Inclusive Business G Uide

How to to How Business Develop and Poverty Fight Christina Gradl and Claudia Knobloch

Inclusive Business Guide

How to Develop Business and Fight Poverty Fight and Business Develop to How — Guide Business Inclusive ISBN 978-3-00-032960-9 Supported by 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

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: [email protected] Aline Krämer www.endeva.org (Siemens AG case study, Nokia case study, MicroEnergy International case study, Brazil country study) Authors: Tobias Lorenz Christina Gradl – [email protected] (water sector profile) Claudia Knobloch – [email protected] 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

to to Develop Business and Fight Poverty How How Christina Gradl and Claudia Knobloch Inclusive Business Guide Photo: Susanne Ullerich Photo:

Imagine this: You see a $100 bill lying on the Preface street. Would you keep walking and think to your- self: “That’s impossible – someone would have picked it up already”. No? You would pick it up? Then you’re exactly the right person to read this publication.

Developing business and fighting poverty offers you real opportunities for sustainable growth – if you know how to capitalize on them. This know- how is augmented with every business model that is developed at the base of the economic pyramid. While many questions remain to be answered, we already have substantial information and experience at our disposal for how to integrate people living in poverty into value chains. Every company and entrepreneur has to learn their own lessons through trial and error to some extent. Thus, the learning journey continues.

This publication is the first comprehensive guide on “inclusive business”, or business that includes people living in poverty as producers and consumers. It brings together existing knowledge, presents several practical examples and provides information about contacts and further reading. We would like to thank everyone who helped compile this knowledge including the entrepreneurs, in- novators and experimenters, the financers, investors and brokers, the observers and academics.

Inclusive business provides answers to the great challenges of our time – making poverty a thing of the past and preserving ecosystems for the future. We hope that the words that follow help you dis- cover and act on new opportunities.

Christina Gradl und Claudia Knobloch endeva Write to us! [email protected] [email protected] 3 endeva | Inclusive Business Guide Preface Photo: I CC Photo: Photo: BMZ Photo:

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 capacity to be increased in scale, thus including thousands of people living in poverty. The emphasis is on “core business” rather than on philanthropy.

I am certain that both the newcomer and the experienced prac- titioner in this field will find this guide invaluable to their work.

Jean-Guy Carrier ICC Secretary General 4 endeva | Inclusive Business Guide

Inclusive business brings added value for The ,market at the base of the global pyramid In brief companies and people living in poverty is large and growing fast. 4 billion people in the alike. Broken down into three sections, world – two-thirds of all human beings – live on less this publication provides answers to three than $3,000* per year. Together they spend $5 tril- basic questions about this new type of lion (measured in terms of local purchasing power) approach to business and social develop- a year. By 2050, there will be 3 billion more people ment: The “What”, the “How” and the on the planet, almost all of them in developing “Where”. countries. And their willingness to pay can be high because people living in villages and slums often Companies and entrepreneurs can capi- pay more and get less than elsewhere – a phenom- talize on their technologies, processes enon known as the poverty penalty. and management know-how to develop new business opportunities at the base of As suppliers, people living in poverty offer compa- the economic pyramid. Activity in these nies opportunities in agricultural raw materials and markets is only going to increase. On the handicrafts in particular but in other areas such as one hand, pressure to tap into new mar- tourism as well. Tight-knit cooperations can im- kets for procurement and sales is increas- prove the reliability of supply, increase quality and ing. On the other, it is getting easier to make unique selling propositions possible when conduct business because overall condi- designing products. tions in many developing countries have improved and there are more financing Environmental protection is also an important options and expertise available. issue. On the one hand, people living in poverty are often more affected by pollution, for example, because their livelihoods depend on farming or The “What” they cannot adequately protect themselves from extreme climate events. On the other hand, de- Both companies and people living in veloping countries now have more and more le- poverty can benefit from inclusive busi- gal incentives for environmentally-friendly activi- ness. Trade often gives poor people bet- ties. Resource-saving technologies, products and ter access to products and services that processes thus offer long-term opportunities for , Market size worldwide in the segment under fulfill their basic needs, it increases their growth. $3,000 a year productivity, creates better opportunities by industry (in $ measured in for them to earn income and, last but not Difficult market conditions are the greatest chal- terms of local purchasing power) least, it boosts their self-confidence and lenge to making inclusive business ventures a suc- Total volume feeling of security. Companies can estab- cess. The transaction costs and risks increase be- 5 trillion lish themselves early on in growth mar- cause the necessary structures like roads, a stable kets, strengthen the supply chain, benefit legal system or information about market partici- from innovation and enhance their abil- pants are often insufficient in slums and villages. ity to innovate, their reputation and ap- Food 2.895 billion peal as an employer.

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 br In i ef

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 economic, 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.

Private-sector institutions and especially governments play an important role in inclusive business. They are responsible for protecting the interests of both consumers and producers. They Growth can also improve the overall conditions for business at the macro level. Companies have incentives to change the overall playing field which benefits other players on the market. Whether inclusive business will play a positive role in general is first and foremost a question of design – this will be the mission of companies, governments and development organizations in the years to come.

Implementation

Development

Source: endeva 6 endeva | Inclusive Business Guide

Content

Introduction ...... 08

Case studies 1 The “What” ...... 10

p 1 page 13 Fighting poverty through business ...... 11 Vodafone Group, Kenya Building growth markets ...... 18 p 2 page 17 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 N atura, 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

12 Transfer to other countries ...... 64 p 18 page 61 Aravind Eye Care System, India

p 19 page 63 ITC Limited, India

p 20 page 65 VisionSpring endeva | Entwicklungsgeschäfte In

7 h al t sverze i c h n i s

3 The “Where” ...... 66 Topics

countries with potential ...... 67 p 1 page 12 Many names – one idea

Brazil ...... 68 p2 page 15 Who is poor? china ...... 69 p 3 page 32 Critical success factors in the company structure India ...... 70

Mexico ...... 71 External contributions Russian Federation ...... 72 p 1 page 16

South Africa ...... 73 Partnerships between German development organizations and the private sector (BMZ)

Sectors with potential ...... 74 p 2 page 28 The role of business in achieving the MDGs (ICC) energy ...... 75 p 3 page 42 The develoPPP.de program (BMZ) Financial services ...... 76

Food and agriculture ...... 77

Health ...... 78

Housing and construction ...... 79

Information and communications technology (ICT) ...... 80

Water ...... 81

Outlook ...... 82

Reference materials ...... 84

literature tips and Internet links ...... 85

list of abbreviations ...... 86

list of supporting organizations ...... 87

endnotes ...... 87

About ENDEVA ...... 88

Publication information ...... 89 8 endeva | Inclusive Business Guide

Fighting poverty through business – is it Developing countries and people living in poverty Intro possible? The answer is yes because inclu- will play an increasingly significant role in future sive business brings together business and business development. There are a number of rea- social development. When companies do sons why: duction business with people living in poverty, 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 create 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 implementation. endeva | Inclusive Business Guide In

9 t ro d uc ti on

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.

Photo: Adam Rogers / UNCDF

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 oping. 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 sectors 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 general 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 cooperatives and government institutions. These new kinds * Literature references to books and magazine articles state the full reference information. Online publica of partnerships need to be tested and fine-tuned. tions are cited only with the author(s), year and title and are indicated by a www. To find these publications, the name of the source document just has to be entered in a standard search engine.

• Despite these challenges, inclusive business can make good business sense, particularly considering the other positive effects for the company such as employee retention, reputation and government ties, organizational learning and the capacity for innovation. Pursuing this wide range of goals all at the same time and simultaneously focusing on creating social and ecological value can also mean a higher degree of complexity. 10 endeva | Inclusive Business Guide

The 1 “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 competitiveness 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 enormous, 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 propositions such as fair production conditions or traditional ethnic handicrafts.

4. Environmental protection is also of particular importance for people living in poverty. Innovative technologies and solutions can make sustainable business possible in every respect – and create opportunities for the long-term growth of companies that have the necessary expertise.

5. For inclusive business to be successful, Rogers / U NC DF Adam Photo: solutions have to be found for dealing with Trading in Guinea difficult market conditions. The transaction costs increase because the structures that enable efficient trade, such as roads or a stable legal framework, are simply lacking. Consequently, innovative business models Further reading: are needed. The development, implementa- Caroline Ashley (2009), Harnessing Core Business for Development Impact www tion and growth of these models is explained in part 2. The “What” e uid A store owner in Madagascar owner A store G ss ne usi ve B usi Incl | endeva 11 - devel business and work development now, Until opment were two completely separate worlds. In- the of realm the to belonged profits and novations spent was money work, development In company. to improve the lives of those living poverty. in There is extreme rationale for both. But there business is where overlap, two the where place a also development and social development intersect. The business models located at this interface are called “inclusive” business models. it’s no wonder that demand for M- for demand that wonder no it’s – Photo: Adam Rogers / UNCDF Adam Photo: M-PESA is a mobile money solution. In the spring of 2010, 9.5 million Kenyans were already using their cell phones to pay for their groceries in supermarkets or to transfer money to their families. Even provider, M-Pesa the owns who Vodafone Safaricom, has been surprised by the rapid growth since the service was launched in 2006. In Kenya, however, bank transactions are expensive and many people don’t have bank accounts. Fast, easy, no account required and, most importantly, cheap PESA was so high. Fighting poverty through business povertythrough Fighting 1 General this shift in perspective former UN Secretarynnan, former - – ey messages ey ofi A that condemns much of humanity to suffering. of humanity much suffering. to that condemns K It is the absence of broad-based business activity, not its presence, not its presence, business activity, of broad-based It is the absence K a lot of untapped potential potential a lot of untapped - and consum as producers ers can be mutually beneficial. business inclusive from reap of include the establishment supply growth-intensive new, enhanced and sales markets, - reten employee reputation, tion and further as training - innova as capacity for well tion. their basic needs and satisfy their productivity, increase and self-confidence income, of security. feeling • living in poverty have People • benefits companies The • able to better are People 12 endeva | Inclusive Business Guide

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.

Many names – one idea

Nowadays, there are a number of terms that Business linkages – refers to possibilities for Making markets work for the poor/MMW4P/ characterize the concept of inclusive business. establishing business ties with small companies M4P – a development strategy that aims to Some focus more on including consumers, and microenterprises in developing countries. make markets work more effectively and thus others on producers. Some are favored more by The International Business Leaders Forum (IBLF) increase the income and improve the quality of business people and others by people working organizes dialog forums on this topic together life of those living in poverty. At the forefront of in development. Here are the most important with the International Finance Corporation this effort are the development organizations terms: (IFC) and the Harvard Kennedy School. DFID, SDC and SIDA.

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. The “What” - Photo: Vodafone Photo:

BoP Source: endeva Source: Opportunities for the majorityfor www conomic Citizenship Base of the Pyramid / Bottom of the Pyramid / Bottom Co n s u m e r s Full E Full e uid Safaricom (www.safaricom.co.ke) The Vodafone Policy Paper Series (03/2005), Paper Policy Vodafone The ImpactThe of Mobile Phones Africa: Sources: Sources: • • services M-PESA, the mobile bank in Kenya. ing service, makes monetary transactions bank people who don‘t have possible for them time and money. saves This accounts. in March immediate: was success Vodafone‘s 2010, M-PESA and had 9.5 million customers up every10,000 new users sign day. G ss ne - usi e r s c ve B usi tresses the inclusion of people living in povertytresses as: S Incl P r o d u | -poor Business linkages Making markets the poor/M4P work for Responsible supply chain management M-PESA turns cell phones into a mobile money solution. M-PESA phones into turns cell endeva Pro value chain development Inclusive business

Photo: IDRC/Sy. Djibril or to c e s e vat i r P r to c e s c i l b u P

sed more by people from the: from people by more sed U saving them unnecessarysaving markets. trips to Skilled directly can be contacted by workers And, regions. different from even customers, a phone when it is certainly have useful to looking a job. for a phone saves having In sphere, private the Cell the quality of life. time and improves with family in touch can stay phone owners better and have far away members who live diagnoses Remote information. to access and emergency healthcare numbers improve with its part Together against crime. protect additional offers Vodafone Safaricom, ner, - - refers to to refers – refers to the the to refers – odafone Group, Kenya Group, odafone V

ommunication for a developed Kenya a developed ommunication for Herders in Senegal use cell phones and GPS systems to track their herds. track to phones and GPS systems in Senegal use cell Herders social responsibility Corporate companies that pursue social objectives as part among them fighting of their business model, Social enterprisespoverty. apply business logic their costs. at least cover to makeresponsibility of companies to a contri Many damage. societybution to and prevent CSR activities integrate companies strive to Inclusive business business. their core into this companies also falls into pursued by Incategory. fact, these types also of initiatives in the CSR departmentoften originate in larger companies. Social enterprise/social business Social enterprise/social The inclusive business model also frequently business model also frequently inclusive The two appears in connection with the following concepts: neurs and farmers can conduct their business infor to access productively:more they have allowing and demand, about prices mation and terms better sell their goods at them to - landline con only four In were there 1980, nections every in Africa. for 100 inhabitants this opportunity identified and Vodafone in the mobile network infrastructure invested one in Nowadays, continent. on the African Both phone. has a cell people in Africa four and the users have the phone companies enormously. benefited both entrepre mobile networks, to Thanks Case study 1 Case C one idea – Many names Many 14 endeva | Inclusive Business Guide

As herders, we have to travel long distances in search of greener pasture. M-Pesa has made our lives easier because we don‘t have to travel to give our relatives and friends money.

Emmanuel Sironga, herder and M-Pesa customer 3

Potential as producers and customers Added value for companies

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 improves 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 microentrepreneurs 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 function 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.

The “What” - - www e New possibilities for consumption and and consumption for possibilities New urther reading: uid Abhijit V. Banerjee and Esther Duflo (2006), V. Abhijit of the Poor Lives Economic The Lands. Many 2002), From (Ed., Petesch Deepa and Patti Narayan University Press) Oxford York: (New of the Poor Voices Amartya as Freedom Kumar Sen (1999), Development University Press) Oxford (Oxford: F • • • In generally talk about this publication, we people” “poor and not living in poverty” “people maketo living environment it clear that it is the Poverty to poverty. that leads of those affected a structural countriesin developing is largely The rather than an individual problem. problem i.e. slums and villages, to references frequent under poverty, for the typical environment constraints that hinder The this view. score markets and perpetuate poverty explained are on page 26. G ss ne usi ve B usi Incl | Farmers, artisans and other producers find new sales chan sales new find producers other and artisans Farmers, endeva powered pump. -powered nels, nels, services are in demand and jobs are created. income. Lower-priced real increase products peo confidence: and give Empowerment creation or participation market of forms new and income lives. their over control more have they that feeling the ple Income: orthern Thailand, can Thailand, a farmer in Issan, NorthernBan Phot, with a times a year harvestnow three two to crops solar 15 - - - - also opportunities shape and participate to in Income these oppor access to allows society. one’s of realizing tunities but is also one result potential. Inclusive not necessarily business does have start to i.e. with the extremely impoverished, but with those who people who earn $1 a day, It is often easier to on $3 or $4 per day. get by be it capital, that have on groups concentrate un knowledge, land or social inclusion, but are it because of inadequate benefit from able to market models that incor Business access. these sectionsporate population offer of the both sides considerable opportunities make to Often, those living in extreme things better. They are poverty speak of. no capital to have funding The dependent on humanitarian aid. aid can be concen development for available on supportingtrated these people if markets opportunities those and business create for good use. put it to capital to who have . 4 Access and telephone to Internet as electricity, Many basic needs are still not met today. One bil One today. met not still are needs basic Many dded value for people in poverty for dded value The problem of poverty, however, can be however, of poverty, problem The concept “capability” describedbetter using the the economist, Amartya by developed Sen. Sen sees poverty as a lack of valuable oppor tunities. This view work This shapes development tunities. people in povertyThe extent. a large to today live choose to to the freedom have don’t This includes simple basic needs fulfilling lives. choice but education and career such as food, Who is poor? it is not Despite the simplicity of this word, define who is poor and who is easy to always forms. causes and many has many not. Poverty Income for is usually used as an indicator World the an international standard, As poverty. for of $1.25 per day Bank established thresholds extreme poverty poverty moderate and $2 for Based power). in local purchasing (measured living were 1.4 billion people on these figures, in extreme poverty and 2.6 billion in moderate poverty in 2005 Basic needs: Basic A participating from benefit to stands also population local The areas: several in business inclusive in Productivity: make insurance, and loans as such services, financial as well op business new up open and efficient more life day-to-day lion people live without access to clean water, 1.6 billion are are billion 1.6 water, clean to access without live people lion and havefive nobillion access. electricity Internet without wa food, provide that models business inclusive of Examples construc housing supplies, medical disposal, wastewater ter, exist. already education even and tion microenterprises. and individuals for portunities Photo: Adam Rogers / UNCDF 16 endeva | Inclusive Business Guide

Partnerships between German development organizations and the private sector by Jonas Naguib (GTZ) and Fritz Jung (BMZ)

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 respective 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.

