing purposes and for the employees’ own personal
poverty through business, this can give development.
rise to other positive social and economic
effects. The company or its partners can Innovations and the capacity for innovation: Innova-
only buy and sell other products if func- tion is the key when it comes to new market envi-
tioning logistics and sales channels are in ronments with completely different expectations
place which in turn help develop other and challenges. Creative solutions for products,
markets and lower the costs per product. processes and business models are always the en-
Producer cooperatives gain knowledge gine for company growth and a prerequisite for
and can invest in quality assurance, pro- long-term market survival. As a result, a compa-
cessing and marketing, thus attracting ny’s overall capacity for innovation is enhanced
more demand. Market structures im- by pursuing projects that follow an unusual logic,
prove when one or more companies in- that ask new questions and that seek new organi-
vest in infrastructure or the government zational solutions.
adapts the legal framework. These initial
business activities trigger new ideas and
the market base broadens. Development
takes place.
15 endeva | Inclusive Business Guide
T h e “ W h at ”
Photo: Adam Rogers / UNCDF
Basic needs: Many basic needs are still not met today. One bil- Income: Farmers, artisans and other producers find new sales chan-
lion people live without access to clean water, 1.6 billion are nels, services are in demand and jobs are created. Lower-priced
without electricity and five billion have no Internet access. products increase real income.
Examples of inclusive business models that provide food, wa-
ter, wastewater disposal, medical supplies, housing construc- Empowerment and confidence: New possibilities for consumption and
tion and even education already exist. income and new forms of market participation or creation give peo-
ple the feeling that they have more control over their lives.
Productivity: Access to electricity, telephone and Internet as
well as financial services, such as loans and insurance, make
day-to-day life more efficient and open up new business op-
portunities for individuals and microenterprises.
Who is poor?
Despite the simplicity of this word, it is not also opportunities to shape and participate in In this publication, we generally talk about
always easy to define who is poor and who is society. Income allows access to these oppor “people living in poverty” and not “poor people”
not. Poverty has many causes and many forms. tunities but is also one result of realizing one’s to make it clear that it is the living environment
potential. of those affected that leads to poverty. Poverty
Income is usually used as an indicator for in developing countries is largely a structural
poverty. As an international standard, the World Inclusive business does not necessarily have problem rather than an individual problem. The
Bank established thresholds of $1.25 per day for to start with the extremely impoverished, i.e. frequent references to slums and villages, i.e.
extreme poverty and $2 for moderate poverty people who earn $1 a day, but with those who the typical environment for poverty, under
(measured in local purchasing power). Based get by on $3 or $4 per day. It is often easier to score this view. The constraints that hinder
on these figures, 1.4 billion people were living concentrate on groups that have capital, be it markets and perpetuate poverty are explained
in extreme poverty and 2.6 billion in moderate knowledge, land or social inclusion, but are un on page 26.
poverty in 2005 4. able to benefit from it because of inadequate
market access. Business models that incor
The problem of poverty, however, can be Further reading:
porate these sections of the population offer
•A
bhijit V. Banerjee and Esther Duflo (2006),
better described using the “capability” concept both sides considerable opportunities to make The Economic Lives of the Poor www
developed by the economist, Amartya Sen. things better. Often, those living in extreme eepa Narayan and Patti Petesch (Ed., 2002), From Many Lands.
•D
Sen sees poverty as a lack of valuable oppor poverty have no capital to speak of. They are Voices of the Poor (New York: Oxford University Press)
tunities. This view shapes development work martya Kumar Sen (1999), Development as Freedom
•A
dependent on humanitarian aid. The funding
(Oxford: Oxford University Press)
today to a large extent. The people in poverty available for development aid can be concen
don’t have the freedom to choose to live trated on supporting these people if markets
fulfilling lives. This includes simple basic needs and business create opportunities for those
such as food, education and career choice but who have capital to put it to good use.
16 endeva | Inclusive Business Guide
Partnerships between the private and public The public and private sector work together
sectors can play a decisive role for sustainable to bring an idea to life, an idea that is increas-
development. In the last 10 years, German de- ingly seen as the basis for sustainable corpo-
velopment policy has established new forms rate management: voluntary assumption of
of partnerships with the private sector lead- responsibility by companies for social, envi-
ing to activities in more than 70 developing ronmental and governance issues, otherwise
and transition countries. Our programme for known as Corporate Social Responsibility
development partnerships with the private (CSR).
sector (www.develoPPP.de) has been com-
mended as innovative in this field. Indeed, we Nowadays, many firms consider CSR a fixed
have many success stories to demonstrate the component of their corporate strategy. Mul-
value of those partnerships. Business and de- tinational corporations can no longer afford
velopment objectives often complement one to have their business activities subject to se-
another and can be achieved more effectively rious criticism in the public eye because, for
in a joint effort. instance, working conditions in the supply
chain are inhumane. CSR is therefore a stra-
Whether the issue is environmental protec- tegic investment that aims to strengthen the
tion, education, healthcare, poverty eradi- general public’s approval of the company and
cation, agriculture, water or energy supply, inspire the confidence of customers, investors
the primary fields of action in development and other stakeholders. Corporate social re-
policy overlap with the business objectives sponsibility also has a positive impact on em-
of the private sector. Consequently, involve- ployee motivation and product quality.
ment in shaping the economic, political, legal
and social framework in developing countries
is mutually beneficial for private and public
partners. The partnerships incorporate the
shared interests and capitalize on the respec-
tive strengths of each partner. Companies
rely on the many years of experience of the
development organizations to safeguard their
investments, participate in growth markets
and establish stable, long-term structures.
The development organization benefits from
the business activities of the private sector
in the partner countries which help achieve
development goals and cut costs. This also
improves the living conditions of people in
developing countries over the long run and
improves the economic, environmental and
social conditions for doing business.
T h e “ W h at ”
The primary fields of action in development policy overlap with
the business objectives of the private sector.
The PPP partnering model is also further de- joined the “Global Compact” and voluntarily
veloped in this context: involvement is not pledged to adopt ten principles in the areas
limited to actors from the public and the pri- of human rights, labor standards, environ-
vate sector; other key actors from civil society, mental protection and anti-corruption. Part-
be they trade unions, non-governmental or- nerships are initiated and practical models
ganizations (NGOs) or academic institutions, developed in dialog with governmental and
are integrated into initiatives and projects. non-governmental representatives.
New platforms for dialog have been created,
like the United Nations’ “Global Compact”,
which is supported by the BMZ. So far, 6,000
companies from around the world have
Helpers from the local community putting up the wind monitors. The measurements were very promising for INENSUS. A house in Senegal. Most houses there are not
connected to the grid.
• Taken together, their com- by 2010, a figure that represents only 2,000
bined local purchasing power one percent of the target group. Already 1,500
is equivalent to $5 trillion. today, the company’s market value is
1,000
roughly $130 million. Source:
IFC, WRI (2007)
• By 2050, there will be three 500 The Next 4 Billion
,
Changes in world population
10,000
7
Billions of People
0
Less
5 Developed
Countries
3
1
More Developed Countries
T h e “ W h at ”
Growing population Poverty penalty
The market is growing rapidly: according to projections It may sound like a paradox but people with little market access
from the United Nations Population Fund (UNFPA), the frequently have to spend more money than their rich neighbors
planet will have approximately , three billion more people or more than consumers in industrialized countries and they
in 2050 than it does today. The great majority will live in have to settle for lower quality. This phenomenon is known as
developing countries. the “poverty penalty”. It represents the opportunity to develop
a better range of products and services by increasing efficiency.
For companies who find a largely saturated and highly In Bangladesh, 1 kWh of electricity costs approximately $1.95
competitive market at the top of the pyramid, it will be in rural regions while in Germany, the price is only one-tenth of
particularly important to take a closer look at lower income this amount. 7 In the slums of Jakarta, Nairobi and Manila, clean
segments. This doesn’t just apply to companies that target water is five to ten times more expensive than in higher-income
consumers but also to business-to-business solutions. Most areas of these cities. Similar price differences exist in the financial
people at the bottom of the pyramid earn their income as system, in healthcare and even in simple consumer goods.
microbusiness owners in agriculture, handicrafts, services
or trade. As entrepreneurs, they are by all means willing to
invest in increasing productivity and competitiveness ei- Further reading
ther through new technologies or materials. But the range •C .K. Prahalad and Allen Hammond (2002), Serving the World’s Poor, Profitably
of products and services open to them has to be consistent (Harvard Business Review 80, p. 48–57)
•C layton Christensen and Stuart L. Hart (2002), The Great Leap
with their needs and financing has to be available. (MIT Sloan Management Review Fall 2002, p. 51–56)
• IFC and WRI (2008), The Next 4 Billion www
Women in Madagascar take part in a training on financial management. A micro-credit group in India meets to collect installments.
Key messages Priprioca is a fragrant plant found in the Local traditions and skills
heart of the Brazilian rainforest. Natura
• The wealth and diversity of discovered the plant and used it as the Skilled workers in developing countries also pro-
natural raw materials makes basis of its Ekos cosmetics line. The com- vide valuable services. Opportunities exist particu-
it possible to safeguard, pany worked together with village com- larly in the case of labor-intensive and handcraft-
broaden and improve the munities in the north of the country to ed products, such as those in demand for interior
supply chain and make use create a new supply chain for this ingredi- design. IKEA works with cooperatives and family-
of new and unusual materi- ent. Ekos became the most successful line run companies in Vietnam to produce textiles and
als, also satisfying the quality of this rapidly growing company. ceramics. The company concludes long-term con-
criteria for “organic” or “fair” tracts with the suppliers that have fixed payment
in many cases. Regions with little market access are also terms, a mutually beneficial model.
interesting as potential sources of supply.
• Tradespeople and artisans By integrating people living in poverty
offer skills, traditional eth- into the supply chain, production vol- Services from tourism to translation
nic handicrafts and tech- umes, delivery reliability and quality can
niques. be improved, the flexibility of the supply The service sector is very underdeveloped but this
chain strengthened and the unique sell- is starting to change thanks to the widespread
• Services ranging from tour- ing propositions enhanced by rare, high- availability of data networks. Digital Dividend in
ism to business process quality and “ethical” products. Cambodia and TxtEagle in Rwanda are start-up
outsourcing can be provided companies that rely on mobile technology to pro-
by microenterprises. vide services like translation in local languages – a
Natural ingredients kind of microbusiness process outsourcing. Inter-
est is also growing in tourism that is committed to
Developing countries have large capaci- making a positive impact on the local culture and
ties for the production of agricultural the natural environment, and in the process creat-
products. Seventy-two percent of all agri- ing unique experiences for tourists. The company
cultural land can be found in developing Hospitality Kyrgyzstan is an ecotourism operator
countries.10 This potential for production in Kyrgyzstan that offers homestays with local no-
is not only important for meeting rising mad families. The local population is essential as a
demand for more and higher-quality food service provider here.
products, but also for the growing need
for renewable energy sources. The quality
of the end products and the production
process is gaining in importance. De-
mand for products certified as “organic”
or “fair” is steadily rising.
Further reading
•A ndrew W. Shepherd (2007),
Approaches to Linking Producers to Markets www
•B eth Jenkins et al. (2007),
Business Linkages – Lessons, Opportunities and Challenges www
• J ulio A. Berdegué et al. (2008),
Innovative Practice in Connecting Small-Scale Producers
with Dynamic Markets – Keys to Inclusion of Small-Scale Producers
in Dynamic Markets www
21 endeva | Inclusive Business Guide
T h e “ W h at ”
Photo: Natura Photo: Thomas Heinze – Fotolia.com
The roots of the priprioca plant contain essential oils. The astounding diversity of the plant world hidden in the Brazilian rain forest could
serve as the foundation for sustainable business models.
Essential oils are an important ingredient in the cosmetics industry. Natura‘s Ekos product line is based on the priprioca fragrance.
Photos: Natura
22 endeva | Inclusive Business Guide
Europe & Central Asia of supply and reputation. Leapfrogging can also
Sub-Saharan Africa take place here. Sustainable agricultural methods
20 40
Southeast Asia and Pacific ods common in industrial agriculture. Ritter has
established a successful model in Nicaragua.
4
2
1
T h e “ W h at ”
47 nations, including China and Brazil, have defined a Environmental protection is thus also a key component of eco-
payment system for feeding electricity from renewable nomic sustainability.
energy sources into the grid.
A cocoa farmer in Nicaragua with his product. Growing organic cocoa is Cutting open a cocoa bean for quality The dried bean is the basic ingredient in
labor-intensive. control. chocolate production.
Overcoming challenges
.
Infant mortality
as poverty indicator
, Global comparison of child mortality
Child mortality for every > 100
> 100
10,000 live births adjusted to
the year 2000.
Source: CIESIN 2005
75 75
Infant morta
as poverty in
50 50
20
20
<9
<9
No data
Infant
nodeaths
Data per 10 000 live
births, adjusted to the year
2000
N
Infant deaths p
births, adjusted
2000
Source
25 endeva | Inclusive Business Guide
T h e “ W h at ”
Slums and villages are the market environment The conditions for efficient trade are lacking
The people at the bottom of the global income pyramid are Market development in slums and villages doesn’t just mean in-
not dispersed equally throughout the globe, they mainly troducing a new product to stores or signing a supply contract
live in the slums and villages of developing countries. The with a producer cooperative. Companies have to overcome chal-
differences between the various countries and regions can lenges that they are unaccustomed to, to this extent at least, in
be clearly seen on a , world map that uses child mortal- developed markets. One fundamental problem is inadequate
ity as an indicator for poverty: poverty is most widespread market conditions. Information is unavailable, the infrastructure
in Africa and Asia. There can also be huge discrepancies doesn’t work, the legal system is ineffective and other conditions
within a single country. In China, for example, the coastal for doing business are simply non-existent. Support systems,
regions are very well developed while poverty is still preva- such as logistics services, financial services or media that com-
lent in the interior. panies could otherwise rely on, are also lacking because these re-
gions are not sufficiently developed as markets. An analysis con-
Today, the overwhelming majority of people who have to ducted by the United Nations Development Programme (UNDP)
get by on less than $2 per day live in rural areas. But this is identified constraints in five areas.14
rapidly changing. By 2050, the planet will have three bil-
lion more people than it does today. Most of them will live
in the urban slums of developing countries.
Photo: Christina Gradl
Photo: UN-HABITAT
In Madagascar, farmers sell sugar cane and vegetables at the village market. Around one million people live in Kibera,
the largest slum in Nairobi, Kenya.
Photo: UN-HABITAT
In a village in Uthra Pradesh, India, women embroider saris to then sell them.
