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IFC's Experience with Inclusive Business IFC’s Experience with Inclusive Business An assessment of IFC’s role, outcomes, and potential scenarios AN IEG MESO EVALUATION © 2018 International Bank for Reconstruction This work is a product of the staff of The World RIGHTS AND PERMISSIONS and Development / The World Bank Bank with external contributions. The findings, The material in this work is subject to copyright. 1818 H Street NW interpretations, and conclusions expressed in Because The World Bank encourages Washington, DC 20433 this work do not necessarily reflect the views dissemination of its knowledge, this work Telephone: 202-473-1000 of The World Bank, its Board of Executive may be reproduced, in whole or in part, for Internet: www.worldbank.org Directors, or the governments they represent. noncommercial purposes as long as full attribution to this work is given. Cover Photo: © World Bank Photo Collection The World Bank does not guarantee the accuracy of the data included in this work. Any queries on rights and licenses, including The boundaries, colors, denominations, and subsidiary rights, should be addressed to other information shown on any map in this World Bank Publications, The World Bank work do not imply any judgment on the part Group, 1818 H Street NW, Washington, DC of The World Bank concerning the legal 20433, USA; fax: 202-522-2625; e-mail: status of any territory or the endorsement [email protected]. or acceptance of such boundaries. IFC’s Experience with Inclusive Business An assessment of IFC’s role, outcomes, and potential scenarios An IEG Meso Evaluation March 30, 2018 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without authorization. CONTENTS ABBREVIATIONS ................................................................................................................................................. IV ACKNOWLEDGMENTS ......................................................................................................................................... V OVERVIEW ........................................................................................................................................................... VI MANAGEMENT RESPONSE ................................................................................................................................ XI INTRODUCTION ........................................................................................................................................ 1 Purpose and objective ................................................................................................................................................................... 5 Approach, scope, and methodology .............................................................................................................................................. 6 IMPLEMENTATION OF IFC’S SUPPORT TO INCLUSIVE BUSINESS MODELS .................................... 9 The extent and nature of IFC’s support for inclusive business models ......................................................................................... 9 Social Bonds ............................................................................................................................................................................................... 12 Salient features of IFC’s Inclusive Business portfolio and its evolution ....................................................................................... 13 Assessment criteria for identification of inclusive business models ............................................................................................ 16 Appropriateness of ex-ante classification of inclusive agribusiness projects .............................................................................. 17 EFFECTS ON IFC, ITS CLIENTS, AND THE BASE OF THE PYRAMID ................................................ 20 Development Outcomes of Inclusive Business Projects ............................................................................................................. 21 Effects of Regulatory Issues on Inclusive Businesses ................................................................................................................ 26 IFC’s Role and Work Quality in Supporting and Strengthening Clients’ BOP orientation ........................................................... 26 Effects on People at the Base of the Pyramid ............................................................................................................................. 28 Demonstration Effects through Replication of Inclusive Business Models .................................................................................. 30 Related Findings from Recent Evaluations ................................................................................................................................. 32 EXPERIENCES WITH DIFFERENT INCLUSIVE BUSINESS APPROACHES ........................................ 36 Objectives and Definitions ........................................................................................................................................................... 37 Approaches ................................................................................................................................................................................. 38 Link with technical assistance and knowledge ............................................................................................................................ 39 Tracking of Results and Link to Staff Incentives ......................................................................................................................... 40 Evaluative Evidence on Alternative Approaches ......................................................................................................................... 40 Factors linked to Reaching the BOP ........................................................................................................................................... 41 Considerations for IFC ................................................................................................................................................................ 42 CONCLUSIONS AND WAYS FORWARD ............................................................................................... 43 Future Options ............................................................................................................................................................................. 44 Further Research ........................................................................................................................................................................ 48 ENDNOTES ........................................................................................................................................................... 59 Appendix A. Methodological Approach iii Abbreviations ADB Asian Development Bank AIMM anticipated impact measuring and monitoring AS Advisory Services BOP base of the economic pyramid CAO Compliance Advisor Ombudsman CY calendar year DEG Deutsche Entwicklungsgesellschaft (German Development Bank) DFI development finance institution DfID Department for International Development EBRD European Bank for Reconstruction and Development E&S environment and social FCS fragile and conflict-affected states FMO Netherlands Development Finance Company FY fiscal year G20 Group of Twenty GPOBA Global Partnership on Output-Based Aid IB inclusive business IDA International Development Association IDB Inter-American Development Bank IEG Independent Evaluation Group IFC International Finance Corporation MAS manufacturing, agribusiness and services MIF Multilateral Investment Fund OMJ Opportunities for the Majority PPP purchasing power parity RNFE rural non-farm economy SDG sustainable development goal UHT ultra-high temperature UMIC upper middle-income country XPSR expanded supervision report iv Acknowledgments This evaluation was prepared by a team of the Independent Evaluation Group (IEG) led by Melvin Vaz and Stephan Wegner. It was carried out under the direction of Caroline Heider (director-general, Evaluation) and José Carbajo Martínez (Director, IEGSP) and guidance from Stoyan Tenev (Senior Manager, IEGFP). Andrew Stone advised the team. The team consisted of Amitava Banerjee, Ana Belen Barbeito, Hiroyuki Hatashima, Eric Han Kim, Takatoshi Kamezawa, Andres Liebenthal, Daniel Palazov, Mari-Noelle Roquiz, and Izlem Yenice. Jozef Vaessen advised on the methodology. Bianca Simogne Castro and Emelda Cudilla provided administrative and logistical support. Kia Penso edited the report. The report benefited from suggestions provided by peer reviewers Nathaniel Jackson (formerly Senior Advisor at the Inter-American Development Bank [IDB]), Roland Michelitsch (Principal Specialist, IDB), Jane Nelson (Director, Corporate Responsibility Initiative at Harvard Kennedy School, and nonresident senior fellow at the Brookings Institution), and Barbara Rambousek (Lead Economist, Associate Director, Economic Inclusion, European Bank for Reconstruction and Development). The team is grateful to IEG and IFC staff, representatives of IFC client companies, and development finance institutions for sharing their insights. v Overview Highlights Definition. Inclusive business is defined as a business that provides goods, services, and livelihoods on a commercially
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