We have many success stories to demonstrate the value of development partnerships with the private sector. The “What”

Photo: Adam Rogers / UNCDF Adam Photo: AG (www.ewe.de), (www.ewe.de), WE AG A house in Senegal. Most houses there are not are MostA house in Senegal. houses there the grid. connected to CE (www.matforce.com) e uid MATFOR Sources: Inensus (www.inensus.com), E InensusSources: (www.inensus.com), sisting of a small wind turbine, solar panels sisting of a small wind turbine, in Senegal and sells and a diesel aggregate) electricity of a village. the inhabitants to in the plan- other similar projects are Many ning stages. Economy business model of Micro Power The electricity demand for assumes that will stimulates provided as the energy increase model thus relies The productivity. more of the development economic on healthy in income- investment encourage To villages. activities, a partneringgenerating - microfi institution (MFI) is makingnance microloans customers. to available G ss ne - usi - ve B usi Incl | endeva 17 the business objectives of the private sector. of the private objectives the business joined the “Global Compact” and voluntarily pledged to adopt ten principles in the areas of human rights, labor standards, mental environ- protection and anti-corruption. Part- nerships are initiated and practical developed models in dialog with governmental and non-governmental representatives. taken with financial support the Ger from man electricity and in coop supplier EWE AG eration with the GTZ. INENSUS then used this eration adapting its busi- as a basis for information local to Economy” Power “Micro ness model with MATFORCE, and joined forces conditions this finalize To Senegal. from a local company phase of the project, the Senegalese- compa formed S.A.R.L. was Africa West INENSUS ny INENSUS GmbH between venture as a joint and MATFORCE. has been working then, the company Since on a pilot project of its business model with These activi - financial supportAG. EWE from the GTZ as a funding from ties also receive JanuaryPPP project. Since 2010, INENSUS - (con system a hybrid operates Africa West - - BMWi) BMWi) – The primaryThe with policy action in development fields of overlap INENSUS, Senegal Photos: Jakob Schmidt-Reindahl Photos: The start-up company INENSUS GmbH, based start-up INENSUS GmbH, The company in small wind specializes Germany, in Goslar, systems. energy turbines and decentralized Jakob founders, In 2007, one of the company Senegal to with a traveled Schmidt-Reindahl, Ministry of the Germandelegation Federal of (Bundesministe Technology and Economics Case study 2 Case A journey new a enterprise to Technologie Wirtschaft und rium für that the GTZ. He found by on a trip organized only approximate where regions, the coastal connected are inhabitants ly 20% of the rural condi- excellent the electricity to offer grid, of wind operation cost-effective tions for supply. energy a decentralized turbines for INENSUS performed an in-depth market Market studies year. an entire for analysis conducted and wind measurements were Helpers from the local community putting up the wind monitors. The measurements were very promising for INENSUS. very for promising were measurements The the local community putting up the wind monitors. Helpers from The PPP partnering model is also further developed in this context: involvement is not limited to actors from the public and the pri- society, civil from actors key other sector; vate be they trade unions, non-governmental organizations (NGOs) or academic institutions, are integrated into initiatives and New projects. platforms for dialog have been created, like the United Nations’ “Global Compact”, which is supported by the BMZ. So 6,000 far, companies from around the world have 18 endeva | Inclusive Business Guide

Building growth markets

Key messages A total of 1.2 billion people live in India, , Global low-income market by income segment two-thirds earn less than $2 per day. They (total spending in $ PPP) • Four billion people live on are the target group of SKS Microfinance. 3,000 less than $3,000 per year. The goal of this microfinance institution is to serve eight million customers 2,500 • 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: 500 IFC, WRI (2007) • By 2050, there will be three The Next 4 Billion billion more people on the Companies that strive for long-term planet, almost all of them in growth can ill afford to ignore the bot- developing countries. tom of the global income pyramid: it is Substantial purchasing power currently made up of two-thirds of the • Interest among these con- world’s population and is growing rap- Even though individual income in this segment sumers in low-priced and idly. (under $3,000) is low, when the incomes of the good quality products is high. “Next 4 Billion”, as they are referred to by the In- ,Four billion people around the world ternational Financial Corporation (IFC) and the live on less than $3,000 per year, mea- World Resources Institute (WRI), are combined, sured in terms of local purchasing pow- their purchasing power is immense. In a report er. Per day, this is equivalent to $3.32 in of the same name, this ,market is estimated to Brazil, $2.11 in China or $1.56 in India.5 be worth around $5 trillion. The smallest part is Based on the international standard, 2.6 made up of the poorest segment that lives on less of these 4 billion people are considered than $500 a year. The largest part is accounted for “poor” because they have less than $2 to by the segment that earns between $1,000 and live on.6 However, definitions of “poor” $1,500 per year. or “rich” are certainly not set in stone and are a question of perspective. In some People in the low-income market spend most of countries, even people who earn less than their money meeting basic needs. Food topped $8 a day belong to the middle class. Even the list at 60% of the market or $2,895 billion in so, their access to healthcare or financial 2006. The market for information and communi- services can still be lacking. Overall, there cation technology made up only a small percent- is a lot of potential for improvement at age at $51 billion. The amount of money spent the bottom of the pyramid. here, however, rose rapidly as income increased.

These market figures are expressed in terms of local purchasing power. International purchasing , Global income pyramid power, however, is also an important indicator for international companies. Regardless of the exact Annual 30,000 volume of the total market, it is clear that people per capita labeled “poor” also spend money to satisfy their income in $ needs. (measured in 2002 PPP) 20,000

, Changes in world population 10,000

0 7 Less 5 Developed Countries

Billions of People 3

1 More Developed Countries

10 20 30 1950 1970 1990 2010 2030 2050

Portion of world population (%) Source: Branko Milanovic, World Bank (2002) Source: UN (2005), World Population Prospect: The 2004 Revision The “What” - Photos: Adam Rogers / UNCDF Adam Photos: SKS India (www. India SKS , www

The Next 4 Billion 4 Next The & WRI (2008) (2008) WRI & C e uid www sksindia.com), Grameen Foundation (www.grameenfoundation.org) Foundation Grameen sksindia.com), dardized products, universal customer and and customer universal products, dardized state-of-the-art on and training partner sales manage to technology mobile and computer to able been has SKS loans. the repay and thanks profits high generate and rapidly grow model. cookie-cutter its to IF Sources: Nowadays, even profit-oriented banks offer offer banks profit-oriented even Nowadays, improve to hard working are and microloans September In model. the of efficiency the million 5.3 had Microfinance SKS 2009, microcredit largest the it making customers, stan on relies company The India. in lender G ss ne -

- 8 - usi ve B usi In the slums of Jakarta, Nairobi and Manila, clean 7

Incl | endeva urther reading Profitably Poor, World’s C.K. and Allen Hammond (2002), Serving Prahalad the (Harvard 48–57) Business Review 80, p. Christensen and StuartClayton L. Hart Leap Great (2002), The 51–56) 2002, p. (MIT Sloan Management Review Fall water is five to ten times more expensive than in higher-income financial the in exist differences price Similar cities. these of areas and even in simple consumer goods. system, in healthcare Poverty penalty Poverty It may sound like a paradox but people with little market access frequently have to spend more money than their rich neighbors or more than consumers in industrialized countries have and to settle they for lower quality. This phenomenon is known as the “poverty penalty”. It represents the opportunity to develop a better range of products and services by increasing efficiency. In Bangladesh, 1 kWh of electricity costs approximately $1.95 of one-tenth only is price the Germany, in while regions rural in this amount. F • • Next The WRI (2008), 4 Billion • IFC and A micro-credit group in IndiaA micro-credit collect meets to installments. group 19 9 But the market potential is still far from being being from far still is potential market the But least at estimates, to according exhausted: microloan potential are people billion one borrowers. Almost all of the borrowers are women. The The women. are borrowers the of all Almost interest and $1,000 to $1 from range loans They year. per 50% and 20% between fall rates rates the than affordable more much thus are up for ask who lenders traditional by offered invest usually are Microloans interest. 700% to chickens few a buy to microenterprise a in ed example. for telephone, village a install or similar inspired has microloans of model This “Mi the 2007, In world. the around programs institutions These continents. five all on tions people. million 155 around to loans granted crocredit Summit Campaign” reported a total total a reported Campaign” Summit crocredit organiza microfinancing 3,500 than more of - - three billion more people more billion three , A model travels around the world growing as it goes it as growing world the around travels model A

–

Grameen Bank, Bangladesh, SKS Microfinance, India When it comes to inclusive business, the the business, inclusive to comes it When charge. the leading been has sector financial has Bank Grameen the years, 30 than more For Bang in poor the to microloans granting been Case study 3 Case Microcredit was Yunus, Muhammad founder, Its ladesh. and 2006 in Prize Peace Nobel the awarded known widely most the microcredit made thus business. through poverty fighting of example be can Bank Grameen the by used model The cooperative of principle the to back traced not does bank The century. 19th the in banks bor Instead, loan. the for collateral require collective bears that group a to belong rowers members group the of one If responsibility. no is group entire the installment, an misses pressure peer The loan. a for eligible longer repay in resulted has group the in exercised 95%. over of rates ment Women in Madagascar take part on financial management. in a training Women The market is growing rapidly: according to from projections the United Nations Population Fund (UNFPA), the approximately have will planet Growing population Growing For companies who find a largelycompetitive saturated market at the and highly top of the income lower at pyramid, look closer a it take to important will particularly be segments. This doesn’t just apply to companies that target Most solutions. business-to-business to also but consumers people at the bottom of the pyramid earn their income as microbusiness owners in agriculture, handicrafts, services they are by all means willing to or trade. As entrepreneurs, invest in increasing productivity and competitiveness either through new technologies or materials. But the range consistent be to has them to servicesopen and products of available. with their needs and financing has to be in 2050 than it does The today. great majority will live in developing countries. 20 endeva | Inclusive Business Guide

Strengthening supply chains

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.

Some valuable raw materials can only be produced or extracted in certain regions. The pharmaceutical industry is constantly on the lookout for new plant-based active ingredients. In this context, cooperation with people who live in regions with a high level of biodiversity like rainforests makes sense for both sides. These partnerships enable new sources of supply to be developed and, at the same time, biodiversity is safeguarded. The course of action pursued by Natura is exemplary in this area.

Further reading • Andrew W. Shepherd (2007), Approaches to Linking Producers to Markets www • Beth Jenkins et al. (2007), Business Linkages – Lessons, Opportunities and Challenges www • Julio 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 The “What”

11 - Photos: Natura Photos: 12

Natura project manager, artello, www icardo M icardo R e uid The consumers hold this holistic and authen- consumers The In 2004, Natura’s in high regard. tic approach 133% of its annual rev market was value L’Oréal. 33% for to enues compared other sustainable perfume for potential The is rainforest the Brazilian from ingredients not enormous: species are thousands of plant being used yet. even Cláudio Boechat Produce (2007), Ekos: PerfumeSource: Essences Sustainable Development G ss ne usi ve B usi Fotolia.com – Incl | endeva Heinze Thomas Photo: The astounding diversity of the plant world hidden in the Brazilian rain forest could could forest rain hidden in the Brazilian world of the plant diversity astounding The sustainable business models. for serve as the foundation 21 Photo: Natura Photo: and companies to set up our supply chain. set up our supply to and companies In 2003, the company successfully persuaded successfully In the company 2003, of pripri producers become villages to three the seeds and trained provided oca. Natura Pricing method. participants in the growing market a because clearlydefined not also was Na- existed. had not previously this plant for with project payment initially negotiated tura participants of land based on the amount which of the plant, used in the cultivation the in production volume in a drop resulted reached on then were Agreements year. first volumes and prices. specific supply sustainability satisfy criteria, Natura To also established a certification program. that ensure to designed was program This species were plant Brazilian from ingredients extracted sustainably and ecologically. I believe the concept was there before the line was. the line was. before there was I believe the concept - fter defining this, we looked for raw materials, communities communities raw materials, for we looked fter defining this, Natura, Brazil First we got to what we sought to achieve, what we wanted to say with to wanted what we achieve, sought to what we got to we First the product. A the product. Essential oils are an important ingredient in the cosmetics industry. Natura‘s Ekos product line is based on the priprioca fragrance. Natura‘s industry. in the cosmetics an important oils are Essential ingredient The cosmetics manufacturer Natura has manufacturer Natura cosmetics The as a holistic and positioned itself in Brazil of ingredients use The sustainable company. only found extracted species of plants from an important in cultivating plays in Brazil role also typesThese of ingredients this image. extremely Natura’s Ekos, the basis for form product line. successful Brazil the in grows only that plant a Priprioca, Case study 4 Case Beauty rainforest the Brazilian from this of ingredient primary the is rainforest, ian long has and fragrance strong a has oil Its line. in living people by perfume a as used been for suitable was ingredient The rainforest. the enough not was there but line product new a work to went Natura So, available. plant the of village with together chain supply a building Brazil. of north the in communities The roots of the priprioca plant contain essential oils. essential of the priprioca contain plant roots The 22 endeva | Inclusive Business Guide

Protecting the environment, securing the future

Key messages: Cocoa is the basis for chocolate produc- fewer natural resources, using environmentally tion and hence the business of Alfred Rit- friendly technologies, products and processes. • Quality of life can only be ter GmbH & Co. KG. But cocoa production improved as long as there are is in a downward spiral: prices are falling, enough natural resources. quality is suffering and environmental de- People living in poverty are particularly affected by struction is increasing. Ritter has created a resource consumption • Environmental protection model in Nicaragua to reverse this spiral: is particularly relevant for a sustainable agricultural model protects Low-income communities are often particularly people living in poverty. the existing forest, increases quality, guar- impacted by environmental damage. Basic hous- antees good prices for farmers and safe- es and shacks are less protected against extreme • Companies with expertise guards the long-term supply of cocoa for weather conditions as a result of climate change. in environmentally friendly Ritter. There is no alternative for contaminated drinking technologies and processes water. Soil erosion and drought can lead to the loss have an advantage in inclu- of a small farmer’s livelihood. However, the people sive business. Decoupling improvements in quality of life who live in poverty often have no other choice but and resource consumption to overuse the natural resources around them. In- • Sustainable models will be in dustrialized nations also often outsource resource- greater demand in the future At the turn of the millennium, the Mil- intensive and “dirty” production steps to develop- and encouraged by policy- lennium Ecosystem Assessment conducting countries. makers. ed an extensive analysis of the world’s ecosystems and arrived at a disturbing conclusion. Over the past 50 years, hu- Leapfrogging man beings have changed these ecosystems more rapidly and extensively than Scientists and companies all over the world have ever before, largely to meet rapidly grow- developed a range of environmentally friendly ing demands for food, fresh water, timber, technologies and resource-saving products and fiber, and fuel. Sixty percent of the ecosys- processes in many areas. They can help encourage tems around the world are debilitated or “leapfrogging”, i.e. accelerating development by used in a way that puts their existence in moving directly to more advanced environmental- jeopardy over the long run.13 Up to now, ly friendly processes such as renewable energies. In economic growth and improved quality some cases, these technologies are much easier to of life have been based on the increased put into practice in developing countries because use of resources, evidenced by the strong standards have not yet been established there, pro- , correlation between CO2 emissions and duction capacities and networks don’t exist and per capita income. The goal is to elimi- there are fewer conflicting interests. Investing in nate this interdependency. Quality of life environmental protection, e.g. renewable ener- has to be improved for more people with gies and energy efficiency can also be worthwhile financially in light of rising prices for oil and gas.