26 endeva | Inclusive Business Guide
Further reading
• UNDP (2008), Creating Value for All – Strategies for Doing Busi-
ness with the Poor www
• World Bank (2008), World Development Report 2009: Reshaping
Economic Geography www
27 endeva | Inclusive Business Guide
T h e “ W h at ”
Photo: Tiviski
Many families still make their livelihoods from camel herding in Mauritania. Milk, not just from camels, but from cows and goats, is used for
production.
Now that the dairy is a successful venture and less of an adventure, it may
seem less exciting. Even so there is never a dull moment. We are always
developing something new, building something, converting old things,
mending, painting or finding solutions to our growth problems.
Nancy Abdeirrahmane, founder and owner, Tiviski camel dairy, Mauritania18
In September 2000 world leaders came to- Over the past few years, business, as repre-
gether at the United Nations Headquarters in sented by the International Chamber of Com-
New York to adopt the United Nations Mil- merce, has had extensive involvement in the
lennium Declaration, committing their na- many UN and other international meetings
tions to a new global partnership to reduce and conferences that have identified the cru-
extreme poverty and establishing a number of cial components of a global partnership for
objectives to be reached by 2015. They have development and its interlinked priorities.
become known as the Millennium Develop- Together, these conferences reflect a global
ment Goals (MDGs). Over the last five years, consensus on the challenges facing humanity
the rise of corporate social responsibility and and set out a roadmap for cooperative action
the growing recognition that business and by governments, business and other groups in
development objectives often coincide, has society. The focus should continue to be on
placed the private sector at the heart of the implementing these objectives. Poverty eradi-
struggle to raise living standards in emerging cation has emerged as the foremost unifying
economies. priority we face.
and cooperation is the best model – is the best model for helping people to get
out of poverty and paves the way to reaching
Fairtrade cotton is produced in Mali. The women benefit from better conditions and the
buyers from a mark of quality that has become increasingly important
29 endeva | Inclusive Business Guide
T h e “ W h at ”
Tackling the challenges of achieving the MDGs will require concerted
effort and partnership by all actors in society.
Healthy and dynamic societies create new tor has tried to solve this problem with mod-
business opportunities and new markets. At els including mobile phone banking as well
the same time, companies can help make as new financial products for business. Green
possible a healthy and educated workforce, business is becoming mainstream and compa-
2 The
“How”
1. New businesses should be developed in Inclusive business is almost the same as business
close consultation with the target group and on established markets and is yet completely
other local experts to overcome inadequate different. It is similar because it strives to gain
market knowledge and experience. competitive advantage through a clear and at-
tractive value proposition, efficient processes
2. The entire implementation process, includ- and top-class partners. It is different because
ing a successful pilot test, often requires a tough market conditions and lack of experience
much longer time frame and more flexibility hinder business processes and because the part-
in terms of financing and project planning ners are unfamiliar. This section describes the
because so many new factors are involved. conventional business development process in
Cooperation with non-traditional partners companies and gives a step-by-step overview of
like development organizations or the target what companies need to pay special attention to
group itself is usually necessary. Specific in inclusive business projects.
skills are thus required of the company.
The “How”
,
Business development process:
3 phases × 4 steps to inclusive business Adapt the model
10
Transfer
to other
countries
Growth
12
11
Expand locally
Engage partners
09 Understand
06 the impact
Implementation
08
02 05
Secure
funding
Development
03 04
Find solutions
Develop
the product
01
Identify
opportunities Source: endeva
The , business development process is broken down here The information provided in the following chapters can only
into three phases: development, implementation and, ul- reflect the current level of knowledge. Even though many ex-
timately, growth. These phases are further subdivided into periments have already been carried out, we are still far from
four individual steps that become clear in the 3×4 model. knowing what the best practices are. The focus of practical efforts
and theoretical discussions has also been primarily on the devel-
This model aims to structure the existing knowledge on opment and implementation stages. With very few exceptions,
how inclusive business works. In practice, however, busi- mainly in the area of telecommunications and financial services,
ness development almost never takes place exactly as there is little experience with and knowledge of the growth stage.
outlined in this linear 3-phase scheme, and certainly not
when applied to ambitious new development projects in The content below is thus designed more to stimulate reflection
a foreign context. It is often necessary to go back a step than to serve as a blueprint for implementation.
when assumptions prove misguided and efforts fail. The
steps within each phase don’t usually happen in succession
but in parallel. And, throughout the various phases, many
things happen at the same time or in a different order. For
instance, many successful inclusive business projects began
when two partners who shared a common interest came
together and recognized the opportunity this represented.
32 endeva | Inclusive Business Guide
The “How”
Development Analyze the market
02
Development
03 04
Find solutions
Develop
the product
01
Strong local partners Strong partners in the may even include external experts such as els over the medium term. How this goal is
country and region where the development anthropologists or staff from development reached is left up to the people involved. Some
project is to be carried out are critical. Ideally, organizations. companies have also created special “social
companies should also be able to rely on their business” divisions. Some of these divisions
own local structures, be they subsidiaries or Internal leeway Inclusive business pro have even been spun off into non-profit orga
branch offices, and count on their full support. jects often clash with established workflows nizations so that profit expectations no longer
in companies. There is simply not enough hinder the development of these projects.
Interdisciplinary team On the one hand, leeway in research and development or busi Learning experiences and dealing with stake
inclusive business builds on core skills and ness development for “learning by doing”. holders are the focus instead.
established business processes. On the other The CSR department may be responsible for
hand, it requires an open mind for unusual individual initiatives but these projects usually
solutions and sensitivity to other cultures lack resources.
and countries. This collection of skills is best Internal incubators can provide the necessary
assembled in an interdisciplinary team that structures more effectively. These organiza
includes experts in marketing and supply tional units then have financial and human
chain management, in product and busi resources at their disposal to generate a certain
ness development and in local conditions. It number of growth-intensive business mod
34 endeva | Inclusive Business Guide
01 Identify opportunities
Key messages Siemens has an enormous product portfo- Needs: One billion people don’t have access to
lio that spans many different sectors and clean drinking water. The problem is usually the
To identify opportunities for countries. With so much diversity, how quality, contamination makes the water undrink-
inclusive business, it helps to: can the best opportunities for inclusive able or can lead to illnesses.
business be identified? Siemens asked its
• Track market innovations employees by holding an ideas competi- Resources: Siemens has the expertise to produce
through conferences, tion. Among the many proposals submit- water filters and adapt them to local conditions.
competitions, blogs and ted was an idea for innovative water fil- Siemens has offices with motivated experts and
publications! ters which are now already being tested trained staff in many developing countries.
in pilot projects.
• Ask context experts, particu- Eliminating inefficiencies: Until now, many people
larly company employees and had to buy expensive bottled water or journey
development workers! Identifying opportunities in the great distances to reach a clean water source.
core business Clean water can be made available on the spot by
• Get acquainted with the filtering the existing contaminated water. Users
context! In the search for inclusive business op- save time and money.
portunities, the following questions are
These opportunities then relevant: “Where and how can products Leveraging innovation: The Siemens technology can
have to be evaluated and and skills be put to use to create added be integrated into a water kiosk system. Respon-
the most promising pursued value for people living in poverty as con- sibility for managing the kiosks can then be as-
further. sumers? Where and how can they be inte- sumed by the community of users or microenter-
grated as producers?” prises. Payment is made by inserting money. This
keeps operating costs low.
The , ‘Sustainable Ventures Crosshairs’
by UNEP helps to systematically answer This example shows how opportunities can be un-
these questions. It maps out the value cre- covered in the core business for the target group
ation process: resources are transformed to participate as consumers, producers and in
into products and services that meet other roles. Since those seeking out projects may
needs. This creates added value, some for not know everything about the inclusive business
the consumer and some for the producer. context, gathering additional information is use-
This process can be improved by leverag- ful.
ing innovation and by eliminating inef-
ficiencies. To the Siemens team, the Sus-
tainable Ventures Crosshairs might have
looked as follow:
Leveraging
innovation
Opportunities:
(re-)inventing
Resources Needs
transformation
processes
Eliminating
inefficiencies
The “How”
In the future, we intend to focus even more intensely on the
opportunities provided by sustainable business. Peter Löscher, President and CEO of Siemens AG 20
Tracking market innovations Meetings with experts: Experts from companies, development orga-
nizations, academia, financing and intermediaries come together
Business development that integrates people living in pov- at general “inclusive business” conferences and workshops but
erty is gaining momentum and has resulted in a number of also meet in specialized workshops to discuss sub-topics, sectors
innovations in all sectors and regions. The following media and countries. Information about these events is provided by the
and events are good places to find ideas for these kinds of WBCSD and its mailing list on the issue of “development” and
innovations: by specialized mailing lists and social networks such as “Business
Fights Poverty”.
Reports: There are several publications and blogs report on
inclusive business projects that have already proven them- Competitions: Competitions call for the presentation of ideas, case
selves successful on the market. The most comprehensive studies and business plans. Investment opportunities can also be
and current reports can be found on the blog www.nextbil- identified on the basis of these business plans. Well-known busi-
lion.net. ness plan competitions are the World Bank Development Mar-
ketplace, Ashoka’s Changemakers, the Business in Development
(BiD) Challenge and the UN SEED Initiative.
Photos: Siemens AG
The “Safe Water Kiosk” brings The winner of the Siemens ideas The fishermen on Lake Victoria (Kenya) test the lamps charged with solar power.
clean drinking water to competition 2008 “Umeme Kwa Wote”
rural Kenya. means “Light for everyone”.
People who are experts on the local situ- Direct exposure to the context can also bring op-
ation can supply valuable suggestions. portunities to light. Experiencing the market first-
Company employees are also familiar hand is an excellent way to enhance facts and fig-
with the company’s competencies where- ures and makes it possible to ask critical questions.
as development organizations know the The following activities facilitate market “immer-
resources and needs of the target group. sion”:
Employees and business partners: Company Delegation trips: Chambers of commerce typically
employees in developing countries who offer business delegation trips to developing and
come into close contact with the supplier emerging economies. Their programs are not usu-
and sales markets, i.e. particularly those ally designed to develop markets in slums and vil-
working in procurement, sales or delivery, lages but the trips are still suitable for making key
are aware of many of the challenges and contacts and getting a foot in the door.
opportunities the market presents. Exist-
ing mechanisms for employee sugges- Exchange programs: As part of an exchange pro-
tions can be used to capture these ideas. gram, company employees can work in devel-
Special idea competitions like the one Sie- opment organizations and/or invite representa-
mens held send the message that fighting tives of the partner organization to work in their
poverty is one of the corporate objectives. company. The Dutch development organization
This stimulates thought and discussion ICCO, for example, has a program called “Share-
about the issue and generates ideas across People” for young managers.
all company divisions and locations.
Cost-benefit analysis
Added company value
Cost-benefit analysis
Can more of the added social value stay
Low priority in the company?
What additional value is created for
the company?
Low
Source: endeva
37 endeva | Inclusive Business Guide
The “How”
Who will pay how much for the resulting benefits?
Systematically deciding which opportunities Added company value: How much of the added value created will
are most promising the company gain? Who will pay how much for the resulting
benefits? To what extent will public goods such as knowledge
When lots of different ideas are brought together this way, or environmental protection, which are difficult to put into
it is important to choose and pursue the most promising business terms, be generated? What additional value such as an
ones. Two criteria play a role in the , strategic assessment enhanced reputation or expertise will be generated for the com-
and selection process: pany?
Added social value: How many people benefit from the po- Opportunities with a lot of value for society that can also gener-
tential business and to what extent? How will the model ate added value for the company are given high priority. In cases
develop? Are there opportunities for creating even more that are less clear-cut, the costs and benefits have to be weighed
added value by expanding products and services? Can the and the ratio between the two possibly improved by adapting
business grow locally and in other countries as well? the idea.
Further reading:
•M icheal E. Porter and Mark R. Kramer (2006), Strategy & Society: The Link between Competitive
Advantage and Corporate Social Responsibility (Harvard Business Review, 84, p. 78–92)
• S tuart Hart and Erik Simanis (2008), Base of the Pyramid Protocol, 2nd Edition www
•U NEP (2008) Towards Triple Impact - Toolbox for Analyzing Sustainable Ventures www
Cell phones have to meet different needs in slums than they do in industrial countries. Sketch of how a design for a Nokia ideas competition could
look.
Key messages The energy specialists at MicroEnergy In- Conversations with experts bring background under-
ternational are working hard to identify standing more sharply into focus. Development
The target market can be the needs of their target group. To achieve experts can be particularly good sources of infor-
analyzed by: the greatest possible benefit, the energy mation in terms of the needs, skills and difficul-
solution ultimately has to be integrated ties of the target group. Chambers of commerce
• Relying on traditional data into people’s day-to-day lives. Spending and business consultants know what is required
research methods, expert in- one day with a family is often much more of foreign companies and are aware of barriers
terviews and market observa- informative than performing extensive and solutions. Representatives of ministries and
tion Internet research. government agencies are well-versed in the legal
environment and legislation. Experts can also
• Obtaining information from Information about the target market is sometimes provide access to sources of informa-
the target group itself using needed to assess the feasibility of a busi- tion that had previously not been available.
suitable methods ness idea. Do the products and services
meet the needs of the target group? What Observing the market situation on location can help
alternative products and services does this to understand the competitive environment as
group currently use? How willing is this well as risks and opportunities. Lots of new ques-
group to pay for these products and ser- tions and observations arise simply by conscious-
vices? How effective are producers? What ly looking at the market environment – and it is
is the anticipated quality? What barriers easier to find the answers locally, than it is with a
are there to implementation? Unlike on remote analysis. Moods and trends that are diffi-
established markets, this type of infor- cult to sense from a distance can also be perceived.
mation is often not possible to research
from behind a desk or on the phone. This
is compounded by the fact that interme- Obtaining information from the target group
diaries like market research institutes or
business consultants that would be oth- The target group itself is in the best position to
erwise available do not scrutinize these provide information about its own needs, prefer-
markets. Even in cases when this data ences, knowledge and resources. However, there
exists, it is frequently not readily acces- are three difficulties when collecting data within
sible because of the way it is organized or low-income communities:
distributed. It is much easier to research
data on location. However, it is often Culture and language: The person asking the ques-
necessary to conduct one’s own market tions not only has to know the language but also
analysis or to collaborate with partners to understand and be able to deal with cultural id-
collect and organize data. iosyncrasies. For example, in some cultures, it is
considered impolite to answer questions with a
“no”.