, Sustainable processes in the supply chain are be- Income and CO2 emissions per capita and country coming increasingly important for companies America to minimize risk for product quality, reliability 100 Europe & Central Asia of supply and reputation. Leapfrogging can also

40 Sub-Saharan Africa take place here. Sustainable agricultural methods

20 Middle East & North Africa can be used from the outset instead of the cost- South Asia intensive and environmentally unfriendly meth- 10 Southeast Asia and Pacific ods common in industrial agriculture. Ritter has

4 established a successful model in Nicaragua. 2 1 The models of the future in tons per capita emissions in tons 2 0.4 CO

0.2 The advantages sustainable models have to offer 0.1 2004 will become even more evident in the future:

00.04 • Political incentive systems at the national and 200 400 1,000 2,000 4,000 10,000 20,000 40,000 international level will drive the costs of using GDP per capita in $ natural resources even higher and make it more

Source: Gapminder, 2008 worthwhile to help protect ecosystems. Already The “What” -

www -sport.de) www weltweit.de), weltweit.de), - o. KG (www.ritter KG o. Exploring the Links www – The dried bean is the basic ingredient in dried bean is the basic ingredient The production. chocolate e Funding: The cooperative makes advance makes advance cooperative The Funding: and transport deliveries cocoa for payments It of organic also assumes the cost costs. certification. a farmers receive The prices: Premium buy the cocoa Ritter to from guarantee high quality meet the company’s beans that higher than the global a price at standards market price. uid

SR WeltWeit (www.csr WeltWeit CSR Sources: • • Ritter GmbH & C Alfred More and more farmers and cooperatives sell farmers and cooperatives and more More Ritter Sport, to their cocoa especially their its sup that Ritter can be sure cocoa. organic can rainforest the And replenished. be will ply keep growing. G ss ne usi ve B usi The Business Case for Sustainability in Emerging Markets Sustainability in Emerging for Business Case The – Incl | endeva urther reading Kumar Duraiappah (2004), Services and Ecosystem Poverty Well-Being, Human (2009): MartinTunçer Herrndorf and Burcu limits. basic needs - respectingSatisfying the earth’s Earth,Stuart Business, Aligning and Humanity L. Hart the Crossroads: At (2007), Capitalism Wharton School Publishing) NJ., (Upper Saddle River, SustainAbility (2007), Value Developing Environmental protection is thus also a key component of economic sustainability. F • • • • Cutting open a cocoa bean for quality bean for open a cocoa Cutting control. 23 Environmentally friendly farming methods: Environmentally - com in crop on plantations is grown Cocoa the protects This with other trees. binations soil and the rainforest. receive Knowledge building: Farmers not just about farm- and training advice such as ing methods but also about topics quality control organization, cooperative and marketing.

• • able to offer an organic product line. productRitter line. an organic offer able to project in Nica- launched the CACAONICA Cocoa in 1990 with this goal in mind. ragua their expand constantly to forced felt growers fell as prices rainforest the fields and destroy - catas Weather and soil fertility decreased. made the situation and soil erosion trophes small farmers. for worse even sustainable cocoa encourages CACAONICA with an standards farming based on organic approach: integrated Photos: Alfred Ritter GmbH & Co. KG Ritter GmbH & Co. Alfred Photos: icaragua o. KG, N KG, o. Alfred Ritter GmbH & C Alfred 47 nations, including China and Brazil, have defined a payment system for feeding electricity from renewable into the grid. energy sources Competition for natural resources is driving prices up and adversely affects quality and reliability of signifi- a offer can processes sustainable Resource-saving, supply. cant competitive advantage here. At a societal level, sustainability is increasingly in mand and de- more attention is paid to harmful behavior. According to the Organic Monitor global demand research for organic food institute, rose in 2007 by $5 bil- billion. lion to a total of $46

When Ritter can’t get its hands on any cocoa, cocoa, get its hands on any Ritter can’t When Global be had. to is no chocolate there has increased material this raw demand for Ritter has years. the last few over drastically about the reliability worryto and more more major by of supply on a market dominated is particularly Competition corporations. for the small harvestscocoa. of organic fierce a lot of time and ideal farming requires Cocoa extremely labor- The conditions. climate only bear trees cocoa and sensitive intensive cocoa Organic years. five fruit after around in the steps a number of different requires 30% yield is approx. Overall farming process. farming meth- less than with conventional kindThis - of sustainable farming neces ods. a special kindsitates of support. solution is a the of Ritter, the producers For closely-knit partnership and long-term to high-quality to and be access cocoa secure Case study 5 Case Ritter: ally of the rainforest A cocoa farmer in Nicaragua with his product. Growing organic cocoa is cocoa organic farmer in Nicaragua with his product. Growing A cocoa labor-intensive. • • 24 endeva | Inclusive Business Guide

Overcoming challenges

Key messages Tiviski is a camel milk dairy in Mauritania, a country situated in the Sahel region of Africa. The • Market conditions that facili- majority of the population of 3.4 million still de- tate trade are often lacking pends on agriculture and livestock for their live- in the slums and villages of lihood. The extreme conditions that Tiviski has developing countries. been confronted with since its formation in 1989 are a good example of the structural challenges • Constraints exist in five areas: posed by inclusive business projects. Companies market information, regula- will face similar hurdles in every developing coun- tory environment, physical try, though usually they won’t be quite as formi- infrastructure, knowledge dable and skills of the market participants and access to financial services.

• Innovative business models are needed to keep transaction costs low. How these models are developed is described in chapter 2 “The How”.

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 75Infant mortality as poverty indicator

50 50 > 100

20 20 75

< 9 < 9 No data Infantno deaths Data per 10 000 live 50 births, adjusted to the year 2000

Source: CIESIN 2005

< 9

No data Infant deaths per 10 000 live births, adjusted to the year 2000

Source: CIESIN 2005

The “What”

hristina Gradl hristina C Photo:

HABITAT N- U Photo: e uid G ss ne usi ve B usi Incl | endeva In a village in Uthra Pradesh, India, women embroider saris then sell them. In India, to embroider a village in Uthra women Pradesh, Around one million people live in Kibera, one million people live Around Kenya. slum in Nairobi, the largest The conditions for efficient trade are lackingtrade efficient for conditions The Market development in slums and villages just doesn’t mean introducing a new product to stores or signing a supply contract chal- overcome to have Companies cooperative. producer a with lenges that they are unaccustomed to, to this extent at least, in developed markets. One fundamental infrastructure problem the unavailable, is Information conditions. market is inadequate conditions other and ineffective is system legal the work, doesn’t for doing business are simply non-existent. such as Support logistics services, systems, financial services or media that com- re- these because lacking also are on, rely otherwisecould panies con- analysis An markets. as developed sufficiently not are gions (UNDP) Programme Development Nations United the by ducted identified constraints in five areas. 25 world map that uses child mortal-

hildren stand in line for water in Kathmandu, water Nepal. stand in line for Children

HABITAT N- U Photo: In Madagascar, farmers at the village market. sell sugar cane and vegetables In Madagascar, lums and villages are the market environment environment the market lums and villages are

Today, the overwhelming Today, majority of people who have to is this But areas. rural in live day per $2 than less on by get rapidly changing. By 2050, the planet will have three bil- live will them of Most today. does it than people more lion in the urban slums of developing countries. ity as an indicator for poverty: poverty is most widespread in Africa and Asia. There can also be huge In China, for example, the coastal within a discrepancies single country. preva- still is poverty while developed well very are regions lent in the interior. S are pyramid income global the of bottom the at people The not dispersed equally throughout the globe, they mainly live in the slums and villages of developing countries. The differences between the various countries and regions can be clearly seen on a

hristina Gradl hristina C Photo: 26 endeva | Inclusive Business Guide

1. Market information 3. Physical infrastructure It is often not easy to access reliable mar- Poor infrastructure hinders the exchange of goods ket information. Standard market re- and services as well as information. In Maurita- search data such as socioeconomic data, nia, there is no real system of roads to speak of, consumer habits and user profiles is rarely which would have made collecting milk a lot eas- recorded for people living in the slums ier. Transport networks are also lacking elsewhere: and villages in developing countries. Nor 60% of all paved roads in the world are found in is much known about existing produc- the few number of high-income countries.16 Net- tion capacities and skills. If this type of works for electricity, water or even data are either data does exist, it has usually been gath- non-existent or in poor condition. ered by government agencies or development banks. Generally they don’t publish 4. Knowledge and skills this data or, if they do, it is not in a user- Knowledge and skills are required to produce friendly format. Third-party intermediar- and use products and services. Eighty percent of ies such as market research institutes, rat- Mauritania’s population is illiterate. The nomads ing agencies or corporate consultants are lacked knowledge on how to prevent animal dis- rare in these markets. When Nancy Ab- eases, boost productivity or organize business. deirrahmane began to set up Tiviski, no Many people, particularly those who live in rural market for camel milk had previously ex- areas, have inadequate access to education. Fur- isted, meaning, of course, that there was thermore, media networks are also insufficient. In also no information about the quantity 2005, only 4% of Africans had Internet access.17 produced or price. 5. Access to financial services 2. Regulatory environment Poor households almost never have a savings or Laws and their enforcement are often checking account, making it more difficult to buy inadequate in developing countries. In expensive products. And, when people don’t have 1989, a legal framework did not exist for bank accounts, they can’t make use of affordable the dairy industry in Mauritania. With- and reliable payment methods like bank transfers. out a police force, functioning courts of Loans for larger investments and purchases are law and other government organizational not granted to many people because they have no systems, businesses have no guarantee legal documents, no secure income or property to that contracts will be honored and that serve as collateral. Insurance companies are gen- they will be protected against crime. erally unwilling to conclude insurance policies Nor do legal processes afford the people with people living in poverty. Insurance cover- living in slums and villages any protec- age would reduce their vulnerability and allow tion. They often don’t have any form of them to take a longer-term view of their business. official identification or proof of perma- Households and companies are thus not able to nent residence. Companies and individu- control their financial situation with any measure als frequently encounter lots of red tape of predictability. During periods of drought, many trying to obtain permits and licenses. In nomads were forced to give up their herds be- Latin America, it takes 73 days to register cause no credit was available to buy feed. Very few a business on average and costs around nomads have bank accounts to organize money 48% of the annual per capita income. In transfers with Tiviski. OECD countries, in contrast, it takes only 17 days and costs 5%.15 Many small businesses thus operate on an informal ba- Innovative business models sought sis. However, this makes it more difficult for them to do business with established These structural problems put special demands on companies who need a solid legal basis the entire business development process which for business relationships. will be explained in chapter 2. The idea is to meet these particular demands with the right solutions, from identifying business opportunities through to applying models that have already been successful in other countries. If these unique features are kept in mind, successful models can also be developed in difficult conditions as is evidenced by the growing number of positive examples.

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 The “What”

18 www www e uid Tiviski Dairy: Africa’s First Camel Milk Camel First Mamadou (2007), Tiviski Gaye Dairy: Africa’s in of Semi-NomadicDairy Herders Livelihoods Improves Mauritania Namitha Dipak (2008), Tiviski Dairy: Milk Marketing Innovative in the Desert to Tiviski for payment. According to Nancy to According payment. Tiviski for to of the dairy the success also Abdeirrahmane, led Mauritanians animal husbandry look at to as a way not merely activity, an economic “as son.” to father passed on from of life Sources: • • Tiviski produces a whole range of dairy a whole range Tiviski produces products cheese. “Camelbert” its milk to fresh from ranging G founder and owner, Tiviski Mauritania camel dairy, and owner, founder bdeirrahmane, ss Milk, not just from camels, but from cows and goats, is used for is used for and goats, cows Milk, but from camels, not just from production. ne - usi Nancy A ve B usi Incl | endeva 27 and cows. Nancy Abdeirrahmane says: “The Nancy says: Abdeirrahmane and cows. dairy impact had a much larger on people imagined.” have could than I ever here and investments many by driven was Success and Tiviski set up a refrigeration innovations: in part which relies collection system on don- key carts collection pick up the milk from to organization cooperative A separate stations. available supports makes credit the herders, - veteri offers seasons, during drought feed for nary about live services advice and provides stock breeding and herding. The producers producers The and herding. breeding stock can be submitted that paid with vouchers are Photos: Tiviski and successful ven so there is never a dull moment. We are always always are is never a dull moment. We so there ven – mending, painting or finding solutions to our growth problems. to our growth painting or finding solutions mending, in addition to camel milk,in addition to – Tiviski Mauritania camel milk dairy, seem less exciting. E seem less exciting. developing something new, building something, converting old things, building something, new, developing something it also sells yoghurt and “Camelbert” cheese, cheese, “Camelbert” it also sells yoghurt and camel cheese made from a soft French-type small sold in many products are These milk. in the country is and they enrichstores what In milk could the past, locally. eat to available or the camel only be obtained directly from imported abroad. was from high prices at milk. than 1,000 families supply camel More goats dairy milk from The processes also now Tiviski has successfully set up Africa’s very set up Africa’s Tiviski has successfully first camel dairy in all of Mauritania despite the company Today, the challenges it faced. sells 20 products Case study 6 Case stubborn as a camel As Now that the dairy is a successful venture and less of an adventure, it may it adventure, an of less and venture dairythe that Now successful a is Many families still make their livelihoods from camel herding in Mauritania. camel herding from families still make their livelihoods Many Photo: Tiviski Photo: 28 endeva | Inclusive Business Guide

The Role of Business in Achieving the MDGs By Louise Kantrow ICC Permanent Representative to the United Nations

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.