Using standard methods
Experience and educational background: In some cas-
Standard market analysis methods can es, people lack the knowledge and experience to
answer some of the questions. answer questions. How should someone who nev-
er owned solar panels before be able to say which
Data research: General data such as the size functions they need?
of the market or the existing production
of agricultural goods is frequently avail- Trust: The relationship between the person asking
able on the Internet. Researching non- the questions and the person answering them af-
digital data on location is also extremely fects the information. People are often ashamed
valuable. Statistical offices, economic and of poverty, e.g. when they are asked about their
agricultural ministries and development consumer habits, or they feel obligated to respond
banks collect data on economic activity even if they don’t know the answer.
such as the amount of cropland planted,
industry revenues and exports. House-
hold surveys on socioeconomic status are
conducted regularly in most countries.
Development organizations conduct
evaluations of their own programs. This
process provides information about the
target group’s needs and structural mar-
ket challenges.
39 endeva | Inclusive Business Guide
The “How”
Using appropriate methods
A number of different methods help overcome these chal- Idea and design competitions: A design competition like the one
lenges and obtain “implicit” information. This is informa- initiated by Nokia gives participants the opportunity to propose
tion not explicitly formulated by respondents because they their own solutions. Language barriers can be overcome by work-
lack distance to their own lives. ing with pictures and drawings. The competitive character and
the possible prizes provide additional incentive to take part.
Visualization: Visual and sensory instruments can provide
support for interviews and focus groups. For example, play A traditional market environment analysis that gives in-depth
money can help deal with the sensitive issue of money. information about market opportunities and constraints can be
Models and drawings can uncover information not men- created on the basis of this information.
tioned in a written or oral survey.
Anthropologist Eva Paul observing a meeting of a microcredit Overnight stay with a family in Uganda Transport of a solar home system to a customer
group in Uganda. to study their energy situation. of Grameen Shakti in Bangladesh.
03 Find solutions
Key messages Smart, the mobile network provider, tar- identity. Process innovations can also be helpful.
gets low-income customers with its prod- Access barriers are lowered by simplifying require-
Successful inclusive business ucts.This strategy has made it one of the ments. At the core of the Smart model are prepaid
models use five strategies to most profitable companies in the Philip- cards available for as little as $0.60. This means
deal with market challenges. pines. The fact that the profit margin is so that people without bank accounts or a verifiable
They: high despite the low prices is a result of address can now use a cell phone which can also
a clever business model that combines a be used for financial transactions.
• Adapt products and process- number of innovative solutions.
es to prevent constraints
Tough market conditions mean that the Investing in removing market constraints
• Invest in removing market costs for transport, communication and
constraints training, quality control and contract In places where it is necessary to remove con-
enforcement can easily eat up profits in straints, companies can shape the market envi-
• Leverage the strengths of inclusive business models. These models ronment themselves. This frequently occurs in the
the poor thus have to find solutions to keep trans- area of information. Companies invest in advertis-
action costs low. The UNDP report “Cre- ing, customer information and training. In some
• Combine resources and ating Value for All” describes five basic cases, companies also offer financial solutions or
capabilities with others strategies for finding solutions to market build infrastructure.
constraints and create a sustainable busi-
• Engage in policy dialog with ness model.21
governments Leveraging the strengths of the poor
Individual solutions can be Adapting products and processes Almost all successful business models take advan-
identified using the strategy tage of the market knowledge and social cohesion
matrix. Constraints can be bypassed by adapt- of people from the target group to gather informa-
ing products. Mobile data transmission, tion, supply products, offer services and informa-
for example, makes cable networks un- tion or convey capabilities.
necessary and makes it easier to pro-
vide information-based services ranging At Smart, credit for talk time can be bought in
from mobile banking to telemedicine. bulk and resold with a surcharge. Around 800,000
New technologies allow electricity and microenterprises make use of this option, with the
water to be supplied off-grid. In some 15% commission contributing to their family’s in-
cases, new identification systems such come. Users can also transfer credit to others by
as smart cards or biometric information SMS which brings the sales system down to virtu-
can replace official documents as proof of ally the household level.
,G
rowing Inclusive Strategies
Markets strategy matrix
Adapt products Invest in Leverage the Combine resources Engage in
and removing market strengths of and capabilities with policy dialog with the
processes constraints the poor others government
Market
information
Regulatory
environment
Constraints
Physical
infrastructure
Knowledge
and skills
Access to
financal services
Source: UNDP (2008) Creating Value for All – Strategies for Doing Business with the Poor
41 endeva | Inclusive Business Guide
The “How”
Smart developed its business model around the
corporate mantra: to make mobile phones as affordable and accessible
to as many Filipinos as possible. Mon Isberto, PLDT and Smart’s Public Affairs Group Head 22
Combining resources and capabilities with others tem, Smart entered into dialog with the government together
with its primary competitor, Globe, and with other companies.
In addition to other companies, public service providers The exchange of information resulted in legislation that made
and development organizations can also offer skills and innovation possible and simultaneously protected the interests
knowledge that round out the business model. In many of consumers and the common good.
cases, they have been active on the target market for quite
some time and have market knowledge, distribution sys-
tems, communication channels and solid relationships. Identifying solutions with the strategy matrix
For its mobile banking business, Smart has built a network
of 10,000 stores and partner banks where the recipient can The five strategies, together with the constraints introduced on
pick up the money. page 26, produce a , strategy matrix. Companies can use this
matrix to develop or improve their own business models. Ev-
It also sometimes makes sense to bundle an industry’s re- ery strategy can, in principle, be applied to every challenge. The
sources to share the investment in removing market con- strategy matrix can thus help identify a number of concrete po-
straints. In India, for instance, several banks got together to tential solutions that should be evaluated for feasibility and ef-
form a rating agency for small and medium-sized compa- fectiveness.
nies (SMEs) to lower the costs of credit checks.
Private companies come up with business Development agencies can put their country-
ideas that successfully take hold at the base of specific expertise to work helping to establish
the global income pyramid, especially when the necessary networks and contacts. Actors
the overall conditions in these countries are in development cooperation are familiar with
conducive to innovation and private sector local conditions and highly experienced in in-
involvement. Development policy helps cre- tegrating poor sections of the population into
ate the right conditions with its focus on sus- the development process and initiating and
tainable economic development programs in facilitating multi-stakeholder dialog.
cooperation with its partner countries.
Because German development policy strate-
There are many private sector ideas for inclu- gically aims at cooperating with the private
sive business projects that, despite their mar- sector, the Federal Ministry for Economic Co-
ket potential over the long run, hardly stand operation and Development (BMZ) created a
a chance of implementation in the short and program for development partnerships with
medium term. The reasons for this can be the private sector (develoPPP.de). develoPPP.de
complex: in addition to inadequate frame- is a public-private partnership program that
work conditions, there is inadequate access was brought to life in 1999 and developed fur-
to information about the relevant markets as ther by the BMZ in 2009. It is aimed at Euro-
well as about the culture, language and needs pean companies and subsidiaries of European
of the people living in developing countries. companies in partner countries. The program
A company that decides to develop products is comprised of three concrete components:
and business models for sections of the popu- • develoPPP.topic provides targeted support
lation living in poverty will face a complex in- to specific sectors where there is a particular
novation process. Development agencies may need for development
be able to help companies overcome these • develoPPP.impulse holds ideas competi-
kinds of challenges. tions for implementation of extraordinarily
promising measures not bound to any par-
For inclusive business models to be successful, ticular sector
they need not only creative ideas and entre- • develoPPP.alliance encourages strategic al-
preneurial stamina, but a well-honed network liances, i.e. large-scale projects usually in-
of cooperation partners: non-governmental volving several companies that focus on the
organizations have often won the trust of the impact of structural improvements beyond
local population and can thus play a key role. a single country’s reach.
Local partner companies know the market
and its consumers inside and out. Political in- Projects have to meet specific criteria to obtain
stitutions and local government agencies can development support, including:
help drive a project forward with their sup- • Relevance for development (particularly
port or hinder it with their skepticism. the anticipated impact on poverty)
• Economic, ecological and social
sustainability
• Complementarity, i.e. public and
private contributions must complement
each other
• Competitive neutrality
• Cost-benefit ratio
SAFO offers us and the local network the support we need to give
the poor and severely undernourished sections of the population
access to fortified food products.
Prof. em. Soekirman, Bogor Agriculture University and director of the Indonesian Fortification Initiative (KFI)
43 endeva | Inclusive Business Guide
The “How”
”develoPPP.de” has been extremely well-received
by the private sector.
”develoPPP.de” has been extremely well- proof of their effectiveness and sustainability.
received by the private sector. This is shown Both partners also keep long-term political de-
not just by the numerous proposals received velopments in mind: eliminating poverty and
by the implementing agencies of the BMZ, it hunger, improving education and healthcare
has become clear in conversations with part- and protecting natural habitats.
ner companies that PPP projects also create
opportunities because private and public part-
ners can each leverage the specific strengths of
the other. Many companies continue projects
that started off as PPPs, thus supplying further
Key messages: D.light designs LED lamps for low-income Cost-optimized design: Products are developed with
consumers in India. While some of the a certain price in mind that the target group can
• Typical characteristics of product expectations these users have are afford. D.light worked to design a lamp that could
products for low-income con- similar to other target groups – aesthetics, be sold for as little as $10.
sumers are: small unit pricing, durability, brightness, affordability, long
shared use, cost-optimized battery lives, etc. – they also have require- Multifunctionality: The target group usually has
design, multifunctionality, ments that are quite out of the ordinary. very few possessions, making multifunctional de-
flexible use, focus on service Because some households only have a vices extremely useful, such as D.light’s feature
rather than product and single lamp, it must be possible to use it for charging cell phones with the lamp battery.
ease-of-use. everywhere: inside the house, on the go In some cases, it is the customers themselves who
or in the fields. And the battery should be find creative uses for the products: when handling
• By integrating producers, un- able to recharge cell phones. Multifunc- complaints from rural China, the appliance man-
usual raw materials and skills tionality is key. ufacturer Haier discovered that customers were
can be used to create unique using their washing machines not only to clean
selling propositions. their laundry but also to clean potatoes and other
Typical product attributes vegetables.
Products have to be consistent with the Flexible use: While customers may often find idio-
needs of the target group and take their syncratic uses for the products they buy, they also
living environment into account. Prod- use them in all kinds of locations. For instance,
ucts that are environmentally friendly in a solar-powered lamp that doesn’t have to be in-
their production, consumption and dis- stalled in a single location but can be used any-
posal take precedence. Certain patterns of where is quite handy.
successful products for people who live in
poverty are already starting to emerge: Focus on service rather than product: It is often easier
to sell services than products because payments
Small-unit pricing: Many day-to-day con- are distributed over a period of time and the risk
sumer products such as shampoo, spices of product repairs remains with the service pro-
or medicine are sold in single-serve pack- vider. In Brazil, IDEAAS charges a monthly rental
ages for a few cents. Single-serve “sa- fee for solar panels installed in households. The
chets” may be more expensive compared fee includes maintenance, repair and service.
to a larger size package but they are more
affordable in this form for customers who Ease-of-use: Products can be designed for intuitive
spend their money as they earn it. This operation to cater to users’ limited ability to read
idea was also put into practice for prepaid or their limited experience. In Peru, ATM’s can be
cell phone cards available in very small operated by voice recognition, even in languages
denominations. spoken by minority groups. Design can also im-
prove product safety. Many farmers die every year
Shared use: A lot of products that require a in India due to poisoning from pesticides. A safe
larger investment can be used jointly by lid and controlled dosage could remedy this prob-
several consumers. This lowers the costs lem.
for the individual. Under the Grameen
business model, cell phones are rented
out by “phone ladies”. Sulabh Interna-
tional offers coin-operated toilet facilities.
45 endeva | Inclusive Business Guide
The “How”
Our products bring the latest deve-
lopments in design and technology
to markets at the base of the
pyramid. Through best practices and
New products made with local resources and skills ongoing solicitation of feedback, we
Working together with people living in poverty can also
give rise to new products. Products with new features could
continually improve and offer better
potentially be developed from special local materials. In products to our customers.
the case of Natura in Brazil, the priprioca plant is the basic D.Light Design 23
ingredient for a new cosmetics line (see case study 4). Local
skills, for example, with handicrafts, can also serve as the
basis for new products. The way these types of products
are developed is no different than conventional business
practice as long as they are sold to known target groups.
Further reading:
• IDEO (2008), Design for Social Impact www
•U NEP and TU Delft (2002), Design for Sustainability – A Practical Approach for Developing
Economies www
Photos: D.Light
The solar lamps from D.light make it possible to read and work even at night.
The “How”
Implementation
Engage partners
06
Implementation
08
05
Secure
funding
05 Secure funding
Key messages The founding partners of the pharma- The positive impact on employee motivation and
ceutical company ATOS were able to rely training, the company’s capacity for innovation
There are three primary on various funding mechanisms from and its reputation can be considerable. This added
sources of capital to finance the Deutsche Investitions- und Entwick- value can help persuade decision-makers to start
inclusive business projects: lungsgesellschaft (DEG). During the or continue projects particularly when start-up
launch phase of its marketing activities, difficulties require additional financial resources.
• The company’s own resources DEG invested share capital in the com-
pany, thus assuming part of the risk. It re- BASF took a look at the total added value gener-
• Government funding ceived funding from the BMZ to sustain- ated for its joint business with the Grameen Foun-
ably grow and process medicinal plants. dation using a , value driver tree. BASF works to-
• Social investors As a long-standing financing partner, the gether with Grameen to offer dietary supplements
DEG thus did its part to make this Ger- in sachets in Bangladesh to fight malnutrition. In
man-Egyptian joint venture a success. addition to the monetary revenues and access to
a new market, BASF reported that this initiative
The sooner that profits can be expected, contributed to responsible corporate governance,
the easier it is to get financing for the to forming partnerships and to establishing it-
project. However, inclusive business proj- self in local communities. The project was used
ects rarely fit into this logic. Risks are of- to communicate both internally and externally
ten high, uncertainties considerable and, and enhanced the perception of BASF as an at-
even in the best-case scenario, profits tractive employer. The various value drivers were
only materialize in the medium or long quantified by comparing them with the costs for
term. Financing thus has to be able to alternative activities within each individual goal.
handle these challenges. It has to be flex- Seen from this point of view, the investment was
ible in terms of outgoing and incoming highly profitable.
payments and have considerable reserves
to be able to cope with delays and unan-
ticipated expenditure. Co-financing with government funding
Business success
Source: BASF SE
49 endeva | Inclusive Business Guide
The “How”
Justifying these budgets can be tricky so it is useful to look at the total
added value generated for the company.
Traditional venture capital investors are not the only inves- In principle, the added social value generated by an inclusive
tors out there. Inclusive business start-ups also have access business project in terms of environment, health, etc. can also
to a number of “social investors” who specialize in fund- be sold as a separate component. Until now, functioning markets
ing business models with added social value, particularly for these services have been largely non-existent. Emissions trad-
to fight poverty. Acumen Fund is a pioneer in the US. The ing, however, has shown that a market can be created for climate
BiD Challenge or Ashoka’s Changemakers, and other busi- protection, a global public good. Certificates turn greenhouse gas
ness plan competitions with a social focus, offer a platform reductions into hard cash.
for social entrepreneurs to present themselves to investors.
The appliance manufacturer, Bosch und Siemens Haushalts-
geräte (BSH), for example, laid the groundwork for selling energy
reductions as certificates by applying to the UN to have its refrig-
erator replacement scheme recognized under the Clean Develop-
ment Mechanism (CDM). These energy savings are achieved by
Further reading: exchanging old, obsolete refrigerators for more energy-efficient
• NCDO and GEXSI (2008), Venture Capital Guide for Development www
• Monitor Institute (2009), Investing for Social and Environmental Impact www
models in Brazilian favelas.
• WBCSD (2004), Finding Capital for Sustainable Livelihoods Businesses www
Photos: ATOS
SEKEM processes raw materials locally for pharmaceutical production. Scientific tests help to ensure the quality of the products.
Case study 13 ATOS Company for Biological Pharmaceuticals S.A.E., Egypt
06 Engage partners
Key messages: Allianz and CARE were able to bundle • Public facilities such as universities, schools,
their skills in India and successfully offer training centers, hospitals and medical facili-
• Successful partnerships microinsurance to low-income customers. ties or agricultural information centers can help
pool core competencies that To develop this market and generate clear convey knowledge and skills for new products,
complement one another. added value, insurance expertise had to services or production methods. Communica-
be combined with knowledge about and tion through these institutions lends the neces-
• When working with non- access to the target group. sary credibility.
traditional partners, different
interests and organizational Most companies source services external-
cultures have to be kept in ly. This is more efficient than doing every- Taking different interests into account
mind. thing in-house because other companies
can be faster and cheaper due to their These atypical partners usually don’t just of-
• Clear objectives and expertise and size. Inclusive business is fer a service in return for money. Their focus is
responsibilities are the basis no different from regular business mean- more commonly on achieving social objectives.
for successful collaboration. ing that companies should always focus The business model has to help accomplish their
on their core competencies. But service mission, e.g. improving the quality of life or the
• Intermediaries can help providers are not as widespread in devel- income of the target group in question. As a re-
identify partners. oping countries as they are in developed sult, these partnerships are often more similar to
markets. In addition, the partners need joint ventures: both partners define their goals
special skills to tackle the challenges they and roles and are responsible for carrying out the
face in low-income markets, e.g. with re- tasks assigned to them. Payment does not usually
spect to the skills of the target group and change hands for services or, if it does, it is usu-
unreliable legal systems that often have ally a small amount. Whether or not the partner-
to be replaced by trust. Therefore, compa- ship lasts depends to a great extent on whether
nies frequently work together with non- all of the partners play their part and the set goals
traditional partners such as development are achieved. A transparent and ongoing impact
organizations, cooperatives or govern- analysis is thus needed.
ment organizations.
The organizational cultures can also vary signifi-
cantly from those of private-sector companies:
Bundling core competencies
• Government development organizations and
There are many examples of cross-sector institutions use public monies and are subject to
partnerships. Several models already ex- strict rules. Project time frames are limited and
ist for specific tasks that are based on the binding agreements can only be made within
core competencies of the actors. the project framework.
• Civil society organizations give greater priority
• Thanks to their well-organized and far- to participation and dialog over efficiency and
reaching networks of borrower groups, rapid growth.
microfinance institutions can, in addition • Cooperative organizations are based on volun-
to selling financing solutions, take on tary participation. Decisions cannot be enforced
responsibility for sourcing and training from the top down but have to have the support
of producers, for marketing communi- of all members. The partners have to work to-
Further reading:
cation and consumer sales. gether intensively to coordinate processes and
• Global Compact, Dalberg Global Develop • Local development organizations usually project planning so that differences in decision-
ment Advisors and the Financial Times have trusted relationships with the tar- making and implementation processes are ac-
(2007), Business Guide to Partnering With
NGOs and the UN www get group. Development organizations counted for.
• Johanna Mair and Christian Seelos (2007), thus often assume responsibility for
Profitable Business Models and Market
tasks that require direct contact with
Creation in the Context of Extreme
Poverty: A Strategic View the target group such as training and
(Academy of Management Perspectives 21, information, organization and quality
Vol. 21, Nr. 4, p. 49–63)
• Ros Tennyson (2003), The Partnering
control, distribution and customer ser-
Toolbook www vice.
• WBCSD, IBLF (2003), A Business Guide
to Development Actors – Introducing
Company Managers to the Development
Community www
51 endeva | Inclusive Business Guide
The “How”
Together with our partners, we have been
able to sell our insurance policies to 3.8 million customers.
Michael Diekmann, Chairmann of the Board of Management, Allianz SE 24
Clearly defining processes important basis for a successful partnership and can help solve
conflicts. A clear division of duties also makes implementation
A written partnership agreement helps to clearly define ex- more efficient because unnecessary decision-making cycles can
pectations. It documents: be avoided.
Photos: Allianz
Women hold their first insurance policies in their hands. Many are skeptical about whether promises will be kept at the beginning. As a result, the advantages and function
are explained at large events like the one shown here in Kerala, India.
Key messages: The financial needs of small traders in Establishing contact with the target group
Ghana are served by money collectors
• Local people can effectively known as “Susu”. Typically, the collector Local people can help, particularly when it comes
take over tasks that require makes his daily rounds, collecting a fixed to dealing with the target group. As employees or
contact with the target group amount of money from each customer. business partners, they can, for example, assume
and benefit from additional He pays out the deposits at a later time, responsibility for sales and customer service. The
income. acting as a human savings account. Bar- Susu visit their customers every day, manage their
clays stood to gain from the close contact savings, extend loans and help solve problems.
• Training local staff and busi- between the Susu and their customers.
ness partners is important. And the bank’s services (accounts, loans Local staff can contribute added value throughout
and skill development) were attractive to the entire business development process if com-
• Partners can help integrate the Susu and improved their range of ser- panies:
local people. vices. • include them in market research,
• involve them in the innovation process,
Anyone who wants to do business in the • train and engage them as trainers and team
slums and villages of developing countries leaders,
stands little chance of success without the • deploy them in sales and establish logistics net-
support of local people. They know their works,
neighbors and their neighbors’ needs and • train and establish them as local service provid-
skills. They are familiar with common, ers.
everyday obstacles, speak the same lan-
guage, trust one another and are part of Additional income is generated when the local
the social network. This makes them an population is integrated. The Susu, for example,
indispensable resource for inclusive busi- can now offer more services, like loans, which
ness projects. they also profit from financially. A role in an
inclusive business project as a service provider,
trainer or salesperson can also boost an individu-
al’s standing. And finally, the skills and knowledge
acquired in this role create additional opportuni-
ties for both the company and the employee.
Photo: Barclay’s
The “How”
picked up in training sessions or “on-the-job”. It is only Barclays, in contrast, works directly with the Susu. Local inhabit-
when this knowledge and these skills are provided that the ants are most effectively integrated into a company’s business
success of projects can be assured. when tasks can be standardized and work does not have to be
monitored because strong incentives exist to turn in the best
possible performance. This is the basis of “microfranchise” mod-
Structuring collaboration els such as VisionSpring (see case study 20). Status gains are also
key. In India, for example, 6,500 farmers coordinate and admin-
Local employees and business partners are often integrated ister publicly accessible Internet kiosks that ITC uses to purchase
through partner organizations. Companies can leverage goods from the farmers (see case study 19). Not only does this
the core competencies of these organizations for training, role provide them with an Internet connection and IT equip-
organizing and motivating local staff. For example, it is ment, their standing within the community is also enhanced.
not Danone itself that organizes yogurt sales in Bangladesh
but its local partner, the Grameen Foundation, which can
rely on its well-organized network of women known as
Further reading
the “Grameen Ladies” who are part of the bank’s borrower
•B eth Jenkins et al. (2007), Business Linkages – Lessons, Opportunities and Challenges www
groups. • J ason S. Fairbourne and Stephen W. Gibson (Ed., 2007), MicroFranchising : Creating Wealth at the Bot-
tom of the Pyramid (Cheltenham: Edward Elgar Publishing)
Photos: Barclay’s
Susu money collectors at the market in Ghana. Their customers make A Susu customer with an informational brochure from the Barclay‘s Initiative.
regular deposits into the “human bank account”.
Key messages Protos, the plant oil-powered cooker from Testing the individual components
BSH for poor households in developing
The following approaches countries, went into large-scale produc- A good way to reduce the complexity of the pilot
have proven useful for testing tion in the spring of 2010. Developing the test is by testing the individual components of the
the model: technology, product and business model business model. BSH, for example, worked togeth-
until they were ready for the market was er with focus groups to find out whether the prod-
• Schedule time and resources an arduous journey. Experiments were uct met user needs. BSH then collaborated with a
for several cycles of conducted in several pilot tests on design, cooperative to test the availability of plant oil and
adaptation production, oil supply and financing un- to test use of the cooker in the village. This was
til all of the different pieces fit together. followed by experiments with pricing to under-
• Test individual components stand the willingness of users to spend money. Al-
of the model step-by-step During the testing phase, problems were ternative financing models such as emissions cer-
fixed and the model adapted until a de- tificates were also tested as compensation for the
• Keep an open mind about gree of efficiency and standardization was environmental and health benefits of Protos. This
results reached that would make it possible to kind of step-by-step process also made it possible
achieve widespread implementation. to gradually win over skeptical partners by provid-
ing evidence of the feasibility of the project.
The “How”
Photos: BSH
Protos cooker in a material test at the University of Hohenheim, Germany. The cooker can be used indoors and out- The customer is visibly satisfied at an
doors, here in use in the Philippines. introduction to how to use the Protos in
Jambi, Indonesia.
The Protos technology and the corresponding business model prove that
it is possible to serve some of the poorest families with high quality,
affordable and environmentally friendly products.
Samuel N. Shiroff, PROTOS project manager, Bosch und Siemens Hausgeräte GmbH 27
Case study 16 Bosch und Siemens Hausgeräte GmbH, Indonesia and the Philippines
BSH Protos – a successful product comes into being over a low flame
The added value offered by the Protos cooker Protos underwent a pilot test from 2003 to BSH received support during the pilot test
from Bosch und Siemens Hausgeräte GmbH 2006 on Leyte, an island in the Philippines. from the DEG through the BMZ’s PPP pro-
(BSH) for rural households in developing Project manager Samuel N. Shiroff explains: gram. In addition to providing funding, the
countries is clear: it costs only around $50, is “Visayas State University turned out to be the DEG also helped with local contacts and
durable, is powered by plant oil rather than ideal partner for us. It is one of the leading through its experience working with local ac-
expensive kerosene, emits no smoke and institutions in the Philippines for plant oil tors. Although the field test proved success-
doesn’t smell bad. Still, it took several years research. Testing conditions were also ideal ful, BSH eventually decided that the market
for a functioning business model to emerge. because the island has agricultural, village conditions for mass introduction were riper
Development of Protos got underway at the and urban structures. And there is a large elsewhere.
University of Hohenheim in 1998. It went into supply of coconut oil available.”
Following tests in other countries, Protos
large-scale production in Indonesia in the
A number of challenges had to be overcome went into production in the spring of 2010 in
spring of 2010.
in the testing phase: in addition to continu- Indonesia. Around 3,000 units are planned to
Product development and implementation ously adapting the product to meet customer be produced in 2010 with a total capacity of
were extremely complex: Dr. Elmar Stumpf needs, it was also important to ensure a 50,000 per annum in the coming years. The
had experimented with the technology while reliable supply of plant oil. This goal was Protos will be sold initially only in Indonesia
working on his PhD. It caught BSH’s attention achieved by involving a coconut cooperative. but other countries will follow. Protos’ devel-
in 2003 and they hired Stumpf to develop a The farmers were able to sell the oil directly opment is certainly far from over.
product for the low-income market. Proto- to BSH, thus giving them better margins. The
types were designed, tested with the target company also wanted to manufacture the
group and modifications made until finally, cookers locally. To make this happen, BSH
in 2009, the Protos technology proved ready had to identify and train producers. Sources:
for market. •B
SH (www.plantoilcooker.com),
•H
edon – Housework Energy Network
(www.hedon.info/BP56:ProtosPlantOilStove),
•B
ioEnergy Lists (www.bioenergylists.org/bshprotosupdate),
TZ (08/2008), PPPreport, p. 4–5 www
•G
56 endeva | Inclusive Business Guide
The “How”
Growth
Adapt the model
10
Transfer
to other
countries
Growth
12
11
Expand locally
09 Understand
the impact
DO , Incorporate the impact analysis into the manage- DON’T Fail to systematically monitor business objectives.
,
ment process and clearly structure it with a view to
goals and expectations.
Key messages When Manila Waters took over respon- To create a comprehensive picture of the various
sibility for managing Manila’s water sys- effects of the business, the analysis should be con-
Inclusive business models tem, it also had to commit to pursuing ducted with the following , three perspectives in
usually pursue various social and environmental goals. Assessing mind:
economic, social and envi- these goals on an ongoing basis is thus es-
ronmental goals. To achieve sential to the company. But even beyond Stakeholder groups: What impact do the business
these goals more effectively, these requirements, the company mea- processes have on the various stakeholders, from
a solid understanding of sures its accomplishments to ensure that employees, suppliers and customers through to lo-
the impacts is necessary. its own standards for sustainable corpo- cal communities and finally on society as a whole?