In this regard, business has consistently em- phasized the importance of mobilizing domestic resources and encouraging local entrepreneurship, foreign direct investment and other private capital flows, overseas development assistance and integrating the informal economy into the formal economy. Creating an environment conducive to enterprises of Creating an environment conducive to all sizes and in all sectors to develop, create jobs and pursue technological innovation enterprises to develop, create jobs and cooperation – coupled with sound governance and policies to reduce barriers to inter- and pursue technological innovation national trade and foreign direct investment – is the best model for helping people to get and cooperation is the best model out of poverty and paves the way to reaching for helping people to get out of poverty the MDGs. and paves the way to reaching the MDGs. ux -L Photo: Armor Photo:

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

The “What”

DP N U / Zaman Shamsuz Photo: form family-run businesses. form DP microloans make it possible for makeUNDP microloans it possible for families in Kishoreganj, Bangladesh, to Bangladesh, to families in Kishoreganj, e uid G ss ne usi ve B usi Incl | endeva 29 tor has tried to solve this problem with models including mobile phone banking as well as new financial products for business. Green compa- and mainstream becoming is business nies are increasingly making their core busi- Companies sustainable. environmentally ness will consistently pursue pro-development activities that overlap with their core business because these activities are more likely to be sustainable in the long term. As mentioned above, is, it as significant and the committed as business, contribution of to the millennium development process can only complement the primary role of govern- the on depend will success Ultimately, ments. national and local of capacity and willingness ap- the implement and create to governments propriate policy frameworks, and to pursue partnerships with business and other stakeholder groups. In turn, these efforts will need to be supported by the international community. Most in business view the millennium development process as integral to their business interests and to their global citizenship. Busi- ness will continue to engage respectfully and openly with communities, governments and other stakeholders around the world in pur- suit of the millennium development objectives. Tackling Tackling the challenges MDGs will of require concerted effort and part- achieving the nership by all actors in society. ICC encourages the UN, other intergovernmental organizations and national governments to seek out the involvement of the private sector in these vital efforts, and include business representatives in discussions on how them to to take the next level. In the past the decade, private sector has indirectly influenced all of the MDGs by providing the backbone for economic growth, through and their core more business operations directly and investment social with as well as chains value and philanthropy. For example, in a wave of innovation, multinational corporations and local companies in developing countries are creating new product lines for rural and low- income populations. In addition, lack of finance and liquidity is a constant problem in many developing countries. The private sec- To To capture the benefits of increased private sector investment, governments and development agencies need to work much more directly with the private sector investment to obstacles and identify ways to eliminate them, to enhance the government’s capacity to create environments that stimulate business and to develop small and medium-sized businesses. Healthy and dynamic societies business create opportunities and new new markets. At the same time, companies can possible a help healthy make and educated workforce, prospering consumers, well-functioning infrastructure, respect for the individual property and and transparency, democracy and freedom. effort and partnershipsociety. in all actors by Tackling the challenges of achieving the MDGs will require concerted of achieving the challenges require MDGs will the Tackling

The Role of Business in in Business of Role The MDGs the Achieving By Louise Kantrow to the United Nations ICC Permanent Representative 30 endeva | Inclusive Business Guide

The 2 “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 attractive 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.

3. As inclusive business projects grow, they frequently pursue several equally important goals of an economic, social and environmental nature, all at the same time. This requires more extensive performance Whenever I see a problem, monitoring and more clear-sighted alignment. If business models are to be replicated I immediately go and somewhere else within a country or even internationally, they have to be as indepen- create a company.

dent as possible of the local context. These Muhammad Yunus, Founder, Grameen Bank 19 models have to be highly standardized and straightforward. The “How”

Source: endeva Source: 12 Transfer to other to countries

the impact

Understand 09

Test the model Test 08 e uid G 10 ss Growth ne Secure usi funding Adapt the model Adapt

ve B 05 usi Incl | endeva 06 The information provided in the following chapters can reflect only the current level of knowledge. Even thoughperiments many ex- have already been carried out, efforts practical of we focus The are. are practices best the still what knowing far from - devel the on primarily been also has discussions theoretical and opment and implementation stages. With very few exceptions, services, financial and telecommunications of area the in mainly stage. growth the of knowledge and with experience little is there The content below is thus designed more to stimulate reflection than to serve as a blueprint for implementation. 11

31 04 Engage partners Develop Implementation the product

07 Expand locally Identify 01 opportunities 02 Development Analyze the marketAnalyze

03 everage local capabilities everage L Find solutions Find business development process is broken down here , process: Business development business inclusive to 3 phases × 4 steps This model aims to structure the existing knowledge on how inclusive business works. In practice, however, business development almost never outlined takes in this linear place 3-phase scheme, and certainly exactly not as when applied to ambitious new development projects in a foreign context. It is often necessary to go back when a assumptions step prove misguided and efforts succession fail. in happen usually The don’t phase each within steps but in parallel. And, throughout the various phases, many things happen at the same For time or in a different order. began projects business inclusive successful many instance, when two partners who shared a common interest came together and recognized the opportunity this represented. into three phases: development, implementation and, ul- growth. These phases timately, are further subdivided into four individual steps that become clear in the 3×4 model. The 3 phases × 4 steps = 12 topics topics = 12 3 phases × 4 steps , 32 endeva | Inclusive Business Guide

Men planning in Vietnam. Every inclusive business venture starts with a planning phase. This plan results in the development of the business model.

Photo: Adam Rogers / UNCDF

Critical success factors in the company structure

For inclusive business to become a reality, the added value and risks for the company has country business units – close cooperation with the company has to have the right internal to be performed. The justification should also the departments responsible for CSR, corporate framework because it is often here, within the clearly outline the added non-monetary value citizenship and sustainability is recommended. organizational structure itself, that the largest for the company in terms of staff retention, PR, This allows goals and successes to be effec barriers exist: in many instances, inclusive busi government ties or research and development. tively communicated, synergies to be exploited ness projects don’t fit into the usual workflows, and even existing project experiences to be they require lots of explanation and more time Collaboration with those responsible for put to good use. and resources than traditional projects. The corporate citizenship, CSR and sustain- following factors are critical to making inclusive ability These departments are often home Employee backing employees want to business successful despite these obstacles: to inclusive business projects until they have be informed about the project and, in some reached the point where they can be incor cases, they even want to get involved, e.g. in Support from the executive management porated into the standard business workflows. idea competitions, on-site volunteering and Without management support there is not They thus serve as “test labs” for business training or just by participating in discussions enough backing and resources to survive solutions to social challenges. However, even on the intranet. Business development that unanticipated problems and delays in the when inclusive business projects are based creates added social value has great potential project. To win over executive management, an somewhere else in the organization – e.g. in the to enhance employee identification with the in-depth analysis that gives a clear picture of Business Development department or in in- company. The “How”

04 Develop the product Identify 01 opportunities 02 Development e Analyze the marketAnalyze earning experiences and dealing with stake uid els over the medium term. How this goal is the medium term. How els over Some is left the people involved. up to reached “social special also created companies have Some of these divisions divisions. business” orga non-profit been spun off into even have expectationsnizations so that profit no longer of these projects. hinder the development L instead. the focus holders are G ss ne

usi 03 ve B usi Incl Try to do everything differently or do the hardest Try in rural thing first: the most impoverished customers new regions, lots of unorganized microproducers, products, etc. Start product development without a business model or design products from behind a desk. Leave things to chance and tackle just any project Leave things to chance and tackle just any without performing a critical assessment. without Make assumptions about the target group first verifying them. | , , , ,

Find solutions Find endeva DON’T DON’T DON’T DON’T Inclusive business pro 33 may even include external experts such as anthropologists or staff from development organizations. leeway Internal jects often with established workflows clash is simply not enough There in companies. or busi and development in research leeway “learning doing”. by for ness development CSR departmentThe for be responsible may but these projects usually individual initiatives lack resources. the necessaryInternal can provide incubators These organiza effectively. structures more financial and human tional units then have a certain generate at their disposal to resources business mod -intensive number of growth On the one hand, Strong partnersStrong in the

Develop products on the basis of a clear business model and in close cooperation with the target group. Stick close to well-known business models and Stick close to well-known business models just core competencies: target the income segment concentrated on in hone customers, existing below urban centers or existing regional markets, make integrate functioning producer cooperatives, use of established or adapted products, etc. Maintain close contact with the target groups, Maintain close contact with the target groups, live in. understand their needs and the reality they Collect a lot of ideas, then systematically evaluate Collect a lot of ideas, then systematically them and decide which ones to pursue.

nalyze the market nalyze ind solutions , , , ,

Develop the product Develop F A Identify opportunities Identify Strong local partnersStrong Interdisciplinary team country and region where the development country the development where and region Ideally, be carried critical. project is to out are on their rely companies should also be able to be they subsidiaries local structures, or own and count on their full support.branch offices, inclusive business builds on core skills and established business processes. On the other hand, it requires an open mind for unusual solutions and sensitivity to other cultures and countries.This collection of skills is best assembled in an interdisciplinary team that includes experts in marketing and supply chain management, in product and busi ness development and in local conditions. It 04. DO DO 03. 02. DO 01. DO The following is a brief summary of the do’s and for businessdon’ts model development: Development Critical structure success factors in the company 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 inefficiencies. To the Siemens team, the Sus- tainable Ventures Crosshairs might have looked as follow:

,Sustainable Ventures Crosshairs

Leveraging innovation

Opportunities: (re-)inventing Resources Needs transformation processes

Eliminating inefficiencies

Source: UNEP (2008), Towards Triple Impact – Toolbox for Analyzing Sustainable Ventures The “How” Photos: Siemens AG Photos:

20 e uid O of Siemens AG and CEO of Siemens AG President öscher, Source: Siemens AG (www.siemens.com) Siemens AG Source: - so success was idea competition internal The held again in 2008, this time it was ful that and countries on developing with a focus A the UN Millennium Goals. Development OSRAM came in first this solution from light portable,time around: battery-driven lamps kiosks. solar energy at can be charged that with, being tested is currently concept The Victoria. fishermen on Lake among others, G ss ne Peter L Peter usi - ve B usi Incl | endeva Experts from companies, development orga- development companies, from Experts experts: with Meetings together come intermediaries and financing academia, nizations, at general “inclusive business” conferences and workshops but also meet in specialized workshops to discuss sub-topics, sectors the by provided is events these about Information countries. and WBCSD and its mailing list on the issue of “development” and “Business as such networks social and lists mailing specialized by Fights Poverty”. case ideas, of presentation the for call Competitions Competitions: be also can opportunities Investment plans. business and studies busi- Well-known plans. business these of basis the on identified ness plan competitions are the World Bank Development Mar- ketplace, Changemakers, Ashoka’s the Business in Development (BiD) Challenge and the UN SEED Initiative. 35 The fishermen on Lake Victoria (Kenya) test the lamps charged with solar power. test the lamps charged Victoria (Kenya) fishermen on Lake The ture. The kiosks are being successfully used kiosksThe being successfully are ture. in Kenya. In 2007, all employees were asked to submit asked to were In 2007, all employees wide The their projects in a competition. that clearly showed of ideas submitted range when it resource a valuable are employees tackling to with their comes problems social “Safe The expertisetechnical and creativity. first prize, awarded which was Kiosk”, Water clean drinkingto provide solution uses a filter with little infrastruc areas in remote water The winner of the Siemens ideas The Wote” “Umeme Kwa 2008 competition everyone”. for “Light means Siemens AG Siemens AG has 430,000 employees around around has 430,000 employees Siemens AG with social and confronted who are the world in their day-to-day lives. problems ecological department responsibility corporate The made use of this local knowledge identify to benefit both society to projects and designed the company. mployees donate their ideas donate Employees Case study 7 Case Reports: There are several publications and blogs report on them- proven already have that projects business inclusive selves successful on the market. The most comprehensive - www.nextbil blog the on found be can reports current and lion.net. Tracking market innovations innovations market Tracking pov- in living people integrates that development Business of number a in resulted has and momentum gaining is erty media following The regions. and sectors all in innovations and events are good places to find ideas for these kinds of innovations: opportunities provided by sustainable business. opportunities business. sustainable by provided In the future, we intend to focus even more intensely on the on intensely more focus even to intend we future, In the The “Safe Water Kiosk” brings Kiosk” Water “Safe The clean drinking to water Kenya. rural 36 endeva | Inclusive Business Guide

How many people benefit from the potential venture?

Asking context experts Getting acquainted with the context

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.

Development organizations: For them, people living in poverty are one of their core target groups. They have been acquainted with the markets for a long time and they understand people’s needs and resources. They are also aware of the challenges and constraints these markets pose. UNDP, the World Bank, the regional development banks and national donor organizations are other good places to start.

Added social value , Strategic assessment of Lo w H i g h

opportunities h

H i g Cost-benefit analysis

Can the added social value be increased in the High priority medium term? Can the business grow?

Cost-benefit analysis

dded company value dded company Can more of the added social value stay A Low priority in the company? What additional value is created for the company? o w

Source: endeva L The “How” www www dition E nd e Photo: Till GabrielTill Photo: uid Sketch of how a design for a Nokia could for ideas competition a design of how Sketch look. Source: Jan Chipchase (www.janchipchase.com) Source: - envi people’s raise to concentrations ozone a design His idea for awareness. ronmental detecting safe also included a sensor for drinking water. Nokia competition, this design able was With make the best possible use of the shortto col- The information in the field. time it spent back lected sent was during competition the and some of it in Finland the developers to pursued further. was G ss How much of the added value created will ne usi ve B usi Incl | endeva urther reading: Ventures Sustainable Analyzing for Toolbox Impact - Triple UNEP (2008) Towards Strategy & Society: The Link between Competitive Micheal and Mark Competitive Link between E. Porter The & Society: R. Kramer (2006), Strategy 78–92) Social Responsibility 84, p. (Harvard and Corporate Business Review, Advantage Stuart 2 Hart and Erik Protocol, Simanis (2008), Base of the Pyramid the company gain? Who will pay how much for the resulting benefits? To what extent will public goods such as knowledge or environmental protection, which are difficultbusiness terms, be generated? What additional to value such as an put into enhanced reputation or expertise will be generated for the - com pany? Opportunities with a lot of value for society that can also gener- cases In priority. high given are company the for value added ate that are less clear-cut, the costs and benefits have to be weighed and the ratio between the two possibly improved by adapting the idea. • Added Added company value: F • • 37 each competition. According to first-hand first-hand to According each competition. Nokia, from everyonecomments who partici- a sense felt and not just the winners, pated, opportunityof pride a rare because it was to a company. their ideas to express in the competition generated designs The the winner in Accra certainly innovative: were simultaneous allow came up with an idea to In Ghana, people use of multiple SIM cards. of to take advantage providers use different one any calls at voice for the cheapest rate winner in Rio suggested The de Janeiro time. air pollution and measures a phone that Who will pay how much for the resulting benefits? resulting for the Who much how will pay strategic assessment earning from customers earning from , – L including one in – How many people benefit from the po- Nokia Open Studios ystematically deciding which opportunities ystematically Added Added social value: and selection process: and selection process: tential business and to what extent? How will the model develop? Are there opportunities for creating even more added value by expanding products and services? Can the as well? business grow locally and in other countries Nokia Open Studios Nokia people outside of learn from to likes to Nokia wanted designers the company. look if they phones would know cell how people living in low- by designed were Nokia find out, held To communities. income competitions design four and one in the slums of Rio (Brazil) de Janeiro (Ghana). camp in Accra a refugee invited living in these slums was Everyone “Nokia Open Studios”. participateto in the Nokia collected ideas and Local employees conductedshort interviews entrants. the with after organized was ceremony awards An Cell phones have to meet different needs in slums than they do in industrial countries. than they do in industrial needs in slums meet different to phones have Cell study 8 Case Photo: Shuan Sadre Ghazi Shuan Sadre Photo: S promising most are When lots of different ideas are brought together this way, it is important to choose and pursue the most promising ones. Two criteria play a role in the 38 endeva | Inclusive Business Guide