Depending on the goal of rate governance have been met. Manila Water improves the water supply of thou-
the analysis, three steps are sands of households and creates income for mi-
necessary: Inclusive business projects, in addition croenterprises and employees. These improve-
to setting purely profit-based targets, ments, however, represent losses for people who
• Mapping the impacts frequently also pursue important social, sell bottled water.
environmental or business objectives
• Measuring the impacts such as reputation or employee motiva- Impact area: What are the social, environmental
tion. These goals are defined, on the one and economic effects? Manila Waters’ activities
• Comparing the impacts hand, by internal needs and expectations positively affect its customers’ health and quality
and, on the other, by the expectations of life and their expenses and income. Its activities
of investors, regulators and interested also reduce water losses. Having to relocate fami-
members of the general public. The im- lies because new pipes are being built has been a
pact analysis, because it strives to monitor negative impact.
multiple objectives, has special require-
ments for each step as the framework in Life cycle stages: What is the impact of the busi-
UNEP’s “Towards Triple Impact” shows. ness in the individual phases of its life cycle – from
acquiring raw materials through to the impact
caused by the use of such materials? When ac-
Mapping the impacts quiring water as a raw material, there is a risk that
reservoirs are overused and the environment dam-
It is important to have a solid under- aged. If there is no sewage system, waste water can
standing of how a business can impact have a negative impact on the environment and
others so that risks and opportunities can hygiene.
be mapped early on. If third parties are
negatively impacted by the business – for The impacts can be documented and character-
example, by pollution – it can meet with ized systematically in a table. The result is an ex-
resistance that can affect whether or not tensive overview that also includes indirect and
the business is successful. If, on the other undesirable effects not often identified without
hand, the effects are positive, they can be this kind of systematic analysis.
included in the added value, thus improv-
ing the result. If the assessment shows, for
instance, that the business improves the
company’s reputation, this effect can be
included in the analysis as a criterion.
The “How”
Measuring the impacts Comparing the impacts
Measuring indicators is useful for internal monitoring and Sometimes, it is essential to compare the actual and planned im-
controlling whether the project is successful or not. These pact of various inclusive business projects. If, for example, inves-
measurements are also helpful for external communication tors or executive managers are trying to decide which projects
with investors, regulators and the general public. they want to fund, they need a quantitative basis.
For internal project management, the parameters and in- Just as in normal business practice, projects are easiest to com-
tervals have to be closely linked to the needs of project pare on the basis of their financial performance. Frequently,
management. In line with this, the explicit project goals however, the non-financial goals take priority over financial ones
and the key indicators that provide insight into the success in inclusive business projects. How these goals are weighted in
of the project are tracked. Some of these indicators are only relation to one another has to be clear for the results to be con-
monitored to keep an eye on the risks and opportunities clusive. The effects can also be assigned a monetary value, for ex-
associated with them. Others are linked to specific goals. ample, by comparing them to the costs of potential alternatives,
e.g. the costs of an advertising campaign or employee training.
The requirements stipulated by investors or regulators and Even though this method doesn’t differentiate between the dif-
the interests of the general public determine the indicators ferent priorities given to the goals, an overview of the return on
needed for external communication. investment calculated in these terms can be useful for effective
communication within the company.
It is advisable to use established indicators for measure-
ment so that the project can be compared to other proj-
ects. There are several methods used to measure the
multi-layered social, economic and environmental effects
of inclusive business projects. The Impact Reporting and
Investment Standards (IRIS) project, which is comprised
of several large social investors, has developed a list of ref-
erence indicators designed to serve as a general standard Further reading:
in the medium term. Companies whose reporting is based •G lobal Reporting Initiative – Reporting Framework: www.globalreporting.org/ReportingFramework
• I mpact Reporting and Investment Standards: www.iris-standards.org
on the requirements set by the Global Reporting Initiative
•O lsen and Brett Galimidi (2008), Catalogue of Approaches to Impact Measurement www
(GRI) can also find relevant indicators here. • Ted London (2009), Making Better Investments at the Base of the Pyramid
(Harvard Business Review, Mai 2009)
•U NEP (2008), Towards Triple Impact – Toolbox for Analysing Sustainable Ventures in Developing
Countries www
• WBCSD (2009), Measuring Impact – Framework Methodology www
Key messages: For many years, Aravind continuously Systematic assessment of the
adapted its business model to get closer determinants of success
• Experience and reference to its goal of restoring vision for 9 million
models are often lacking people. Its greatest asset – its well-trained A systematic assessment of the , factors that will
when it comes to adapting and motivated staff – always formed the determine the success of a venture is helpful when
models for inclusive business. basis for the model, lending it increased identifying courses of action. Following UNEP’s
efficiency and scope. Where skills were “Towards Triple Impact”, a distinction can be
• It is thus useful to assess lacking internally, for example, in the made in this assessment between the factors that
the current enablers and production of the lenses, the company are currently affecting the success of the venture
constraints as well as future formed partnerships with other compa- and those that will affect it in the future and be-
opportunities and risks to nies. This strategy has already made it tween positive and negative factors. Factors can
identify different courses of possible for Aravind to perform 2 million also be other actors and financial, non-material or
action. operations free of charge for people who material resources or processes.
are extremely impoverished.
Constraints: Who adversely affects the venture?
Growth usually entails continuous ad- What resources are lacking? Which processes
aptation of the model to reach the goals within the value chain don’t work well? For Ara-
more effectively. However, it can be more vind, the constraints preventing it from treating
difficult to identify courses of action the greatest number of people with vision prob-
in inclusive business because there is a lems were: the length of the operation, ignorance
shortage of experience, reference models on the part of those affected and the costs of med-
and established “best practices”. ical materials.
Now Future
Time
Source: UNEP (2008)
Towards Triple Impact – Toolbox for Analyzing Sustainable Ventures
61 endeva | Inclusive Business Guide
The “How”
We have to do more
to generate demand.
Most of this blindness is
needless and curable.
Defining concrete measures We have to eradicate
The alternative courses of action can be identified based on
an analysis of this kind that looks at the factors that make
all needless blindness.
Dr. V., former CEO, Aravind Eye Care System 28
a venture successful. They can be assessed based on their
anticipated contribution to the success of the venture and
their feasibility, ultimately giving rise to concrete measures
for adapting the model.
Further reading:
NEP (2008), Towards Triple Impact – Toolbox for Analyzing Sustainable Ventures www
•U
uhammad Yunus (1997), Banker to the Poor – Micro-Lending and the Battle against World
•M
Poverty (New York: PublicAffairs)
While one patient is being operated on, the next patient is being readied on the next table. Aravind is a master of efficiency - an operation lasts only 10 minutes. The result?
More that 300,000 people regain their sight every year.
11 Expand locally
Key messages: Within just 10 years, ITC has successfully Broadening regional presence requires
integrated 40,000 villages and roughly standardization
• Inclusive business can 4 million farmers into its supply chain
expand in three directions: through 6,500 Internet kiosks. The pro A high degree of standardization is helpful in suc-
through broadening its ject was able to reach this scale thanks cessfully scaling up a venture. Simplification facil-
regional presence, through to a very structured and standardized itates transferability. Collaborating with a single
widening its portfolio, and growth process. development organization that covers the entire
through deeper target group target market of a country is much easier than
penetration. The , total volume of an inclusive busi- working together with lots of local organizations.
ness venture is determined by its expan- Outsourcing the same set of tasks to external part-
• Standardized processes make sion in three dimensions: ners is easier than negotiating a new allocation of
it easier to expand quickly. responsibilities time and time again. The less de-
Breadth: implementation of the project in pendent on specific partners or local conditions
other regions. For ITC, this meant estab- the business model is, the easier it is to expand.
lishing kiosks in more and more villages. ITC has a clearly defined process for setting up its
e-kiosks in new regions.
Width: purchase or sale of other products
and services. The e-kiosks can be used by It is therefore no surprise that the greatest success-
farmers for more than selling crops, they es in scaling up ventures have been in mobile te-
can also buy seeds, pesticides and a host lephony. Smart Communications reaches approx.
of other products. 80% of the population of the Philippines with its
pre-paid telephone service (see case study 10). In
Depth: further penetration of the target the three years up to March 2010, M-PESA, the
group or targeting of other groups. Using mobile money solution that Safaricom offers cus-
the same example, integrating all of the tomers in Kenya, had signed up almost 9.5 million
farmers in the vicinity of an e-kiosk and customers; around 10,000 new users are currently
integrating other people who could also added every day (see case study 1). Mobile data
order products using the Internet kiosk. transmission doesn’t depend on local infrastruc-
ture; much of the sales and services can even be
digitized and standardized.
The “How”
Over the next decade, the e-Choupal network will cover more than
100,000 villages, representing one-sixth of rural India,
and create more than 10 million e-farmers.
S. Sivakumar, CEO of ITC’s agri-business division 29
The target group can be more deeply penetrated over the The usual approach used when targeting customers is to go down
course of a project as a result of several different effects: the income pyramid, i.e. start with customers who have low av-
erage income and work down to those with very low income.
• The efficiency of the venture increases through the ef- This same logic can be applied on the production side: start by
fects of scale and learning. These increases in efficiency integrating a few medium-sized producers and then integrate
can be used to further lower the price of products, mak- many small producers.
ing them attractive to an even wider range of customers.
• With time, the company becomes more familiar with
the target group’s needs. And, the target group becomes
Further reading:
more familiar with the products and services. They can
•M ichel Bachmann and Patrick Vermeulen (2008), Scaling at the Bottom of the Pyramid (Working Paper)
be adapted to more effectively meet the needs of the tar- • J osefina Bruni Celli, Rosa Amelia González, and Gerardo Lozano (2010)
get group, enhancing the benefits and further expanding Market Initiatives of Large Companes Serving Low-Income Sectors
in: SEKN (2010) Socially Inclusive Business – Engaging the Poor through Market Initiatives in Iberoamerica
demand. • David Lehr (2008), Microfranchising at the Base of the Pyramid www
Farmers look at market prices together in the “e-Choupal”. This helps them sell their crops more efficiently.
Key messages: VisionSpring has accomplished what only Where can it work?
a few inclusive business ventures have
• Standardization and simplifi- been able to do: make the leap to other Some markets are particularly suited to inclusive
cation are essential. countries. This could be due in part to the business ventures. This is evidenced by the large
fact that eyeglasses look pretty much the number of existing examples in a small number
• All markets must be selected same everywhere in the world and have of countries including Brazil, India, Mexico and
as carefully as the first one. It the same function. However, this is also South Africa. The authors of the study “Emerg-
is possible that the model will certainly a result of the model’s clear sys- ing Markets, Emerging Models” conducted by the
need to be adapted. tem which can be easily implemented by Monitor Group maintain that countries with the
other organizations. following three attributes are particularly suitable:
• International partners can be
helpful. Large domestic markets: India is the largest market
Standardized processes population-wise with almost 1 billion people who
live on less than $3,000 per year. Generally speak-
The principles for regional expansion also ing, countries with a large low-income population
apply to transferring the business model offer more opportunities for growth than those
to other countries: the more standardized with a small, widely dispersed population.
and straightforward a model is, the easier
it is to implement it in other environ- A decent private economy: good conditions to exper-
ments. VisionSpring is the ideal model iment with new models may exist in places with
with its “Business in a Bag”. a conducive legal system and a solid landscape
of small and medium-sized companies. An active
informal sector is also a good sign: it shows that
Exhaustive selection of the target country people living in poverty already produce goods
and services and are also able to pay for them.
Before the target country is selected, the
basic conditions for successful implemen- A robust civil society: development organizations,
tation must be in place. These include cooperatives and other civil society groups are im-
favorable market conditions, particularly portant as partners and experts when setting up
the political and legal environments. inclusive business ventures. It is also not uncom-
Analyses like the “Doing Business” stud- mon for them to drive innovations and find new
ies published by the World Bank or business models.
sector-based country comparisons help
assess these factors. However, it can be
more effective to talk to experts like staff International partners
working in in-country subsidiaries, inter-
mediaries, export consultants or develop- An international partner can make it easier to
ment organizations. And, it goes without transfer the model to other countries. If designed
saying that basic information about the from the outset to be an international partner-
new market, like demand and competi- ship, the business model can be developed with a
tive environment, has to be gathered. view to possible expansion to other countries and
The business model is thus adapted to the the expertise of local branch offices incorporated.
new market by means of market research,
model development and pilot tests.
Further reading
•W
orld Bank Doing Business: www.doingbusiness.org
•C
SR Weltweit: www.csr-weltweit.de (English version available)
onitor Institute (2009) Emerging Markets, Emerging Models –
•M
Market Based Solutions to Challenges of Global Poverty www
65 endeva | Inclusive Business Guide
The “How”
Photos:John-Michael Mass/Darby Films
VisionSpring works together with BRAC in Their almost 70,000 healthcare work A patient at a vision check in Ghana.
Bangladesh. ers will also distribute glasses soon.
Publicity for the visit from VisionSpring in a village in India - it is important to get
people‘s attention! This seamstress in Nicaragua can do her work again better with glasses.
Countries
with potential
3 The
“Where”
1. The countries presented here are national The following country profiles provide an initial
economies with a large low-income popu- look at potential opportunities and challenges
lation. In addition, many companies from for inclusive business ventures and identify local
within and abroad are already active in these contacts. There is also an upper and middle class
countries. Many companies from abroad in each of the countries selected but the profiles
have sales partners, sales offices or even relate to the target group at the lower end of the
their own production sites and subsidiaries income pyramid.
in these countries.
There is no universal recipe for selecting a coun-
2. The showcased sectors offer sales and try as a market for an inclusive business venture.
sourcing opportunities in the context of Just as is standard business practice, all of the key
poverty. For people living in poverty, these factors have to be reviewed: market size, target
opportunities are important with respect to groups, competitors, legal system, etc. General
satisfying basic needs, increasing foreign trade recommendations apply here just as
productivity and generating income. they do for all international business and can be
found, for example, in the information provided
by the foreign chambers of commerce.
67 endeva | Inclusive Business Guide
The “Where”
The following countries are described:
• Brazil
• China
• India
• Mexico
• Russia
• South Africa
More in-depth information and support for inclusive business projects in many countries can be obtained from the following institutions:
Bertelsmann Foundation, Bertelsmann Trans CSR WorldWide (online portal), information on UNDP Growing Inclusive Markets World Bank, “Doing Business Reports”
formations Index project 2010 – ranking with areas of activity, legal systems, contacts and case Case studies database by country and sector information on the market environment in
information about the development level of studies in 28 countries | www.csr-weltweit.de www.growinginclusivemarkets.org 181 countries
democracy, market economy and management www.doingbusiness.org
in 125 countries UN Global Compact, local networks of compa WBCSD, local networks offering seminars and
www.bertelsmann-transformation-index.de nies and other actors seeking to implement the workshops in many countries
Compact’s principles in over 80 countries www.wbcsd.org
www.unglobalcompact.org
68 endeva | Inclusive Business Guide
Brazil
Population: Brazil is the largest country in Latin The example of the cosmetics company Natura is
201.1 million (2010 estimate) America and it has an efficient market described on page 21.
economy. The social policies of the Lula
Percentage of the population
with an income < $3,000
administration have already lowered the Casas Bahia is the largest retailer in Brazil. It offers
(in purchasing power parity): unemployment rate and reduced poverty low-income customers consumer credit and in-
70.7% (2005) over the last few years through programs stallment purchases with little red tape but charg-
such as “Fome Zero” to fight hunger or es high interest rates and the products are often
GDP (nominal):
the youth employment program “Primei- of mediocre quality. Customers usually accept this
$1.499 trillion (2009 estimate)
ro Emprego”. because it is the only way they can make purchas-
Average GDP growth per year, es of expensive items like furniture or electrical
1997–2007: Most of the people living in poverty appliances. The success of Casas Bahia exposes a
2.8% (78.2%) are based in cities. The desert- need – and a large market niche.
like regions in the northeast of the coun-
GDP / per capita
(by purchasing power parity): try are extremely poor. Many Brazilians Sadia, one of the world’s leading producers of
$10,200 (2009 estimate) have inadequate access to basic services: food, supports more than 3,500 swine producers
10% do not have access to clean drinking in reducing greenhouse emissions through the
Percentage of income water, 25% don’t have sanitary facilities. use of biogas systems within the framework of
< $3,000
(in purchasing power parity)
Bank services are very expensive and only its “Sustainable Swine Production Program”. The
of total income: 43% of Brazilians have access to financial emission reductions can be sold as carbon credits.
22.6% (2005) services.
Unemployment rate:
On the other hand, Brazil has a great
7.4% (2009 estimate) abundance of natural resources that could
Gini coefficient 2009: be used as a source of procurement. One-
0.55 third of the country is covered by rain for-
Contacts
est. Working with local communities can
HDI ranking 2009: open up access to valuable raw materials Avina Foundation Networking and financing for sustainable development
75 / 182 and, at the same time, protect the forest.
projects in Latin America | www.avina.net
CPI ranking 2008: The country is also the world’s largest pro- BoP Learning Lab Brazil Networking and information exchange about BoP
(particularly distribution) | www.ces.fgvsp.br
75 / 180 ducer of biofuel, the production of which
is often associated with poor conditions New Ventures Brazil Part of the “New Ventures” program of the WRI, incubator
and consultancy for inclusive business | www.new-ventures.org.br
for harvest workers. On the highly com-
Plano CDE Market research company specializing in low-income households |
petitive energy market, integrating small
www.planocde.com.br
farmers and treating employees well can
serve as a unique selling proposition.
Market size
The “Where”
China
To date, most examples can be found in Chinese More than 30 years of market economic Population:
corporations. In 1998, Haier developed washing reforms have changed China drastically. 1.33 billion (July 2010 estimate)
machines that made it possible for farmers to The rapid pace of industrialization has
Percentage of the population
wash their potatoes or other harvested crops in meant a better standard of living and ex- with an income < $3,000
the machine without clogging the drain. Goat cellent road networks have improved the (in purchasing power parity):
cheese can be made with a newer model. infrastructure. Despite these economic 80.8 % (2005)
successes, four out of five people in China
GDP (nominal):
The state-run company China Mobile set up an still live on less than $3,000 per year.
$4.814 trillion (2009 estimate)
“Information Network Platform” in rural areas
in 2006 to give farmers access to market informa- The government has launched various Average GDP growth per year,
tion. And it has been successful: in 2006 alone, state-backed measures to fight poverty: 1997–2007:
the customer base of China Mobile doubled in ru- domestic economic growth is stimulated 9.5 %
ral regions from 26 million to 53 million. through regional assistance programs,
GDP / per capita
and consumer assistance programs guar- (by purchasing power parity):
The largest newsprint manufacturer in China, antee farmers a 10% to 50% discount on $6,600 (2009 estimate)
Huatai, has been producing paper from renewable cars and electrical appliances. The income
raw materials since 2000. It engaged 6,000 house- of farmers improved after the agricultural Percentage of income
< $3,000
holds to plant the rapidly growing trees and thus tax was eliminated in 2006. (in purchasing power parity)
increase their household income. of total income:
The gap that exists between cities and ru- 55.2 % (2005)
ral regions is one of the greatest obstacles
Unemployment rate:
to achieving balanced development of
the national economy. 560 million Chi- 4.3% (2009 estimate)
nese live in cities and 750 million live Gini coefficient 2009:
in rural areas. Three times as many chil- 0.415
dren attend higher-level schools in cit-
Contacts
ies than in the country and this figure is HDI ranking 2009:
BoP Learning Lab China Networking and information exchange at the even higher for universities, reaching 68 92 / 182
Tsinghua University |
www.johnson.cornell.edu/sge/programs/sgeichina.html
times as many. 300 million Chinese in ru- CPI ranking 2009:
ral areas don’t have clean drinking water; 79 / 180
International Poverty Reduction Center China Partnership of the Chinese the cooperative healthcare system only
government with UNDP, World Bank, ADB and DFID | www.iprcc.org.cn
reaches around 25% of a rural areas.
New Ventures China Part of the “New Ventures” program of the WRI,
incubator and consultancy for inclusive business | www.new-ventures.org.cn
Pollution and the demand for energy
are steadily on the rise as a result of the
rapid industrialization and the improve-
ment in individual standards of living.
China is the second-largest producer of
greenhouse gases, the water in many riv-
ers is undrinkable and the soil is depleted. Market size
Small farmers in particular have to deal
Around 1.1 billion people in China
with the consequences.
make do with less than $3,000 per
year. China, along with India, is the
Several hundred million small farmers largest market for inclusive business
could act as suppliers for food producers. ventures. Poverty is most widespread
in the northwest provinces and in the
All services and products that increase the
countryside. The study “The Next 4
productivity of farmers, for example, pro- Billion” unfortunately does not contain
viding information services or resilient any data about China.
seeds, would find a huge market.
70 endeva | Inclusive Business Guide
India
Population: The Indian economy has grown rapidly In India, there are many good examples of inclu-
1.173 billion (2010 estimate) since the markets were deregulated in sive business ventures that are frequently driven
1991. By 2050, India will not only be by Indian companies or local social entrepreneurs.
Percentage of the population
with an income < $3,000
the most populous country in the world, Several of them were already presented as case
(in purchasing power parity): it will also be the third-largest national studies: microfinance providers Grameen and SKS
95 % (2005) economy after the US and China. India Microfinance (p. 19), D.light with its LED lamps
is a stable democracy with a highly quali- (p. 45), the Allianz microinsurance program (p.
GDP (nominal):
fied elite. 51), Aravind eye clinics (p. 61), ITC and the “e-
$1.095 trillion (2009 estimate)
Choupals” Internet kiosks (p. 63) as well as the
Average GDP growth per year, Still, around 95% of the Indian popula- microfranchise VisionSpring selling eyeglasses (p.
1997–2007: tion lives on less than $8 a day. Poverty 65).
6.9 % in India is primarily a rural problem. 78%
of those living in poverty are in the coun- The goal that Sulabh has set for itself is to improve
GDP / per capita
(by purchasing power parity): tryside. the poor hygiene conditions in India. This social
$3,100 (2009 estimate) enterprise provides coin-operated toilets in urban
There are many indications for poverty: slums. It also provides affordable sanitary facilities
Percentage of income 85% of Indians living in rural regions for homes.
< $3,000
(in purchasing power parity)
have no access to sanitary facilities, 45%
of total income: of children are underweight and an esti- Reuters Market Light offers farmers information ser-
92.7 % (2005) mated 44% of the workforce can barely vices via mobile-based text messaging. Localized
read and write. weather forecasts, advice about crops, market data
Unemployment rate:
and crop prices and relevant policy and national
10.7% (2009 estimate) Currently, around half of all value cre- and international news allow farmers to make in-
Gini coefficient 2009: ation in India takes place in the informal formed decisions about their agricultural practices
0.368 sector which is characterized by low pro- and sales, thus increasing their productivity and
ductivity. Integrating microentrepreneurs incomes.
HDI ranking 2009: into markets by granting microloans
134 / 182 and insurance or providing infrastruc-
CPI ranking 2009: ture could benefit the national economy
84 / 180 greatly and the market is huge.
Contacts
On the supply side, rural poverty could Centre for Emerging Markets Solutions, Indian School of Business
be reduced primarily by integrating small Research and exchange on inclusive business solutions | www.isb.edu/cems
farmers into value chains. New Ventures India
Part of the “New Ventures” program of the WRI, incubator and consultancy for
sustainable business ideas in India | www.newventuresindia.org
Market size
The “Where”
Mexico
Mexico has a number of large companies, some Mexico has one of the fastest growing Population:
of which even operate internationally such as the middle classes in the world living side- 112.5 million (2010 estimate)
cement producer CEMEX or the food corporation by-side with people in widespread pov-
Percentage of the population
Bimbo. Innovations thus often originate with ex- erty. As a country with a strong national with an income < $3,000
isting or newly established Mexican companies. economy and good overall conditions for (in purchasing power parity):
companies, Mexico has always had good 69.6 % (2005)
CEMEX’s “Patrimonio Hoy” model provides not examples of inclusive business ventures
GDP (nominal):
only the financing of homes for low-income mostly aimed at the urban population.
$1.017 trillion (2009 estimate)
families but also building material and advice on Goods and services that promise a bet-
construction. The “Construmex” program makes ter standard of living for the low-income Average GDP growth per year,
it possible for migrants living in the US to invest population are particularly in demand. 1997–2007:
their remittances directly into housing construc- 2.9 %
tion (it has not, however, accepted any new cli- As a member of the OECD, Mexico has
GDP / per capita
ents since 2009). a comparatively high level of develop- (by purchasing power parity):
ment but there are huge discrepancies $13,500 (2009 estimate)
The company Amanco offers small farmers irriga- between cities and the country and great
tion systems adapted specifically to their needs. variations in income and living situation Percentage of income
< $3,000
Thanks to the availability of credit, the purchase within the cities. Despite the relatively (in purchasing power parity)
can be financed from higher crop volumes. strong economic performance, three out of total income:
of four people in Mexico still live on less 39.8 % (2005)
The microfinance bank Compartamos stands out as than $3,000 per year.
Unemployment rate:
the most profitable bank in Mexico, a success that
has not only earned praise but also criticism for its Mexico is a country with significant en- 5.6% (2008 estimate)
high interest rates. vironmental problems, an area that offers Gini coefficient 2009:
a lot of business opportunities for foreign 0.481
companies. There is also great need for
Contacts HDI ranking 2009:
solutions in healthcare and nutrition par-
Avina Foundation ticularly in rural regions. 53 / 182
Networking and project financing | www.avina.net
CPI ranking 2009:
Movimiento BDP – Empresas contra la Pobreza
89 / 180
Information exchange and support for specific projects |
www.movimientobdp.org/
Market size
Russian Federation
Population: As the biggest country in the world, Rus- Commercial banks and the credit card company
139.4 million (2010 estimate) sia is a country of polar extremes: it has VISA work together with microfinance institutions
a trade show for millionaires but 61.4% to offer mobile banking in rural areas where the
Percentage of the population
with an income < $3,000
of its inhabitants live on less than $3,000 banks have no branch offices.
(in purchasing power parity): per year. The economy is dominated by
61.4 % (2005) large corporations but many Russians In 2000, Opportunity International (OI), the in-
form small businesses as an alternative to ternational alliance of microfinance institutions,
GDP (nominal):
unemployment. Even though the rapid founded FORA (Fund for Support of Microen-
$1.232 trillion (2009 estimate)
economic growth of the last few years trepreneurship). Up until 2005, FORA granted
Average GDP growth per year, has improved the standard of living of 115,000 microloans and became the largest non-
1997–2007: many Russians, the increased prosperity commercial provider of microloans in Russia. In
6.2 % has largely bypassed far-flung provinces 2005, FORA merged with the FORUS bank and can
like Ingushetia or Kalmykia. The situation now also offer its customers other products like
GDP / per capita
(by purchasing power parity): of groups who depend on social benefits, savings accounts.
$15,100 (2009 estimate) such as retirees, is also particularly critical
because retirement benefits are not keep- Microsoft equips the Cafemax Internet cafés, which
Percentage of income ing up with price increases. offer e-learning facilities, with software, e-learning
< $3,000
(in purchasing power parity)
schedules and marketing resources. This allows
of total income: Russian households are well-equipped the cafés to offer their customers true added value
33.4 % (2005) with electrical appliances. Cell phone over their competitors.
ownership is as high as 114.9%. The mar-
Unemployment rate:
ket, however, is well undersupplied for With its Microenterprise Acceleration program,
8.9% (2009 estimate) other services and products: only 21.5% the hardware manufacturer HP gives microentre-
Gini coefficient 2009: of Russians have Internet access and only preneurs the skills they need to effectively use IT.
0.375 69% have access to financial services. HP offers training through its own programs and
There is also great demand in affordable in partnership with small agencies not only in how
HDI ranking 2009: housing, healthcare and education. to use computers but also in successful business
71 / 182 management. The company acquires new custom-
CPI ranking 2009: There are roughly 6 million microentre- ers with this strategy and simultaneously makes an
146 / 180 preneurs in Russia. To grow their business- active contribution to their development.
es, they primarily need access to financing
that, to date, has not been readily avail-
Contacts
able. The current value of microloans is
approximately $1 billion; the market is European Bank for Reconstruction and Development
Promotes the transition to an open market economy and private and entrepre
estimated at up to $7 billion. neurial activities in the countries of Central and Eastern Europe and the Com
munity of Independent States (CIS). | www.ebrd.com
Market size
The “Where”
South Africa
Amanz’ abantu installs water and sewage pipes in South Africa has the strongest national Population:
slums. The customers get drinking water from a economy in Sub-Saharan Africa. Since 49.1 million (2010 estimate)
central location (max. 200 meters from home) the first general elections in 1994 mark-
Percentage of the population
and pay with a cashless smart card. ing the end of apartheid, the country has with an income < $3,000
become a flourishing part of the global (in purchasing power parity):
Aspen Pharmacare produces affordable medicine economy. South Africans proudly dem- 74.4 % (2005)
including a drug that fights HIV/AIDS, the most onstrated their openness to the world
GDP (nominal):
prevalent illness in the country. The company has during the soccer world cup in 2010.
$280.6 billion (2009 estimate)
become the largest manufacturer of medicine in The government, which passed a law for
southern Africa. “black economic empowerment”, has laid Average GDP growth per year,
the foundation for an assistance program 1997–2007:
Eduloan extends credit with favorable terms so designed to include “historically under- 3.7 %
that mostly “historically underprivileged sections privileged sections of the population”,
GDP / per capita
of the population” can finance a higher educa- largely excluded during apartheid, in the (by purchasing power parity):
tion. Since its formation in 1996, Eduloan has economy. $10,100 (2009 estimate)
served 500,000 customers.