02 Analyze the market

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 never 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 market challenges. The “How” Transport of a solar home system to a customer a customer to of a solar home system Transport Shakti in Bangladesh. of Grameen A design competition like the one e uid Source: Interview International,Source: Micro Energy with Noara Kebir, Aline Krämerby the evening and early morning. This method This and early morning. the evening and unpleasant can also bring unanticipated “In- Ugan Kebir says: Noara to light. findings the product that showed research da, field This on the market needs. did not satisfy very for our partnerwas difficult swallow to solar products finance to because he wanted unfortunately This what. no matter there his for be counterproductive turned out to for precisely or perhaps Still even customers.” learned “We Kebir thinks: Noara this reason, research conducting the little field from more 20 surveys.” did than from we G ss ne - usi ve B usi Incl | endeva ondon: Earthscan) urther reading: Six Truths About Emerging- About Truths and Anne Goebel-Krstelj Stengel (2004), Six E. Alejandro Guillermo D’Andrea, 2–12) 34, p. (strategy+business Market Consumers of 21 Sets of Ideas and Activities A Sourcebook RobertWorkshops: Chambers (2002), Participatory (L Idea and design competitions: initiated by Nokia gives participants the opportunity to propose work- by overcome be can barriers Language solutions. own their ing with pictures and drawings. The competitive character and additional incentive to take part. the possible prizes provide A traditional market environment analysis that gives in-depth information about market opportunities and constraints can be of this information. created on the basis F • • Overnight stay with a family in Uganda Overnight stay situation. study their energy to 39 frequently do not give objective answers. objective answers. do not give frequently in authoritarian societies who live Those the giving in particular to accustomed are hear. to the interviewer that wants answers much less become I have Consequently, contact with use interviewsinclined to for the contact, intense more The the end user. can be is that the information the better is a veryTime important factor in obtained. establishing trust.” favors increasingly MicroEnergy a result, As the method of participatory observation. willing and able to who are Anthropologists longer on the target or even spend a full day When market can help with this approach. importantis this issues, be energy discussing is primarily light used in example, for cause, - - Here, the target group documents its own nergy International MicroEnergy Visual Visual and sensory instruments can provide sing appropriate methods sing appropriate Tracking energy needs energy Tracking International brings together MicroEnergy 2002, Since solutions. and energy microloans has been working together the company institutions and with various microfinancing including Bang suppliers in countries energy and Uganda. Tanzania ladesh, India, on its in-country initially relied MicroEnergy primar partners market research, provide to Case study 9 Case ily using methods such as interviews and microfinancing Sometimes, groups. focus questions institutions simply included several evaluation in their customer “energy” about of Micro co-founder Kebir, Noara surveys. of this describes the drawbacks Energy, living in poverty only are “People approach: familiar with the interviewrarely method and they is that result The often misunderstand it. Anthropologist Eva Paul observing a meeting of a microcredit Paul Eva Anthropologist in Uganda. group Photos: MicroEnergy International MicroEnergy Photos: habits, for example, in a journal or through photos of its environment and favorite products. Self-observation: support for interviews and focus groups. For example, play example, For groups. focus interviewsand for support money can help deal with the sensitive issue of Models and money. drawings can uncover information not men- oral survey. tioned in a written or Visualization: A number of different methods help overcome these challenges and obtain “implicit” information. This is informa- they because respondents by formulated explicitly not tion own lives. lack distance to their U 40 endeva | Inclusive Business Guide

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 provide 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.

, Growing 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

Physical infrastructure onstraints C Knowledge and skills

Access to financal services

Source: UNDP (2008) Creating Value for All – Strategies for Doing Business with the Poor The “How”

22 www www www DT and Smart’s Public Affairs Group Head Group Affairs Public and Smart’s PLDT on Isberto, M e uid Smart Communications: Low-Cost (2007), Smart Grace Ganchero Elvie Low-Cost Communications: Workers Overseas Philippino for Transfers Money Smart Inc. (www.smart.com.ph) Communications, Sources: • • an enormous saving for people working for an enormous saving otherwise pay to who would abroad have 45% of their hard-earnedaround money for service fees. Doing Business with the Poor for Strategies G – strategy matrix. Companies can use this ss , ne usi ve B usi Incl | endeva urther reading: Jamie Anderson and Niels Billou (2007), Pyramid the Base of the Economic At Innovation Poor: World΄s Serving the (Journal 14–21) 28, p. of Business Strategy Models Emerging Markets, Monitor Institute (2009), Emerging Reinventing Strategies Strategies (2004), Reinventing London StuartTed L. Hart and (Journal 350–370) of International Business Studies 35, p. All for Value UNDP (2008), Creating • • F • • tem, Smart entered into dialog with the government together with its primary competitor, Globe, and with other companies. The exchange of information resulted in legislation that made innovation possible and simultaneously protected the interests common good. of consumers and the matrix solutions with the strategy Identifying The five strategies, together with the constraints introduced on page 26, produce a matrix to develop or improve their own business models. ery strategy can, in principle, be applied to every challenge. Ev- The strategy matrix can thus help identify a number of concrete potential solutions that should be evaluated for feasibility and effectiveness. 41 Smart the model around its business developed Smart can also carry customers telephone out financial transactionscell with their typeThis of mobile banking lets phones. bank accounts have people who don’t and send money easily and reliably. receive serviceThe functions even internationally. In 2008, abroad. work million Filipinos Eight but the home $16.4 billion they officially sent chan- higher if informal is probably figure Money can be transferred included. nels are represents This by SMS with Smart. affordably to as many Filipinos as possible. possible. as Filipinos as many to ommunications, Philippines ommunications, Smart C corporate mantra: to make mobile phones as affordable and accessible and accessible as affordable phones mobile make to mantra: corporate ombining resources and capabilities with others ombining resources Smart Communications, Inc. is the largest Inc. is the largest Smart Communications, with more in the Philippines provider cellular company The than 43 million customers. meet the needs to its product range targeted who 33 million Filipinos of the approximately gen- strategy This the poverty below line. live than $2 billion and a of more revenues erated than $0.5 billion in 2008. EBITD of more Case study 10 Case Smart-income cellular customers low solutions for Companies are often reliant on collaboration with govern- with collaboration on reliant often are Companies ments. The government has the sole authority to define and enforce generally binding also laws. help improve Governments market structures can in the areas of education, information and infrastructure. Companies can be important sources of information for shaping legislation because they are aware of the challenges and have a reason to confront them. What this means is that individual the be to have necessarily doesn’t governments with dialog same thing as socially detrimental lobbying. The demands are infused with legitimacy through the collective activities of stakeholders, e.g. through chambers of commerce, basis legal no was there Because dialogs. industryexpert or for mobile banking in the heavily regulated banking sys- ngaging in policy dialog with governments Engaging in policy dialog with governments It also sometimes makes sense to bundle an industry’s resources to share the investment in removing market con- to together got banks several instance, for India, In straints. form a rating agency for small and medium-sized companies (SMEs) to lower the costs of credit checks. C In addition to other companies, public service providers and development organizations can also offer skills and knowledge that round out the business model. In many cases, they have been active on the target market for quite some time and have market knowledge, distribution - sys tems, communication channels and solid For its relationships. mobile banking business, Smart has built a network can recipient the where banks partner and stores 10,000 of pick up the money. 42 endeva | Inclusive Business Guide

The develoPPP.de program by Jonas Naguib (GTZ) and Fritz Jung (BMZ)

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) The “How”

- but the – Photo: © GTZ/Florian Kopp © GTZ/Florian Photo: 0.2–0.3% on average – by the private sector. the private by e uid Source: GTZ Source: is minimal Develop considerable. health benefits are and effectively achieved goals are ment into new BASF taps And finally, efficiently. the go through to markets without having time-consuming market of acquiring process everyknowledge for country afar. from Reports projects in Bangladesh, of successful - Tanza Indonesia, Cambodia, Bolivia, Brazil, future the nia and Uzbekistan underscore first operational The of this model. potential startedprojects in the middle of 2009, were of the PPP project. point the midway G ss ne - usi - ve B usi Incl | endeva 43 proof of their effectiveness and sustainability. proof of their effectiveness and sustainability. de- political long-term keep also partners Both and poverty eliminating mind: in velopments hunger, improving education and healthcare habitats. and protecting natural ”develoPPP.de” has been extremely well-received well-received been extremely has ”develoPPP.de” tor based on its development expertise based on its development tor and multi-stakeholder dialog in the facilitate to themselves. countries kick-offcountry, a to of SAFO introduction To the business, local decision-makers from to brought are political and social spheres GTZ’s role is mainly to advise the public sec is mainly to role GTZ’s The up with a plan of action. come gether to such as flour or fortifygoal is to staple foods closely works SAFO this goal, achieve To oil. and sell these produce that with companies help drafting busi- receive They products. supportedness plans and are with technical are the programs the same time, expertise. At - volun creating by a legal framework given tary including logos for or binding standards Everyone food products. labeling fortified in SAFO benefits and the effects involved can offer companies Local multiplied. are established in the market products already (the target consumers For a higher value. at in price million), the increase is several figure - - - SAFO / BASF SE ombining forces to fight malnutrition to ombining forces Roughly two billion people around the world world the Roughly billion people around two malnutrition because they don’t from suffer such as vitamins get enough micronutrients can of- consumers Low-income and minerals. don’t foods that to buy staple only afford ten of micronutrients. amounts adequate contain de and mental Malnutrition hinders physical the immune system. and weakens velopment basic staples with micronutrients Fortifying to fight way is an easy and cost-effective the of SAFO, is the focus This malnutrition. of Oil the Fortification for Alliance “Strategic GTZ is collaborat and Other Foods”. Staple ing with BASF SE on this project within the program. “develoPPP.de” of the framework includ- various micronutrients BASF produces good vision ing vitamin A, which is critical for efforts BASF’s immune system. and a strong part malnutrition are combat to of its strate goal of sustainability. gic Case study 11 Case C Malnutrition vision loss especially in children. often to leads ”develoPPP.de” ”develoPPP.de” has been received by the extremely private sector. This is shown well- not just by the numerous proposals received by the implementing agencies of the BMZ, it has become clear in conversations with partner companies that PPP projects also create part- public and private because opportunities of strengths specific the leverage each can ners Many companies continue projects the other. further supplying thus PPPs, as off started that 44 endeva | Inclusive Business Guide

04 Develop the product

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 improve 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. The “How”

23 - ight Design Light D. A Practical Approach for Developing Developing for Approach A Practical – www e uid ight (www.dlightdesign.com), Light (www.dlightdesign.com), D. Sources: Institute (http://extreme.stanford.edu/suc of Design Standford cess_stories/dlight_design.html) The team entered the finished product in entered team The won. And business plan competitions. several D.light, company, the for-profit formed They the money from in 2007 with the prize their first product, is an Nova, competition. to 20 times more off 10 gives LED lamp that A solar-charged lantern. than a kerosene light Cell 200 hours of light. up to battery provides the battery. from phones can also be charged $10 and $25. Other between lamp costs The and been unveiled already lamp models have in development. currently are more G ss ne usi - products to our customers. our customers. to products - ve B to markets at the base of the the base of at markets to usi www Incl | urther reading: Design for Social Impact for IDEO (2008), Design Design for SustainabilityTU Delft for (2002), Design UNEP and Economies Our products bring the latest deve the latest bring Our products • F • endeva lopments in design and technology and technology in design lopments continually improve and offer better better and offer improve continually ongoing solicitation of feedback,ongoing solicitation we pyramid. Through best practices and and practices best Through pyramid. 45 preneurial Design for Extreme Affordability”. Extreme Affordability”. for Design preneurial Sam originally Goldman colleagues and his use on stalls LED lamps for design set out to in Burma. vendors of night that realize them to take long for It didn’t need of in desperate households were many their product. In studying the homes of the require other they identified group, target ments not immediately obvious to outsiders: to obvious not immediately ments - the ceil be hung easily from needed to lights be car and still be able to ing and the walls experimented They ried comfortably outside. the opting for of the battery, with the size enough light provided LEDs that lowest-price night. with at and work read to - - ight Design, IndiaLight Design, D. ject. Today, it has already sold several sold several it has already Today, ject. ew products made with local resources and skills and productsew made with local resources duced by kerosene lanterns is dim, usually lanterns kerosene by duced is kerosene by, or read work not enough to fumes and is a emits unhealthy expensive, hazard. fire significant a with up come to mission a on out set D.light a by inspired project was The solution. better “Entre entitled University Stanford at course hundred thousand LED lamps and has more thousand LED lamps and has more hundred a success: Its for recipe than 80 employees. product. convincing today, world in the people one in five For the only option for are lanterns kerosene they But unfortunately, household lighting. pro not the best solution: the light are D.light began back in 2006 as a student in 2006 as a student began back D.light pro Case study 12 Case out lanterns snuffs kerosene D.light The solar lamps from D.light make it possible to read and work even at night. at even and work read make it possible to D.light solar lamps from The Photos: D.Light Photos: N Working together with people living in poverty can could features new also with Products products. new to rise give potentially be developed from special local materials. In the case of Natura in Brazil, the priprioca plant is the basic Local 4). study case (see line cosmetics new a for ingredient 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 target groups. practice as long as they are sold to known 46 endeva | Inclusive Business Guide

During implementation, one stone has to be laid at a time until the finished business model can finally be tested. Bild Adam Rogers / UNCDF The “How”

Test the model Test 08

Secure

funding 05 e uid G ss ne usi 06 ve B usi Incl Start off with limited resources that could jeopardize Start off with limited resources the project in the event of unexpected expenditure. account Calculate the budget without taking into uncertainties and risks. partially Engage a number of partners who are only and suitable. This increases the costs of coordination difficult. the risks of failure and makes growth more Define relationships with local staff or business partners informally or individually without clearly thinking through incentive structures. Conduct a pilot test without taking into account possible obstacles and stakeholder interests. Insist on keeping a tight schedule. Continue with a project that clearly is going to fail. Engage partners | Implementation , , , , endeva DON’T DON’T DON’T DON’T

07 47 everage local capabilities everage L with considerable added –

Test the business model components step-by-step. the business Test Schedule testing cycles. Be open to failure. Leverage the knowledge and contacts of the local people by integrating them with clear tasks and standardized processes value for the target group and clear incentives for cooperation. Engage a small number of partners who are a per- Engage a small number of partners who - fect fit (ideally an organization with complemen tary skills, a clear self-interest and a broad reach). Structure funding flexibly to accommodate delays Structure funding flexibly to accommodate and additional costs. the busi- Incorporate uncertainties and risks into ness plan from the outset.

ecure funding ecure everage local capabilities everage , , , , Test the model Test L Engage partners S 08. DO DO 07. DO 06. 05. DO

Business model implementation can be broken down into four steps. and are The don’ts generally following rec- do’s ommended for the individual steps: Implementation 48 endeva | Inclusive Business Guide

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 company, 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 unanticipated expenditure. Co-financing with government funding

Public funding is also available for projects that Multi-level added value with help fight poverty or protect natural resources and internal resources can serve as models for other companies. Institu- tions that provide financing include: Larger companies often fund inclusive business projects from their own internal National development organizations of the donor coun- resources. Justifying these budgets can be tries: DFID in Great Britain, USAID in the U.S., tricky so it is useful to look at the total ADA in Austria and others offer programs similar added value generated for the company. to the German develoPPP.de program (see pages 42–43).

, BASF value driver tree Development banks: These include the IFC and the regional institutions ADB, AfDB, IADB and EBRD as well as national development banks. CSR Partnerships Attractiveness Governments of the target countries: Subsidies encourage companies to do their part in helping to Market access as an employer attain goals beneficial to society such as creating infrastructure or providing education.

Broad basis in local communities Communication

Business success

Source: BASF SE The “How” - e uid mentation. It provided an equivalent of an equivalent Itmentation. provided funds. PPP program the BMZ’s $245,000 from partners- private the equiva The contributed the project. of $260,000 to lent DEG Source: artichokes a facility extract to and operate DEG The these medicinal plants. and process helped structure this project and provided during all phases of imple advice extensive G ss ne - - usi ve B usi Incl | endeva ew markets for public goods for markets ew N In principle, the added social value generated by an business inclusive project in terms of environment, health, etc. can markets also functioning now, Until component. separate a as sold be trad- Emissions non-existent. largely been have services these for climate for created be can market a that shown has however, ing, gas greenhouse turn Certificates good. public global a protection, reductions into hard cash. The appliance manufacturer, Bosch energy selling for groundwork the laid example, for und (BSH), geräte Siemens Haushalts- refrig- its have to UN the to applying by certificates as reductions Develop- Clean the under recognized scheme replacement erator ment Mechanism (CDM). These energy savings are achieved by exchanging old, obsolete refrigerators for more energy-efficient models in Brazilian favelas. gypt 49 added value generated for the company. for generated value added Photos: ATOS Photos: www www phase, the DEG, which is one of the largest the DEG, which is one of the largest phase, finance, of development providers European selling later held a 20% stake in the company, Schaette in 1995 after the Dr. to its share financially sound. project proved In financ 1999, the DEG became a long-term of focus The with the DEG. together mented and Echinacea grow to the pilot project was - upcom for ing and advisory partner ATOS at a long time, For investments. ing expansion used imported extracts produce to ATOS taken from extractsThese were medicine. To in Egypt. also be grown could that plants a PPP establish local production capacity, imple planned and successfully project was www SEKEM processes raw materials locally for pharmaceutical production. Scientific tests help to ensure the quality of the products. to ensure tests help production. pharmaceutical Scientific locally for materials raw SEKEM processes ompany for Biological Pharmaceuticals S.A.E., E Pharmaceuticals Biological for ompany ATOS C ATOS Justifying these budgets can be tricky at the total look is useful to so it can these budgets Justifying ocial investors for entrepreneurs entrepreneurs for ocial investors urther reading: Development Guide for Capital NCDO and GEXSI (2008), Venture Impact Social and Environmental for Monitor Institute (2009), Investing Finding Capital for Sustainable Livelihoods Businesses Sustainable Livelihoods for Capital WBCSD (2004), Finding Since 1977, the Egyptian company SEKEM company 1977, the Egyptian Since has pursued a sustainable business strategy organic among other things, includes, that of local farm- and the integration agriculture typesThese need of business models ers. of the risks funding partners aware who are business projects and who inclusive posed by instruments. with flexible can respond selected finance the DEG was to a result, As in 1986, venture: a German-Egyptian joint with the GermanSEKEM, together company, the subsidiary founded ATOS Schaette KG, Dr. Pharmaceuticals Biological for Company pharma- manufacture natural to (ATOS) S.A.E. During the start-up and herbal teas. ceuticals Case study 13 Case the desertAll-natural medicine from • F • • S inves- only the not are investors capital venture Traditional tors out there. Inclusive business start-ups also have access to a number of “social investors” who specialize in funding business models with added social value, particularly to Acumenfight Fund poverty. is a pioneer in theUS. The BiD Changemakers, Challenge and or other Ashoka’s busi- platform a offer focus, social a with competitions plan ness investors. to themselves present to entrepreneurs social for 50 endeva | Inclusive Business Guide

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- cation and consumer sales. gether intensively to coordinate processes and Further reading: • 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) control, distribution and customer ser- • Ros Tennyson (2003), The Partnering Toolbook www vice. • WBCSD, IBLF (2003), A Business Guide to Development Actors – Introducing Company Managers to the Development Community www The “How”

24 - www Microinsurance Report – e uid earning Insure the Poor to erty helps Insurance against risks. protection and creates the long term plan for people to net. a safety Institute (2010) Allianz SE and Emergia Source: L involved in the sale of insurance policies and in the sale of insurance involved some support provide in handling claims. mutually beneficial partnershipThis allows a new market and position access to Allianz CARE first time ever, the for And, its brand. people living in pov International can offer G ss ne ichael Diekmann, of Management, Chairmann S the Board AllianzE of usi M ve B usi Incl | endeva important basis for a successful partnership and can help solve conflicts. A clear division of duties also makes implementation more efficient because unnecessary decision-making cycles can be avoided. Identifying partnersIdentifying But how does one go about finding local partners and establish- sides both know who Intermediaries relationship? working a ing and can assess the potential for collaboration are helpful here. Development organizations, embassies or foreign chambers of net- Compact Global local intermediaries; as act often commerce works or the WBCSD can also give advice. 51 Together with our partners, with been have we Together groups to help cope with the problems they with the problems help cope to groups structures These in their day-to-dayface lives. people in offer to being leveraged now are including southern India insurance, general A policy costs components. and accident life $2.50 per year. around - clearlyAllianz devel defined: are roles The ops and supplies the products and handles local knowl- for CARE is responsible claims, group. edge and contact with the target people about the educate CARE employees and its benefits using of insurance concept and Bollywood-stylepuppet theater skits. with local microfinance together Working they are and self-help groups, organizations are International, Indiaare able to sell our insurance policies to 3.8 million customers. 3.8 policies to sell our insurance able to Allianz SE und C which goals are to be reached by when and with what means, which tasks and responsibilities are assigned to each individual partner for implementation, if so, how, whether profits are to be distributed and end. how and when the partnership will or can learly defining processes defining processes learly

When Allianz took stock of the damage after stock took Allianz When 2004, this Germanthe tsunami in December there that discovered company insurance - damage claims after the larg any hardly were Why? history. in recent disaster est natural Because almost no one in the tsunami region come decided to company The insured. was change scheme to up with a microinsurance this situation. a partnership into with entered Allianz to an aid organization, CARE International, people products and distribute to develop CARE has been working living in poverty. groups” “self-help a long time with the for these form Women India. throughout found Insurance and humanitarian aid join forces giant 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 the advantages result, As a at the beginning. will be kept skeptical about whether promises are Many policies in their hands. hold their first insurance Women India. in Kerala, here like the one shown events large at explained are study 14 Case Photos: Allianz Photos: • • • • C ex- define clearly to helps agreement partnership written A pectations. It documents: When developing a business model, it is not uncommon that widely varying ideas exist about these fundamental questions. Arriving at a consensus at the beginning is an 52 endeva | Inclusive Business Guide

07 Leverage local capabilities

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 language, 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 individual’s standing. And finally, the skills and knowledge acquired in this role create additional opportunities for both the company and the employee.

Training local staff Photo: Barclay’s Photo: When local employees and business partners are integrated, the most important thing is making sure that they have the right knowledge and expertise. In their role as sales or service representatives, local staff has to be able to talk about products and provide services. If they are working in purchasing, they have to be able to explain and monitor processes. The necessary skills, such as sales pitches, financial management, group coordination, business communication, etc. can be Susus offer financial services to microentrepreneurs in Ghana.

There are perhaps 4,000 Susu collectors in Ghana, each serving between 400 and 1,500 customers daily. We believe that there is a real opportunity for Barclays to learn from them so that we can know how best to help and complement their services.

Edward Derban, Heads of Barclays’ Susu program 25 The “How” - - Photos: Barclay’s Photos: Susu Collec – www www Lessons, Opportunities and Challenges Lessons, – lgar Publishing) e Bank services the to specially tailored can be loans that to Susu including access customers passed on to the Susu and their customers for Training uid

Linking Traditional Banking RobertSource: Traditional Darko Osei (2007), Linking Microbanking Barclays The with Modern Finance: in Ghana Initiative tors • • Around 1,500 Susu can now offer their cus- offer 1,500 Susu can now Around - services better the collabora tomers through has access and Barclays tion with Barclays loans will make it to Access small traders. to in the future, grow to these traders easier for customers. larger turning them into G dward E dward ss ne - usi ve B heltenham: E Cheltenham: usi Incl | endeva urther reading MicroFranchising : Creating Wealth at the Bot at Wealth : Creating 2007), MicroFranchising Gibson (Ed., W. and Stephen Jason S. Fairbourne ( of the Pyramid tom Beth Jenkins (2007), Business Linkages et al. • A Susu customer with an informational brochure from the Barclay‘s Initiative. the Barclay‘s from brochure with an informational A Susu customer - inhabit Local Susu. the with directly works contrast, in Barclays, ants are most effectively integrated into a company’s business when tasks can be standardized and work does not have to be monitored because strong incentives exist to turn in mod- “microfranchise” of basis the is This performance. possible the best els such as (see VisionSpring case study 20). Status gains are also In India, for example, 6,500 farmers coordinate and key. admin- purchase to uses ITC that kiosks Internet accessible publicly ister goods from the farmers (see case study 19). Not only does this role provide them with an Internet connection and IT is also enhanced. ment, their standing within the community equip- F • 53 Nationwide information campaigns about campaigns information Nationwide of financial services,the advantages insur ance and financial management ance

• Barclays Bank has been operating in Ghana Bank has been operating Barclays customers 1917. Mostsince of the bank’s In the the upper middle class. from come unsuccessful the bank had made several past, As customers. low-income target to attempts together work decided to Barclays a result, with the Susu who know the local traders daily and make and their financial situation of their customers. rounds together and the Susu worked Barclays with the following a program develop to components: - imited, Ghana Bank of Ghana Limited, Barclays tructuring collaboration tructuring collaboration A modern bank at the service of traditional money collectors of Ghana 26% of the population Only around the means that This has a bank account. majority has no access of the population financial services formal to such as loans or though small traders even accounts savings of these need in particular in desperate are a network of infor demand, cover To services. Case study 15 Case called the mal money collectors and lenders, the last 300 years over developed has “Susu”, service visit These providers Africa. West in collecting daily, 1,500 customers their 400 to each cus- of money from amount a fixed Susu serveThe out deposits. or paying tomer they don’t However, the poor. as banks for and they extend credit to much leeway have run the risk of being robbed. always Susu money collectors at the market in Ghana. Their customers make customers Their market the Susu money collectors at in Ghana. “human bank account”. the deposits into regular Local employees and business partners are often integrated often are partners business and employees Local through partner organizations. Companies can leverage the core competencies of these organizations for training, organizing and motivating local staff. For Bangladesh in example, sales yogurt organizes that itself it Danone not is but its local the partner, Grameen Foundation, which can rely on its well-organized network of women the “Grameen borrower Ladies” who are part of the bank’s known as groups. S picked up in training sessions or “on-the-job”. It is the that provided are skills only these and knowledge this when be assured. success of projects can 54 endeva | Inclusive Business Guide

08 Test the model

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 providing evidence of the feasibility of the project.

Flexibility for adaptation cycles Keeping an open mind about results Pilot projects for inclusive business should be planned with more flexibility Sometimes, pilot tests show that would-be busi- and time than standard business projects. ness opportunities cannot be successfully imple- Inclusive business projects often require a mented. It is therefore essential that the model number of changes to the existing busi- should be subject to critical review after every pi- ness: a new market, a new product, new lot test. By the time the test is completed, it must partners, etc. This makes the pilot test be possible to abandon the project if it does not more complex and increases the prob- look like it is going to be feasible. ability that several adaptation cycles will be necessary. The test phase can only be Just because a pilot test fails, however, doesn’t completed and implementation started necessarily mean that the work was in vain. The when all components have been brought findings can be incorporated into other devel- into alignment and the business model is opments. If the market proves to be completely resilient enough to successfully survive insurmountable, parts of the model can often be over the long run. As the Protos cooker used elsewhere. In one such case during a pilot showed, this phase can take several years. test of Procter & Gamble’s PUR water purification sachets, it was discovered that the willingness of Jordan Kassalow, founder of VisionSpring, the target group to pay for the product that had the eyeglasses microfranchise (featured in originally been assumed did not and would not case study 20), had a similar experience: exist. Today, PUR is distributed by aid organiza- “You have to go out and test your assumptions free of charge to poor households as part of tions – you should test as soon as you can, the company’s philanthropy program. It is also as quickly as you can and as efficiently as sold in the US for profit as a product for outdoor you can. Expect that for every 10 assump- enthusiasts. tions, 8 will be wrong and 2 will be right. Then study the two that were right and figure out why. Turn those two into ten new assumptions, and repeat the process. This is all about iterations – figure it out one step at a time, hit your head against the wall. It will take longer than you expect it to take. (…) Why we’re successful is because we’re very transparent with our mistakes as well as our successes.” 26 The “How”

- 27 - www The customer is visibly satisfied at an is visibly satisfied customer The in use the Protos to how to introduction Jambi, Indonesia. Housework Energy NetworkHousework Energy - – e uid BSH (www.plantoilcooker.com), BSH (www.plantoilcooker.com), Hedon (www.hedon.info/BP56:ProtosPlantOilStove), Lists (www.bioenergylists.org/bshprotosupdate), BioEnergy 4–5 p. GTZ (08/2008), PPPreport, gram. In addition to providing funding, the funding, In providing addition to gram. DEG also helped with local contacts and working its experience local ac with through Sources: • • • • BSH received support duringBSH received the pilot test PPP pro the BMZ’s the DEG through from - success test proved the field Although tors. the market decided that BSH eventually ful, riper were mass introduction for conditions elsewhere. Protos in other countries, tests Following production in the spring of 2010 in into went planned to 3,000 units are Indonesia. Around capacity in 2010 with a total of be produced The years. 50,000 per annum in the coming be sold initially only in Indonesia will Protos - devel Protos’ will follow. but other countries is certainlyopment over. far from G ss ne PROTOS project manager, Bosch und Siemens Hausgeräte GmbH Bosch und Siemens Hausgeräte project manager, PROTOS hiroff, usi ve B usi amuel N. S Incl S | endeva The cooker can be used indoors and out cooker The in use in the Philippines. here doors, 55 Protos underwent a pilot test from 2003 to 2003 to underwent from a pilot test Protos an island in the Philippines. 2006 on Leyte, explains: manager Samuel N. Shiroff Project be the turned University out to “Visayas State ideal partner Itus. is one of the leading for oil plant for institutions in the Philippines also ideal were conditions Testing research. village because the island has agricultural, is a large there And and urban structures. oil available.” supply of coconut be overcome A number of challenges had to - continu phase: in addition to in the testing meet customer ously adapting the product to also important it was a ensure needs, to goal was This oil. supply of plant reliable cooperative. a coconut involving by achieved sell the oil directly able to farmers were The The margins. them better BSH, thus giving to manufacture the to also wanted company make this happen, BSH To locally. cookers producers. and train identify had to affordable and environmentally friendly products. and environmentally affordable - a successful product comes into being over a low flame a low being over into a successful product comes – Bosch und Siemens Hausgeräte GmbH, Indonesia Bosch und Siemens Hausgeräte and the Philippines it is possible to serve some of the poorest families with high quality, with high quality, serveit is possible to families some of the poorest The Protos technology and the corresponding business model prove that business model prove and the corresponding technology Protos The types were designed, tested with the target with the target tested designed, types were finally, made until and modifications group ready proved technology in 2009, the Protos market. for The added value offered by the Protos cooker Protos by the offered added value The GmbH Bosch und Siemens Hausgeräte from households in developing rural (BSH) for $50, is is clear: only around countries it costs than oil rather plant by is powered durable, emits no smoke and kerosene, expensive years several it took Still, smell bad. doesn’t a functioning emerge. for business model to got underway the at of Protos Development It of Hohenheim in 1998. University into went large-scale production in Indonesia in the spring of 2010. and implementation development Product Elmar Stumpf Dr. extremely complex: were while with the technology had experimented attention It BSH’s caught working on his PhD. a develop to Stumpf in 2003 and they hired market. Proto the low-income product for Case study 16 Case BSH Protos Protos cooker in a material test at the University of Hohenheim, Germany. of Hohenheim, the University at test in a material cooker Protos Photos: BSH Photos: 56 endeva | Inclusive Business Guide

Photo: Adam Rogers / UNCDF

The “How” 12 Transfer to other to countries the impact Understand e

uid G 09 ss ne usi ve B usi Incl Fail to systematically monitor business objectives. opportunities Overlook impacts that harbor potential and risks. Accept obstacles and risks as a given. conditions unique the to model the adapt Constantly in a city or region. Put the model into practice without having in-depth knowledge of the market beforehand. | , , , , endeva DON’T DON’T DON’T DON’T 10 Growth 57 Adapt the model Adapt

11 Expand locally :

Work with international partners. Work Incorporate the impact analysis into the manage- Incorporate the impact analysis into the a view to ment process and clearly structure it with goals and expectations. Simplify and standardize processes. Be on the lookout at all times for options to Be on the lookout at all times for options obstacles and risks. overcome

dapt the model , , ,

, Transfer to other countries to Transfer Expand locally A Understand the impact With a microloan, Alphonsine Rasoampamonjy and Marie Thérèse have set up a have Thérèse Alphonsine Rasoampamonjy a microloan, and MarieWith Inclusive plants. vegetable watering the young carefully theysmall farm are where also need this kind so that they can grow. business ventures of care Photo on previous page previous on Photo 12. DO DO 11. 10. DO 09. DO

The following do’s and don’ts are recommended for the four steps of growth: Growth 58 endeva | Inclusive Business Guide

09 Understand the impact

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 requirements 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 improving 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.