Still, three out of four South Africans live Percentage of income
< $3,000
SABMiller is the largest brewery in South Africa and on less than $3,000 a year. For historical (in purchasing power parity)
operates globally. It buys its raw materials from reasons, the percentage of those living of total income:
16,800 small farmers, mainly in South Africa, but in poverty who are black is considerably 30.9 % (2005)
also in Uganda and Zambia. In addition to giving higher than those who are white. Ap-
Unemployment rate:
pledges to buy certain volumes, the company, in proximately half live in rural regions and
cooperation with seed suppliers, NGOs and coop- the other half in cities. The slums close 24% (2009 estimate)
eratives, offers training and advice for the farmers. to cities have developed out of the town- Gini coefficient 2009:
ships, the places where blacks lived dur- 0.578
Mondi is the largest paper recycler in South Africa. ing apartheid. Supplying the townships
The company has overhauled its business model: with adequate housing, electricity and HDI ranking 2009:
instead of only working with its own employees, water is an enormous challenge. Other 129 / 182
the company also supports local small and mi- basic services are also lacking. Only 46% CPI ranking 2009:
croentrepreneurs. It buys waste paper from 3,000 of the population has access to financial 54 / 180
suppliers via 117 offices. services.
Market size
2.895 billion
2,500 billion $
500 billion $
under $3,000 per year in $ billion PPP
332 billion
158 billion
51 billion
20 billion
Energy
Food
Health
Housing
ICT
Water
p Asia
p Latin America
p Africa
p Eastern Europe Source: IFC, WRI (2007)
The Next 4 Billion
75 endeva | Inclusive Business Guide
The “Where”
Market size
Spending for energy Energy
in $ billion
p Asia 350.9
p Latin America 30.5
p Africa 26.6
p Eastern Europe 25.4
Total 433.4
Overview Solutions
1.6 billion people around the world do not have access to • Energy-efficient products such as better stoves or compact
electricity. The energy they need for cooking, heating, power- fluorescent lamps or LED lamps benefit the environment
ing machines and generating light comes from gasoline, gas, and save money.
wood or batteries. Fuels like kerosene are not only inefficient
and expensive, they also cause health problems and are harm- • Decentralized mini-grid solutions on household or commu-
ful to the environment. When it comes to energy supply, Af- nity level with electricity generated from wind, water, sun
rica has the most serious problems. In Rwanda or Uganda, for or biomass can guarantee a decentralized energy supply.
example, the percentage of households with access to electric- Linking projects to financing solutions can facilitate the
ity is under 10% in rural regions. necessary investments.
The energy solutions available are much more expensive than Examples
electricity supplied from the grid. In Bangladesh, the cost of
energy (kerosene, batteries, etc.) in off-grid areas is equiva- Four examples have already been presented: INENSUS (p. 17),
lent to $1.95 per kilowatt hour, i.e. 10 times the price a pri- MicroEnergy International (p. 39), D.light Design (p. 45) and
vate consumer in most Western countries pays for electricity. BSH Protos (p. 55).
Many households spend up to 50% of their monetary income
on energy. • The Aprovecho Research Center (USA) teamed up with Sheng-
zhou Stove Manufacturer (China), to design a stove that
reduces the amount of wood or coal needed by up to 40%
to 50% and reduces emissions by up to 70%. As a mass-
produced product, it is sold at a very affordable price by the
spin-off company Stovetec.
Financial services
Overview Solutions
Lack of access to capital, insurance and bank accounts hin- • Microfinance institutions and insurance companies have
ders the growth of millions of microenterprises in develop- adapted products to their customers’ needs: loan amounts
ing countries. Microcredit was a ground-breaking concept in range between $1 and $1,000 and insurance policies for life,
inclusive business ventures. Today, the sector offers not only health or accident are available below $10 per year.
microloans, it also includes microinsurance and solutions for
money transfer and savings accounts. • Credit is guaranteed through collective responsibility: the
loans are granted to a group of poor people who are jointly
liable for repayment. 95% to 99% of these loans are paid
Market size back.
Estimates on the size of the microcredit market vary drastical- • To sell their products or assess claims, insurance companies
ly. Some estimates claim there are 1 billion potential custom- rely on collaboration with local development organiza-
ers while others put this figure closer to 3 billion. The huge tions, cooperatives or self-help groups.
potential of this market has spurred commercial banks and
insurance companies to adapt their products to the needs of • Every microfinance program includes a financial literacy
low-income households over the last few years. “The Next 4 campaign.
Billion” contains no data about the size of the market for this
sector. • Modern technology like mobile billing systems and stan-
dardized processes for performing credit checks help keep
Access to financial services transaction costs low.
Percentage of households with a banking account
• Mobile banking services allow bills to be paid and money
< 20 % to be transferred across international borders quickly and
20 – 40 % inexpensively using text messages.
40 – 60 %
60 – 80 %
> 80 %
No data Examples
available
Additional information
• Allianz SE (2010), Learning to Insure the Poor – Microinsurance Report www
• Boston Consulting Group (2007), The Next Billion Banking Consumers www
• Christopher N. Sutton / Beth Jenkins (2007), The Role of the Financial Services Sector in Expand-
ing Economic Opportunity www
• International Labour Office and Munich RE Foandation (Ed., 2008),
Protecting the Poor. A Microinsurance Compendium www
• Microinsurance Network, www.microinsurancenetwork.org
• MixMarket, www.mixmarket.org
• Micro Credit Summit, www.microcreditsummit.org
• Consultative Group to Assist the Poor, www.cgap.org
77 endeva | Inclusive Business Guide
The “Where”
Market size
Spending for food and agriculture Food and agriculture
in $ billion
p Asia 2.236
p Eastern Europe 244
p Africa 215
p Latin America 199
Total 2.894
Overview Solutions
The food sector is interesting for inclusive business ventures On the consumer side:
on two levels: individuals on low incomes can be integrated
into value chains both as consumers and as producers. • Developing affordable food products fortified with vitamins
and minerals eliminates malnourishment.
Further reading:
• World Economic Forum and Boston Consulting Group (2009), The Next Billions: Business Strate-
gies to Enhance Food Value Chains and Empower the Poor www
•H arvard University John Kennedy School’s CSR Initiative and FSG Social Impact Advisors (2008),
The Role of The Food & Beverage Sector in Expanding Economic Opportunity www
•R egoverning Markets (2008) Inclusive Business in the Agrifood Markets: Evidence and Action www
78 endeva | Inclusive Business Guide
p Asia 95.5
p Latin America 24
p Eastern Europe 20.9
p Africa 18
Total 158.4
Overview Solutions
Medical services are inadequate in many emerging nations • Microfranchise systems can spread services for basic medi-
and developing countries and the poor can often not afford cal care and advice quickly and create opportunities for
effective medicine and medical treatment. The poor rarely earning income.
consult doctors: self-treatment is typical.
• Access to medical care is improved by producing affordable
The most common illnesses and causes of death among peo- medication and granting licenses to generic manufacturers.
ple living in poverty are infections like diarrhea or malaria,
complications during pregnancy and, particularly in Africa, • Integrating local, medically trained staff or local develop-
HIV/AIDS. Major challenges in healthcare include insufficient ment organizations for preliminary examinations helps to
hygiene, poor housing conditions and ignorance about the expand the coverage. Solutions involving telemedicine can
causes and transmission of disease. also improve the quality of on-site advice.
People in rural regions in particular could act as suppliers of • Mobile care provided by clinic buses reaches people in iso-
raw materials for pharmaceuticals. lated areas.
Additional information
• Adeeb Mahmud and Marcie Parkhurs (2008), The Role of the Health Care
Sector in Expanding Economic Opportunity www
• IFC (2007), The Business of Health in Africa www
• John Paul (2005), Private Sector Strategies for Providing Healthcare
at the Base of the Pyramid www
79 endeva | Inclusive Business Guide
The “Where”
Market size
Spending for housing and construction Housing and
construction
in $ billion
p Asia 171.4
p Eastern Europe 60.8
p Latin America 56.7
p Africa 42.9
Total 331.8
Overview Solutions
The market for “housing” at the base of the global pyramid • Microfinance institutions grant affordable loans with long
is concentrated in cities. The number of slums in the rapidly repayment periods to construct homes.
growing metropolises in the southern hemisphere is on the
rise. People usually build their own houses, which means that • Solutions for home construction are sold instead of build-
construction progress is dependent on the (irregular) family ing materials. This includes, in addition to a microloan, the
income. Investments are not made in quality when construct- regular supply of building materials, training for housing
ing homes as a result of the ill-defined legal status – if the au- construction and advice from architects and construction
thorities “clear out” a slum, the house can be torn down from workers.
one day to the next. The poor quality of construction, how-
ever, increases the risk of property loss in extreme weather • Affordable pre-fabricated houses improve the quality of
conditions. This risk is increasing as the climate changes. housing. In some cases, recycled building materials are
used. Energy-efficient solutions ensure good insulation and
Many people at the bottom of the income pyramid work in ventilation.
the construction sector. Informal construction companies
face the same issues of supply and financing outlined above.
Examples
Additional information:
• S tephanie Schmidt and Valeria Budinich (2006), Housing Solutions Serving Low-Income
Populations: A Framework for Action www
•U N-HABITAT (2007), Business for Sustainable Urbanisation – Challenges and Opportunities www
•U nited Nations Human Settlements Programme (2003), The Challenge of Slums. Global Report on
Human Settlements www
80 endeva | Inclusive Business Guide
communications
in $ billion
p Asia 28.3
technology (ICT) p Latin America 13.4
p Eastern Europe 5.3
p Africa 4.4
Total 51.4
Overview Examples
Many households in developing countries do not have ac- Several examples were presented in the previous section includ-
cess to modern information and communications technology ing Vodafone (p. 13), SMART (p. 41) and ITC e-Choupal (p. 63).
(ICT): Internet, telephone lines and hardware and software
to meet local requirements are usually scarce, expensive and • Grameen and Telenor came up with a model for telephone
of poor quality. Information and communication services are rental from “village phone ladies” in the rural market in
often not adapted to the needs of poor households. Bangladesh. Telenor then put the model into practice in
Pakistan and has since entered the Indian market.
Poverty penalty • Zain’s “One World Network” in Africa and the Middle East
has created a cross-border mobile network with no roaming
Access to information technology is particularly limited in the charges that also offers access to banking and data services.
countryside. This is true for both network coverage as well
as the sale of equipment and services. The lack of access to • Google SMS offers poor households in Uganda access to all
telecommunications can have a significant indirect impact on kinds of different information through text messages (for
the poor. It can mean additional cost and effort trying to ac- example, information about health or agriculture) and to
cess information as well as lost income because the market is the local “Google Trader” marketplace where households
inaccessible. can buy and sell goods and services.
Solutions
Telecommunications and IT
• Mobile technologies have gained widespread acceptance in Spending on ICT compared to other
The share of
many countries due to the low installation costs compared sectors by income segment (Mexico) telecommunications
to landlines and the great distances they cover. Mobile tele- Share of sector spending indexed to the and IT increases in
share of the poorest segment. the higher income
phony is also increasingly used for Internet access. segments by a factor
of 8
• Prepaid access has become widely established as a payment
method. 4
3
Transport
• Microfinance solutions make it possible for new customer
groups to buy equipment. 2
1 Housing
• Community computer centers don’t just offer affordable In-
Food
ternet access, they also offer training, networking and local 0.5
information exchange between users. 500 1,000 1,500 2,000 2,500 3,000
Income segment below $3,000 per year
Additional information
eth Jenkins, Bill Kramer and Rob Katz (2007), The Role of the Information and Communications
•B
Technology Sector in Expanding Economic Opportunity www
oston Consulting Group (2007), The Next Billion Consumers: A Road Map for Accelerating
•B
Telecommunications Growth in Brazil www
81 endeva | Inclusive Business Guide
The “Where”
Market size
Spending for water Water
in $ billion
p Asia 6.4
p Africa 5.7
p Latin America 4.8
p Eastern Europe 3.2
Total 20.1
Overview Solutions
The infrastructure for water supply and wastewater removal is • Forming cooperatives to invest in infrastructure
often poor in developing countries. As a result, there are many
microentrepreneurs that provide water using wheelbarrows, • Local water companies can contract microentrepreneurs to
kiosks or trucks, particularly in urban areas. While quantity maintain infrastructure, collect payments and provide cus-
is the primary problem when it comes to agriculture, quality tomer service
is the problem for drinking water. The water often contains
germs that can spread illnesses or it is contaminated with • Prepaid solutions at water kiosks
heavy metals.
• Billing groups instead of individuals
Additional information
• Al Hammond et al. (2008), Safe Drinking Water for All – A Sector Review of the Opportunity for
Community-Scale Social Enterprises www
82 endeva | Inclusive Business Guide
Outlook
The “Inclusive Business Guide” is primarily in-
tended as a guide for companies. This publica-
tion therefore brings to light the added value that
inclusive business can offer this target group and
shows the courses of action open to it. It’s im-
portant, though, not to lose sight of the critical
questions when focusing on these practical ones.
Instead of wrapping up with a summary of the
findings, this publication concludes with a broad
outlook that puts the spotlight on the interests
and roles of other actors, particularly government
institutions and the people who suffer from pov-
erty.
O u t lo o k
Bild rechts: Malik Asim Mansur, 2008 CGAP Microfinance Photography Contest
Photo: Adam Rogers / UNCDF
Imelda Bangsail formed a small weavery on the Philippines with a In a village in the mountains of Kashmir, Pakistan, Masoom Ali
microloan. She also sells products to wholesalers. carves wood that he sells at the market.
It is not easy to measure the contribution that inclusive It would also be conceivable for inclusive business ventures to
business makes to giving people in poverty freedom of play a positive role in structuring the overall legal conditions
choice. Development aid is a charitable gift – and gifts are even if there is only anecdotal evidence for this up to now. The
not refused. Charity is important in times of crisis and is interests of investors are often given more weight by govern-
an indication that people are valued. But charity can also ment officials than those of voters in the slums and villages. If
take away people’s voice if it diminishes their freedom to a company wants to improve the housing offered in slums, this
make decisions. According to the survey “Voices of the could give enough impetus to legalize ownership and give ho-
Poor” conducted by the World Bank, the poor themselves meowners the ability to invest. A positive example of this can
see lack of say and participation in society as one of the be found in Mali: when the French electricity provider EDF set
key characteristics of poverty. Inclusive business ventures, about creating local companies for rural power supply, there was
however, offer choice and thus a channel to express needs. no corresponding legal framework for private electricity supply.