, Three perspectives of analyzing Society at large a sustainable venture

Source: UNEP (2008) Communities Towards Triple Impact – Toolbox for Analyzing Sustainable Ventures Employees

Supplier Venture Customers Stakeholder groups

Economic Social Environmental Impact area

Raw material Packaging & Product Production End-of-life extraction distribution use Lifecycle stages The “How” www www www e uid Manila Water Company, Inc. (www.manilawater.com), Inc. (www.manilawater.com), Company, Water Manila Company: Improving Water Jane Corneault (2006), Manila Service the Poor for Wastewater and Water Sources: Sources: • • the operational workflows. Over the years, years, the Over workflows. the operational 86% of the pipes. has replaced the company only 19.6%. Even at are losses today Water is this value internationally, when compared Other sanita- plans include expanding low. treatment tion services and wastewater its also measures Waters Manila capacities. - and is continu in this area accomplishments ously working improve. to Toolbox for Analysing Sustainable Ventures in Developing in Developing Ventures Sustainable Analysing for Toolbox G – Framework Methodology Framework ss – ne Reporting www.globalreporting.org/ReportingFramework Framework: usi – ve B usi Incl | www endeva omparing the impacts urther reading: Global Reporting Initiative Impact-standards.org www.iris Reporting Standards: and Investment Impact to of Approaches Galimidi Measurement (2008), Catalogue Olsen and Brett Countries Towards Triple Impact Triple UNEP (2008), Towards WBCSD (2009), Measuring Impact (2009), Making the Base of the Pyramid at London Investments Better Ted Mai(Harvard 2009) Business Review, • • • F • • • C im- planned and actual the compare to essential is it Sometimes, inves- example, for If, projects. business inclusive various of pact tors or executive managers are trying to decide which projects need a quantitative basis. they want to fund, they Just as in normal business practice, projects are easiest to compare on the basis ones financial over of priority take goals non-financial their the however, financial performance. Frequently, in inclusive business projects. How these goals are weighted in relation to one another has to be clear for the results to be con- ex- for value, monetary a assigned be also can effects The clusive. alternatives, potential of costs the to them comparing by ample, e.g. the costs of an advertising campaign or employee training. Even though this method doesn’t differentiate between the different priorities given to the goals, an overview of the return on investment calculated in these terms can be useful for effective communication within the company. 59 dividuals to the central water supply system. supply system. water the central dividuals to is working with the municipali- Water Manila disposal in the slums. ties on wastewater all households connected have plan to They 2018. In by addition, system the sewage to integrated the slums were 700 families from or sellers. chain as employees the value into sheet: balance the in reflected is success Their Water Manila of operation, year in the third in the black. already was In- 2008, the com of $68.9 million. net income generated pany keep to just have doesn’t Waters But Manila to it also has of its financial indicators, track supplying the for the parameters monitor in the as stipulated with water population impact useful The is also analysis concession. of of the ongoing improvement in terms ompany, Philippines Philippines ompany, Manila Water C Water Manila easuring the impacts Manila, the capital of the Philippines, has one has one Manila, the capital of the Philippines, in Asia. supply systems of the oldest water lost two-thirds of its water ailing system The in 1997. leaks or illegal diversions through connected to Only 60% of households were than 3% were and fewer system the water Most of the system. the sewage connected to in water people living in the slums bought for existed No system high prices. at canisters disposal in the poor districts. wastewater Inc. won Company, Water the ManilaWhen supply of the water for the concession the Manila process, eastern in a public tender to commit to required was company Filipino it has And in the slums. conditions improving had Water 2008, Manila by been successful: in- 1.5 million low-income connected roughly Case study 17 Case all of Manila for Water It is advisable to use established indicators for ment measure- so that the project can be compared to other projects. There are several multi-layered social, economic methods and environmental effects used to of measure inclusive business projects. the The Impact Reporting and Investment Standards (IRIS) project, which is comprised of several large social investors, has developed a list of reference indicators designed to serve as a general standard in the medium term. Companies whose reporting is based on the requirements set by the Global Reporting Initiative here. (GRI) can also find relevant indicators The requirements stipulated by investors or regulators and indicators the determine public general the of interests the needed for external communication. For internal project management, the parameters and in- tervals have to be closely linked to the needs management. In of line project with this, the explicit project goals success the into insight provide that indicators key the and only are indicators these of Some tracked. are project the of monitored to keep an eye on the risks and opportunities to specific goals. associated with them. Others are linked Measuring indicators is useful for internal monitoring and controlling whether the project is successful or not. These communication external for helpful also are measurements and the general public. with investors, regulators M 60 endeva | Inclusive Business Guide

10 Adapt the model

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.

Enablers: Who supports the venture? What resources are available? Which processes within the value chain work well? Aravind relies on the high level of professionalism of its staff and the efficiency of its processes.

Opportunities: Who can contribute to the success of the venture in the future? Under which circumstances? Which resources could potentially be , Determinants for the success of available? Are there changes to processes planned inclusive business ventures that could strengthen the business? Aravind saw an opportunity to partner with a lens manufacturer who could produce the lenses at a lower price. Other opportunities lie in remote diagnostics and treatment using computers, video conferencing and the Internet. Enablers Opportunities Positive Risks: Who could negatively impact the venture in the future? Under which circumstances? Which Significance for resources are threatening to dry up? Are there success of Venture changes to processes planned that could make the the venture venture more difficult? One risk would be the loss of tax breaks from the government – even though Aravind is profitable, higher taxes would directly Negative Constraints Risks impact the cost to the end customers.

Now Future

Time

Source: UNEP (2008) Towards Triple Impact – Toolbox for Analyzing Sustainable Ventures The “How”

28 www are System System are ye C ye Fotolia.com – imrek Photo: O, Aravind E Aravind CEO, ., former V Dr. Dr. a cataract operation at Aravind Aravind at a cataract operation Micro-Lending and the Battle against World World against Micro-Lending and the Battle – – We have to do more more do to have We to generate demand. demand. generate to Ventures Sustainable Analyzing for Toolbox We have to eradicate eradicate to have We needless and curable. curable. needless and e – all needless blindness. all needless uid Janat Shah und L S Murty High (09/2004), Compassionate, Model (IIMB Aravind The Cost: Low at Quality Health Care 31-43) p. Management Review, (www.aravind.org) System Care Eye Aravind Sources: Sources: • • - expen was driver one cost a long time, For led Aravind This materials. consumable sive startto manufacturing itself these materials “Aurolab” Today, with a partner. together of $2 instead cost manufactures lenses that $100. up to proved have improvements continuous The rewarding under $20. Incosts in the US, the comparison: These $3,000. around costs same operation In its decades. over place took improvements performedAravind first decade on the job, 375,000 in the second 125,000 operations, 1.5 million. and in the third Most of this blindness is this blindness Most of G ss ne usi ve B usi Incl | urther reading: Towards Triple Impact Triple UNEP (2008), Towards the Poor (1997), Banker to Yunus Muhammad PublicAffairs) York: (New Poverty • F • endeva 61 three-quarters no cost at of the operations Aravind five are there Today, the patient. to in place. the same system all have clinics that set up was center training In 1996, an Aravind medical staff. for was the identified constraint Another people many of those affected: ignorance their that aware even aren’t areas in rural Aravind’s Again, can be treated. condition play: into its brought asset was most valuable camps” “eye organizes Aravind staff. trained - if neces and, examined are patients where the hospital the same day. to brought sary, of 1,793 camps 2006, a total During the year which 2,313,398 patients at conducted, were - restora and 270,444 sight examined were performed. 2004, Since were tion surgeries cases can also be treated straightforward - telemedi through “Vision Centers” in on-site cine services. - - are System, India System, are ye C ye Aravind E Aravind ision at a discount price V 9 million people In roughly India, are there could get back blindness who from suffering Aravind with a simple operation. their sight has been pursuing the goal System Care Eye It has 30 years. of helping these people for success growing been doing this with ever improve ongoing and systematic thanks to performs the foundation Today, ments. every and treats operations year 300,000 eye 2.5 million patients. was built in Hospital” Eye “Aravind first The took a cataract operation time, that 1976. At steps in the boost efficiency, To 30 minutes. the doc now, reorganized: were the process all solely on the operation, concentrate tors of the pre-op and post-op is taken care work the time a reduces This medical staff. of by min- 10 just to operation the doctorfor needs particularly passed on to are savings The utes. performspoverty-stricken Aravind patients: Case study 18 Case 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? result? The of efficiency is a master lasts only 10 minutes. operation - an Aravind on the next on, the next table. is being readied patient is being operated one patient While every their sight regain 300,000 people year. that More Photo: Christina Gradl Photo: Defining concrete measures measures concrete Defining on based identified be can action of courses alternative The an analysis of this kind that looks at the factors that make a venture successful. They can be assessed based on their anticipated contribution to the success of the venture and measures concrete to rise giving ultimately feasibility, their for adapting the model. 62 endeva | Inclusive Business Guide

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 infrastructure; much of the sales and services can even be digitized and standardized.

Other examples of successfully scaled ventures exist in the area of microfranchising: here, the core business is completely standardized and it is up to the individual franchisee to adapt it to local con- , Dimensions of business expansion ditions. The rules of collaboration between the franchisor and the franchisee are clearly defined and there is no room for negotiation (see case study 20 for VisionSpring). h i dt W

B r e a dt h Widening the portfolio D e p

t Widening occurs through the purchase or sale of h additional products and services. Established struc- Business volume tures and processes can be used more efficiently as a result and the added value for producers and consumers is increased. When it started off, ITC only provided trading-related information for the farmers’ products like information about prices, weather, etc. Now, e-Choupals have become true online marketplaces where farmers can buy everything from savings accounts to healthcare advice. Source: adapted from Michel Bachmann and Patrick Vermeulen (2008), Scaling at the Base of the Pyramid (Working Paper) The “How”

29 - Photos: ITC Limited, Christina Vogt Christina Limited, ITC Photos: -business division agri ’s C www Agriculture & Rural Development Department,Agriculture CEO of IT S. Sivakumar, – e ngaging the Poor through Market through Initiatives Iberoamericain Poor the ngaging – E uid ITC (www.itcportal.com), (www.itcportal.com), ITC Bank World (www.worldbank.org/rural) Sources: Sources: • • By the beginning of 2008, ITC had put 6,500 of 2008, ITC By the beginning e-Choupals using this strategy operation into network The 40,000 villages. and had reached all sorts serves trading now for as a channel of products sav and services from ranging ings accounts to healthcare services. The goal The services. healthcare to ings accounts the year 100,000 villages by integrate is to conduct 30% of village 2012 and to 20% to this platform. business over G ss ne usi ve B usi Incl | endeva urther reading: Scaling at the Bottom of the Pyramid (Working (2008), Scaling of the Pyramid the Bottom at Vermeulen Michel Paper) Bachmann and Patrick (2010) Lozano Celli, Josefina Rosa Amelia Bruni González, and Gerardo Serving Sectors Companes Market of Large Initiatives Low-Income Socially(2010) SEKN Inclusivein: Business the Base of the Pyramid at Microfranchising (2008), Lehr David The usual approach used when targeting customers is to go down down go to is customers targeting when used approach usual The the income pyramid, i.e. start with customers who have low average income and work down to those with very low income. This same logic can be applied on the production side: start by integrating a few medium-sized producers and then many small producers. integrate F • • • 63 and create more than 10 million e-farmers. than 10 million more and create them price control, higher sales prices and higher sales prices control, them price direct sales channel This quantity discounts. and company for the mutually beneficial was the farmers. the implementation, successful Following In the system. expanding shifted to focus selects a one farm where ITC new regions, is installed with Internet access. computer contact person of this farm is ITC’s owner The - uphold his du to and must take a public oath of contact for the point are stations The ties. a hub”, “ITC farmers within a 5 km An radius. sales and purchases, for marketplace physical everyis also set up for 40 e-Choupals. - 100,000 villages, representing one-sixth of rural India, one-sixth representing of rural villages, 100,000 imited, India C Limited, IT Over the next decade, the e-ChoupalOverthan more next the decade, network will cover The efficiency of the venture increases through the effects of scale and learning. These increases in efficiency can be used to further lower the price of products, mak- customers. of range wider even an to attractive them ing With time, the company becomes more familiar the with target needs. group’s And, the target group becomes more familiar with the products and services. They can tar- the of needs the meet effectively more to adapted be expanding further and benefits the enhancing group, get demand. -Choupals take India storm by

prise, trading, among other things, in food in food among other things, trading, prise, started Inproducts. 1999, the company products directly from buying agricultural company The and time. costs save farmers to which equipped farmers with Internet access sell goods prices, research them to allowed gives This seeds or fertilizer. and order ITC to Around 800 million people in India in ru- live Around as small most make their livelihood areas, ral over they had no control now, Until farmers. when selling their productsthe price and on middlemen or auction dependent were “e-Choupals” Internet kiosksThe called prices. 4 over well for this problem solved ITC from million farmers. enter is an Indian Limited commercial ITC e Case study 19 Case Farmers look at market prices together in the “e-Choupal”. This helps them sell their crops more efficiently. more helps them sell their crops This “e-Choupal”. in the market together look at prices Farmers • • Deepening penetration of the target group group the target of Deepening penetration The target group can be more deeply penetrated over the a result of several different effects: course of a project as 64 endeva | Inclusive Business Guide

12 Transfer to other countries

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, intermediaries, 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 • World Bank Doing Business: www.doingbusiness.org • CSR Weltweit: www.csr-weltweit.de (English version available) • Monitor Institute (2009) Emerging Markets, Emerging Models – Market Based Solutions to Challenges of Global Poverty www The “How” www e The company cooperates with partners cooperates in company The usually local are They the other countries. given are They organizations. development from business model, practically the entire systems the management the sales sets to and ongoing support. In India and El Salvador, VisionSpring main- VisionSpring In India and El Salvador, network of franchisees. tains its own uid Nico Clemminck and Sachin Kadakia (2007) in Restoring Eyesight Scojo India Foundation Works: What the Direct Selling of Reading Glasses Through IndiaRural