If people in poverty are not satisfied with the quality of With the support of the World Bank, the company was able to
the products or services they buy, there are, ideally, other persuade the government of the need for this regulatory founda-
people they can do business with. Freedom of choice gives tion. In 2006, the same year the law went into effect, the authori-
people room to make their own decisions. ties awarded 50 contracts to small suppliers.
However, information is required to make choices. The ex- The approach of “fighting poverty through business” is still in
amples found in this report are positive business ventures the fledgling stages. It is important to continue observing the
with the poor where both sides benefit and the company impact inclusive business ventures have on people’s opportuni-
takes its responsibility seriously to provide its customers ties and to create political and financial incentives to steer in the
or partners with extensive information and to give them right direction. The concept shows great promise. Companies,
the ability to make independent decisions. In the context governments, development organizations, investors and other
of poverty, however, there are many less positive examples actors will have the opportunity to shape this approach over the
where the poor have had to pay too much for too little or next few years.
have even been harmed. Sometimes they lack choice but it
is often the case that they also lack good information. Con- Let’s keep pushing forward!
sequently, it is important that consumers are protected and
a legal framework that guarantees security and reliability is
put in place in developing countries. Government institu-
tions have a vital role to play here.
84 endeva | Inclusive Business Guide
Reference
materials
85 endeva | Inclusive Business Guide
R e f e r e n c e m at e r i a l s
Literature tips and Internet links List of abbreviations
Literature references to books and magazine articles K. V. Rangan, G. Herrero und B. Barton (Ed.) (2007) ADA Austrian Development Agency
state the full reference information. Online publica Business Solutions for the Global Poor: Creating
ADB Asian Development Bank
tions are cited only with the author(s), year and title Social and Economic Value
and are indicated by a www. To find these publications, Jossey-Bass. San Francisco AfDB African Development Bank
the name of the source document just has to be Collection of essays on strategic approaches and
entered in a standard search engine. examples of inclusive business ventures GDP Gross Domestic Product
Literature tips Christian Seelos und Johanna Mair (2007) BMZ Federal Ministry for Economic Cooperation
Profitable Business Models and Market Creation and Development (BMZ)
Stuart Hart (2010) in the Context of Deep Poverty: A Strategic View
BoP Base of the Pyramid
Capitalism At the Crossroads: Next Generation Academy of Management Perspectives 21(4), p. 49–63
Business Strategies for a Post-Crisis World Looks at partnerships with socially-oriented entrepre- B2B Business-to-Business
Wharton School Publishing. Upper Saddle River, neurs as a strategic model for inclusive business
B2C Business-to-Consumer
New Jersey
UNDP (2008)
Strategic considerations for aligning the fight against CDM Clean Development Mechanism
Creating Value for All – Strategies for Doing
poverty, environmental protection and profits
Business with the Poor www CPI Corruption Perception Index
Beth Jenkins et al. (2007) Identifies constraints and potential solutions for inclusive
Business Linkages: Lessons, Opportunities, and business ventures on the basis of 50 case studies DEG Deutsche Investitions- und Entwick
Challenges www lungsgesellschaft (German investment and
UNDP (2010) development organization)
Discusses ways of integrating small and medium-sized
The MDGs – Everyone’s Business www
companies in developing countries
Provides a guide to institutions that support inclusive DFID Department for International Development
Beth Jenkins (2007) business through policymaking, research and advocacy, (Ministry of Development, Great Britain)
Expanding Economic financing and complementary capabilities by MDG EBRD European Bank for Reconstruction and
Opportunity: The Role of Large Firms www
WBCSD (2004) Development
Outlines the potential contribution large companies can
Doing Business with the Poor – A Field Guide www GRI Global Reporting Initiative
make to fighting poverty
Implementation recommendations for inclusive business
IBLF (2008) ventures on the basis of case studies GTZ Gesellschaft für Technische Zusammen
Business and the Millennium Development Goals: arbeit (German organization for technical
WBCSD (2007) cooperation)
A Framework for Action (2nd edition) www
Doing Business with the World – The New Role of
Discusses how companies can contribute to achieving
Corporate Leadership in Global Development www HDI Human Development Index
the Millennium Development Goals
Discusses obstacles to and opportunities for inclusive
IADB Inter-American Development Bank
IFC und WRI (2007) business in 10 sectors
The Next 4 Billion: Market Size and Business IBLF International Business Leaders Foundation
World Economic Forum (2009)
Strategy at the Base of the Pyramid www
The Next Billions: Unleashing Business Potential IFC International Finance Corporation
Estimates the size of the global low-income market by
in Untapped Markets www
sector and country on the basis of household surveys IRIS Impact Reporting and Investment Stan
Recommendations for developing business to fight
Prabhu Kandachar und Minna Halme (Ed., 2008) poverty dards
Sustainability Challenges and Solutions at the ICT Information and Communications Tech
Base-of-the-Pyramid: Business, Technology and nologies
the Poor Other literature tips on topics, sectors and indus
Greenleaf. Sheffield tries are provided in the individual chapters. IT Information Technology
Collection of essays on strategic approaches and
ICC International Chamber of Commerce
examples of inclusive business ventures
MDGs Millenium Development Goals
Aneel Karnani (2006)
Websites with current information MFI Microfinance institutions
The Fortune at the Bottom of the Pyramid –
A Mirage www OECD Organization of Economic Co-Operation
Business Fights Poverty
Takes a critical look at the BoP approach and Development
Social network for inclusive business
Monitor Institute (2009) http://businessfightspoverty.ning.com
PPP Public-Private Partnership
Emerging Markets, Emerging Models – Market-
Inclusive Business
Based Solutions to the Challenges of Global SDC Swiss Agency for Development and
Blog
Poverty www Cooperation
www.inclusivebusiness.org
Identifies promising models for successful inclusive
SIDA Swedish International Development
business ventures Next Billion
Cooperation Agency
Blog
C. K. Prahalad (2004)
www.nextbillon.net SNV Netherlands Development Organization
The Fortune at the Bottom of the Pyramid: Eradi-
cating Poverty Through Profits WBCSD Webseite UN United Nations
Wharton School Publishing Section and newsletter on “development”
Upper Saddle River, New Jersey www.wbcsd.org UNDP United Nations Development Programme
Argues in favor of a business and profit-oriented ap- UNEP United Nations Environmental Programme
proach to fighting poverty
WBCSD World Business Council for Sustainable
Development
UNDP United Nations Development Program; net Ashoka Supports social entrepreneurs with Cornell University – Johnson School – Center for
works and development expertise in 166 countries. programs in over 60 countries and 25 regional Sustainable Global Enterprise
“Growing Sustainable Business” program with brokers offices , www.ashoka.org Development of the “BoP Protocol” to generate inclu
in currently 15 countries, sive business ventures
BoP Learning Labs Information exchange and
, www.undp.org & , www.undp.org/gsb Stuart Hart (Samuel C. Johnson Chair in Sustainable
knowledge building about inclusive business ven
Global Enterprise and Professor of Management)
Many government-led development organizations tures , www.bopnetwork.org
, www.johnson.cornell.edu/sge
(such as DFID for the UK or USAID for the US) work
IBLF International Business Leaders Forum;
with the private sector to establish inclusive business IESE Platform for Strategy and Sustainability
brokering and training for partnerships through the
models. So do many not-for-profit organizations such Strategic management of socially-oriented
“Partnering Initiative” , www.iblf.org
as CARE International or OXFAM. companies
Schwab Foundation for Social Entrepreneurship Christian Seelos (Director of the IESE Platform for
Supports and connects social entrepreneurs Strategy and Sustainability) and Johanna Mair (Associ
Financing , www.schwabfoundation.org ate Professor of Strategic Management)
, www.iese.edu> Knowledge > Centers and Chairs >
UN Global Compact Initiative for corporate citizen ESE Platform for Strategy and Sustainability
ADB Asian Development Bank; finances private
ship with networks in many countries
sector projects in Asia , www.adb.org
, www.unglobalcompact.org Harvard Kennedy School CSR Initiative
Acumen Fund invests in businesses to end global Role of businesses in fighting poverty
WBCSD World Business Council for Sustainable De Jane Nelson (Director)
poverty , www.acumenfund.org
velopment; global network of companies that focuses , www.hks.harvard.edu/m-rcbg/CSRI/
AfDB African Development Bank; finances projects on the issue of sustainability, with local networks in
in Africa , www.afdb.org many countries , www.wbcsd.org Massachusetts Institute of Technology D. Lab
Design for people in poverty
EBRD European Bank for Reconstruction and De Amy B. Smith (Design lab instructor)
velopment; finances private-sector projects in Eastern , http://web.mit.edu/d-lab
Competitions
Europe and the CIS , www.ebrd.com
TU Delft BoP Initiative
IADB Inter-American Development Bank; finances BID Challenge Business plan competition for Design for people in poverty
projects in Latin America. Its intitiave “Opportunities companies from developing countries, focuses on Prabhu Kandachar (Associate Professor of Industrial
for the Majority” supports inclusive business ventures contribution to development , www.bidnetwork.org Design Engineering) and Jan-Carel Diehl (Assistant
, www.iadb.org Professor for Design for Sustainability)
Changemakers Platform and competition for
socially-oriented entrepreneurs sponsored by Ashoka , http://home.tudelft.nl/en > Faculty for “Industrial
IFC International Finance Corporation; finances
Design Engineering”> Research > Projects
inclusive business ventures with the “Sustainability , www.changemakers.com
Business Innovator” program , www.ifc.org William Davidson Institute, University of Michi-
Echoing Green Grants for socially-oriented entre
gan, BoP Initiative
UNFCCC United Nations Framework Convention on preneurs , www.echoinggreen.org
Strategic management of inclusive business ventures
Climate Change; provides information on emissions
New Ventures Program of the World Resource Ted London (Director)
trading within the scope of the “Clean Development
Institute to support companies from developing , www.wdi.umich.edu > Research Initiatives > Base
Mechanism” , http://cdm.unfccc.int
countries (particularly Brazil, China, India, Indone of the Pyramid
In many countries, the national development banks sia, Colombia, Mexico) focusing on environmental
offer specialized financial support for inclusive busi sustainability , www.new-ventures.org
ness ventures.
Rio Tinto Prize for Sustainability Competition for
sustainable projects (not necessarily business models)
with $1 million in prize money
, www.alcanprizeforsustainability.com
R e f e r e n c e m at e r i a l s
Endnotes
www
25 Stephen Williams (2006),
5 IFC and WRI (2007), The Next 4 Billion www Ghana: Susu Collectors Connect with Formal Bank-
ing New African www
6 Shaohua Chen and Martin Ravallion (2008),
The Developing World is Poorer than We Thought, 26 Rob Katz (2008),
but No Less Successful in the Fight Against Poverty A Barefoot Optometrist at Work: Interview with
www VisionSpring
in Acumen Fund Blog, August 20, 2009 www
7 Survey by MicroEnergy International (unpublished)
27 endeva interview with Samuel N. Shiroff, August
8 Sam Daley-Harris (2009),
10, 2009
State of the Microcredit Summit
Campaign 2009 www 28 C. K. Prahalad (2004),
The Fortune at the Bottom of the Pyramid:
9 Deutsche Bank (01/2008), Mirkrofinanz-Invests www
Eradicating Poverty Through Profits,
10 Food and Agricultural Organization (2009), Wharton School Publishing, Upper Saddle River,
FAOSTAT (available at unter http://faostat.fao.org/ New Jersey
site/377/default.aspx#ancor)
29
Microfinance India (February 19, 2009),
11 Cláudio Boechat (2007), Marketing to Rural India: Making the Ends Meet www
Ekos: Perfume Essences Produce Sustainable
Development www
Partners
We would like to extend a special thanks to our partners.
The German Federal Ministry for Economic Cooperation and Development
(Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung)
financed this publication and provided expertise on content together with
the Gesellschaft für Technische Zusammenarbeit.
The International Chamber of Commerce supports the communication of
the publication. Publication information
Copyright © endeva
Additional acknowledgements www.endeva.org
Several sections in the publication were written by experts. This publication was financed in part
We would like to express our gratitude for providing their expertise. by the German Federal Ministry for Economic
Cooperation and Development
We are grateful to:
(Bundesministerium für wirtschaftliche
Martin Herrndorf Zusammenarbeit und Entwicklung).
(section on financing, IT sector profile, Mexico country profile)
Published by:
Fritz Jung and Jonas Naguib
endeva
(sections on “Partnerships between German development organizations
Brunnenstraße 192
and the private sector” and “The develoPPP.de program”)
10119 Berlin
Prof. Dr. Genia Kostka Germany
(China country profile) Tel.: +49 30 4738 3959
Email: info@endeva.org
Aline Krämer
www.endeva.org
(Siemens AG case study, Nokia case study,
MicroEnergy International case study, Brazil country study)
Authors:
Tobias Lorenz Christina Gradl – c.gradl@endeva.org
(water sector profile) Claudia Knobloch – c.knobloch@endeva.org
Jakob Schmidt-Reindahl
Layout & typesetting:
(INENSUS case study)
derMarkstein.de, Berlin
Louise Kantrow
(section on “The role of business in achieving the MDGs”) Translation:
Libby Bunn, Berlin
Leonie Vierck
www.eco-accents.com
(SAFO case study)
Proofreading:
Ann Marie Bohan
Reviewers
Experts from the realms of business, academia and development work Cover photo:
contributed with comments and suggestions. Their ideas and advice Siemens AG
gave the publication structure and clarity. A woman in Kenya uses an OSRAM lamp
charged by solar power. This business idea
Our gratitude goes to: arose from the Siemens ideas competition
Michael Anthony (Allianz SE), that is described on page 35.
Katharina Averdunk (endeva),
Dr. Andreas Blüthner (BASF SE), Dr. Michael Grewe (BMZ), Printing:
Martin Herrndorf (endeva and the University of St. Gallen), Lokay Druck
Prof. Dr. Genia Kostka (Frankfurt School of Finance & Management), Printed on FSC-Paper
Aline Krämer (endeva and the TU Munich),
Jonas Naguib (GTZ), Daniel Philipp (MicroEnergy International), Publication date of the
Christine Polzin (SERI), Isabel Reingruber (SAP AG), English translation (with updates):
Heiko Schwiderowski (DIHK), Nicolai Tewes (Allianz SE), December 2010
Piera Waibel (University of Zurich)
Publication date of the German version:
November 2009
ISBN 978-3-00-032960-9
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ISBN 978-3-00-032960-9