VisionSpring (www.visionspring.org) (www.visionspring.org) VisionSpring • Sources: • • Two models are used for the transfer to other to the transfer used for models are Two countries: • BRAC is the franchise partner is the franchise BRAC in Bangladesh. is represented NGO in the world largest The in 80% of all villages in the country and thus In January 100 million people. reaches 2009, all 69,000 train to agreed both organizations - Vision with the workers healthcare BRAC sell 13.8 million goal is to The Spring system. 2012. Bangladesh by in rural eyeglasses G ss ne usi ve B - usi Incl | A patient at a vision check in Ghana. at A patient Photos: John-MichaelPhotos: Mass/Darby Films This seamstress in Nicaragua can do her work again better with glasses. again better in Nicaragua can do her work seamstress This endeva 65 VisionSpring developed a system that not that a system developed VisionSpring - eyeglass distribute only makes it possible to the for income also generates it es quickly, mi- “Business in a Bag”, the With group. target get everything they need croentrepreneurs In a three-day market eyeglasses. and sell to to also learn session, they how training adjust in villages, “vision campaigns” conduct with patients and refer and sell eyeglasses The clinics. to vision problems complex more they need the equipment receive franchisees sold. they are once the eyeglasses for and pay that in such a way model is standardized The The the world. in it can be applied anywhere in India developed in 2001. Itmodel was as early in El Salvador as implemented was (2004), Guatemala by followed was This 2002. Kenya, Bangladesh (2006) Ghana, Ethiopia, Nigeria,Zambia (2007). Other and pilot tests and Nicaragua. underwayare in Paraguay had 6,200 ac VisionSpring By July 2010, than and had sold more entrepreneurs tive A pair of glasses costs 360,000 eyeglasses. $1 to the franchisee, $3, of which $1 goes to the manufacturer. and $1 to VisionSpring - Their almost 70,000 healthcare work almost 70,000 healthcare Their glasses soon. ers will also distribute - and with their help. This This and with their help. isionSpring and the company is already is already and the company – V – working to achieve this goal in six countries. this working achieve to af- negatively are and income Productivity vision deteriorates: when a person’s fected any use their looms properly can’t weavers ture this market ture artisans seeds, plant can’t farmers can’t more, often This designs. their complex produce poverty. family into the entire drags But the solution can be simple: reading in any Reading glasses can be found glasses. dollars in industri- just a few for drugstore In countries, developing countries. alized that is no distribution system there however, regions. in rural available makes eyeglasses social enterprise developed a microfranchise a microfranchise developed social enterprise work to puts microentreprenuers model that these market for The selling basic eyeglasses. million people around 400 products is large: their vision with improve could the world cap goal is to VisionSpring’s basic eyeglasses. VisionSpring supplies eyeglasses for those for supplies eyeglasses VisionSpring living in poverty Case study 20 Case Global distribution local microentrepreneurs thanks to VisionSpring works together with BRAC in with BRAC together works VisionSpring Bangladesh. Photos:John-Michael Mass/Darby Films Publicity for the visit from VisionSpring in a village in India - it is importantVisionSpring get to the visit from for Publicity attention! people‘s 66 endeva | Inclusive Business Guide

Countries with potential

The 3 “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. The “Where” “Doing Business Reports” Bank, “Doing Business Reports” World in on the marketinformation environment 181 countries www.doingbusiness.org e uid G ss ne usi ve B usi Incl | endeva ase studies database by countryase studies database by and sector UNDP Growing Inclusive Markets UNDP Growing C www.growinginclusivemarkets.org local networks seminars and offering WBCSD, countries workshops in many www.wbcsd.org arket size: size: arket verview: ontacts: O Brief description of the country as a whole and the situation of people living in poverty. M Size of the market segment with an income of less than $3,000 per year, broken down by sector and with annual segments incomes covering of $500, $1,000, “The study IFC $1,500, and WRI the from taken are $2,000, figures These $3,000. $2,500 and Next 4 Billion”, published in 2007. Examples: Successful examples of inclusive business ventures in the respective country. C Contacts who can help develop business to fight poverty. 67 weltweit.de - (online portal), information on on information portal), (online ompact’s principles in over 80 countries principles in over ompact’s CSR WorldWide CSR case and contacts systems, legal activity, of areas www.csr | countries 28 in studies local networksUN Global Compact, of compa nies and other actors seeking implement the to C www.unglobalcompact.org ranking with – China India Mexico Russia South Africa Brazil The Human Development Index (HDI) is a global ranking of social development based on data for per capita rank- the lower (the literacy and expectancy life income, ing, the more developed the country is). The Gini efficient co- and HDI ranking are from the UNDP Human Development Report 2009/10. the Corruption Perception Index (CPI) Finally, evaluates the perceived level of corruption worldwide (the higher to perceived is country the corrupt more the ranking, the be). The data can be found in Interna- the Transparency tional Index 2009. The average GDP growth between 1997 and 2007 comes database. Bank’s from the World in inequality of degree the indicates coefficient Gini The income distribution (1= complete inequality, 0 = complete equality). The total population, the nominal and per capita gross are rate unemployment the and (GDP) product domestic Factbook. 2010 World taken from the CIA’s The percentage of the population that earns less than $3,000 per capita and year and the percentage their in- study the from taken are income total of up make comes WRI in 2007. “The Next 4 Billion” published by IFC and arket data: data: arket ore in-depth information and support for inclusive business projects in many countries can be obtained from the following institutions: the following can be obtained from countries business projects and support in-depth in many ore inclusive information for

M Trans BertelsmannBertelsmann Foundation, Indexformations project 2010 of level about the development information market and management democracy, economy in 125 countries -index.de www.bertelsmann-transformation • • • • • • The country all have the same structure: profiles M Overview of key macroeconomic figures. • • • • • • The following countries are described: described: countries are The following 68 endeva | Inclusive Business Guide

Brazil

Market data Overview Examples

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 Bank services are very expensive and only its “Sustainable Swine Production Program”. The (in purchasing power parity) 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- third of the country is covered by rain for- 0.55 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 The country is also the world’s largest pro- BoP Learning Lab Brazil networking and information exchange about BoP CPI ranking 2008: (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 competitive energy market, integrating small Plano CDE Market research company specializing in low-income households | www.planocde.com.br farmers and treating employees well can serve as a unique selling proposition.

Market size

Annual expenditure in the income segment Household expenditure below $3,000 per year (2002) by sector (2002)

Expenditure Of which Total expenditure Of which in the income segment Income segment in $ billion in cities in $ billion below $3,000 per year

3,000 36.8 87.6 % Food 113.7 48.6 %

2,500 37.0 86.3 % Housing 26.7 35.7 %

2,000 39.3 85.1 % Water 3.2 50.6 %

1,500 36.1 79.8 % Energy 21.0 57.8 %

1,000 26.7 73.7 % Health 34.2 35.0 %

500 6.0 64.3 % ICT 20.3 27.2 %

Total 181.9 82.4 % The “Where”

(2005) (2005) 9.5 % 0.415 < $3,000 92 / 182 79 / 180 hina Population: Population: 1997–2007: (2009 estimate) (2009 estimate) (2009 estimate) arket data arket 55.2 % 80.8 % C GDP (nominal): size Market of total income: of total M GDP / per capita (July 2010 estimate) CPI ranking 2009: HDI ranking 2009: 4.3% Unemployment rate: rate: Unemployment Gini coefficient 2009: any data about China. any Percentage of income Percentage $6,600 with an income < $3,000 (in purchasing power parity) power (in purchasing (in purchasing power parity): power (in purchasing (by purchasing power parity): power purchasing (by Percentage of the population Percentage per year, GDP growth Average $4.814 trillion 1.33 billion make do with less than $3,000 per Around 1.1 billion people in China Around year. China, along with India, is the year. countryside. The study “The Next 4 study The countryside. largest market for inclusive business market inclusive largest for ventures. Poverty is most widespread is most widespread Poverty ventures. in the northwest provinces and in the in the northwest provinces Billion” unfortunately does not contain Billion” Overview More than 30 years of market economic reforms have changed China drastically. The rapid pace of industrialization meant has a better standard of living and excellent road networks have improved the infrastructure. Despite these China in people five of out four successes, economic still live on less than $3,000 per year. The government has launched state-backed various measures to fight poverty: domestic economic growth is stimulated through regional assistance and consumer assistance programs, programs guarantee farmers a 10% to 50% discount on income The appliances. electrical and cars of farmers improved after the agricultural tax was eliminated in 2006. The gap that exists between cities and rural regions is one of the greatest obstacles to achieving balanced development the of national economy. 560 million Chi- nese live in cities and 750 in million rural areas. live Three times as many children attend higher-level schools in cities than in the country and this figure is even higher for universities, reaching 68 ru- in Chinese million 300 many. as times ral areas have don’t clean drinking water; the cooperative healthcare system only reaches around 25% of a rural areas. Pollution and the demand are steadily on for the rise as energy a result of the rapid industrialization and the improvement in individual standards of living. China is the second-largest producer of greenhouse gases, the water in many riv- depleted. is soil the and undrinkable is ers Small farmers in particular have to deal with the consequences. Several hundred million small could act as suppliers farmers for food producers. the increase that products and services All pro- example, for farmers, of productivity viding information services or resilient seeds, would find a huge market. 69 Examples e uid ventures.org.cn G ss ne usi Partnership of the Chinese Partnership ve B usi China Mobile set up an entures” program of the WRI, of the program entures” V Haier developed washing Incl | endeva Networking at the exchange and information Part of the “New of the Part ontacts Tsinghua University | Tsinghua www.johnson.cornell.edu/sge/programs/sgeichina.html China ReductionInternational Poverty Center Bank,World DFID | www.iprcc.org.cn ADB and with UNDP, government China Ventures New - business | www.new and consultancy inclusive incubator for BoP Learning Lab China BoP Learning C The largest newsprint manufacturer , Huatai has been producing in paper from renewable China, raw materials since 2000. It engaged 6,000 households to plant the rapidly growing trees and thus increase their household income. “Information Network Platform” in rural in 2006 to give farmers access to market areas information. And it has been successful: in 2006 alone, ru- in doubled Mobile China of base customer the ral regions from 26 million to 53 million. The state-run company To To date, most examples can be found in Chinese corporations. In 1998, machines that made it possible wash for their potatoes farmers or other to harvested crops in the machine without clogging the with a newer model. cheese can be made drain. Goat 70 endeva | Inclusive Business Guide

India

Market data Overview Examples

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 have no access to sanitary facilities, 45% (in purchasing power parity) 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

Annual expenditure in the income segment Household expenditure below $3,000 per year (2004) by sector (2004)

Expenditure Of which Total expenditure Of which in the income segment Income segment in $ billion in cities in $ billion below $3,000 per year

3,000 89.8 72.4 % Food 965.1 88.1 %

2,500 159.0 62.4 % Housing 62.1 48.5 %

2,000 264.3 45.4 % Water 1.7 70.4 %

1,500 394.9 28.2 % Energy 162.9 87.2 %

1,000 289.0 13.8 % Health 41.2 85.3 %

500 8.6 8.8 % ICT 14.8 52.6 %

Total 1205.6 31.1 % The “Where”

% % % % % % % (2005) (2005) in cities 2.9 % 0.481 Of which < $3,000 75.1 85.0 83.4 75.2 66.0 49.1 14.8 53 / 182 89 / 180 Population: Population: 1997–2007: (2010 estimate) (2009 estimate) (2009 estimate) (2008 estimate) arket data arket 39.8 % 69.6 % GDP (nominal): size Market of total income: of total M GDP / per capita CPI ranking 2009: HDI ranking 2009: Mexico 5.6% Unemployment rate: rate: Unemployment 1.2 Gini coefficient 2009: Percentage of income Percentage xpenditure Expenditure in $ billion 28.9 32.2 32.8 23.0 10.4 $13,500 128.5 with an income < $3,000 (in purchasing power parity) power (in purchasing (in purchasing power parity): power (in purchasing (by purchasing power parity): power purchasing (by Percentage of the population Percentage 112.5 million Total per year, GDP growth Average $1.017 trillion Overview 500 Income segment Income 3,000 2,500 2,000 1,500 1,000 Annual expenditure in the income segment in the income segment Annual expenditure (2004) $3,000 per year below Mexico has one of the middle fastest classes growing in the world living side- by-side with people in widespread poverty. As a country with a strong national for conditions overall good and economy companies, Mexico has always had good examples of inclusive business ventures mostly aimed at the urban population. Goods and services that promise a better standard of living for the low-income population are particularly in demand. As a member of the OECD, Mexico has a comparatively high level of ment develop- but there are huge between cities and the country discrepancies and great variations in income and living situation within the cities. Despite the relatively strong economic performance, three out of four people in Mexico still live on less than $3,000 per year. Mexico is a country with significant en- offers that area an problems, vironmental a lot of business opportunities for foreign companies. There is also great need for par- nutrition and healthcare in solutions ticularly in rural regions. 71 Examples e uid G ss ne usi ve B % % % % % % usi Incl stands out as out stands Compartamos Of which in the income segment $3,000 per year below 48.3 38.4 29.5 56.0 43.8 48.3 | 2.2 endeva 14.5 10.6 12.9 74.8 45.6 Amanco offers small farmers irriga- in $ billion la Pobreza contra Empresas – entures” program of the WRI, incubator and consultancy WRI, incubator for of the program entures” V Total expenditure expenditure Total ontacts Energy Health ICT Housing Water Food Household expenditure Household expenditure sectorby (2004) Information exchange and supportInformation exchange specific projects | for www.movimientobdp.org/ Mexico Ventures New “New of the Part business | www.nvm.org.mx/ inclusive Foundation Avina Networking and project financing | www.avina.net BDP Movimiento C The microfinance bank microfinance The The company tion systems adapted specifically to their needs. Thanks to the availability of credit, the purchase can be financed from higher crop volumes. that success a Mexico, in bank profitable most the its for criticism also but praise earned only not has high interest rates. CEMEX’s “Patrimonio Hoy” model provides only not the financing offamilies but also building material and homesadvice on for low-income construction. The “Construmex” program makes it possible for migrants living in the US to invest their remittances directly into housing construction (it has not, however, accepted any new cli- ents since 2009). Mexico has a number of large companies, some of which even operate internationally such as the cement producer CEMEX or the food corporation Bimbo. Innovations thus often originate with ex- Mexican companies. isting or newly established 72 endeva | Inclusive Business Guide

Russian Federation

Market data Overview Examples

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 schedules and marketing resources. This allows (in purchasing power parity) 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 estimated at up to $7 billion. Promotes the transition to an open market economy and private and entrepre neurial activities in the countries of Central and Eastern Europe and the Com munity of Independent States (CIS). | www.ebrd.com

The Russian Microfinance Center Association for microfinance organizations | www.rmcenter.ru/en

Market size

Annual expenditure in the income segment Household expenditure below $3,000 per year (2003) by sector (2003)

Expenditure Of which Total expenditure Of which in the income segment Income segment in $ billion in cities in $ billion below $3,000 per year

3,000 40.2 81.5 % Food 135.2 41.4 %

2,500 38.0 75.3 % Housing 94.7 34.0 %

2,000 29.5 63.1 % Water 2.5 38.9 %

1,500 18.4 46.6 % Energy 14.5 44.0 %

1,000 7.4 27.2 % Health 20.2 45.2 %

500 0.7 12.3 % ICT 3.9 34.9 %

Total 134.2 67.6 % The “Where”

% % % % % % % (2005) (2005) in cities 3.7 % 0.578 Of which < $3,000 58.1 77.7 70.8 66.3 54.6 38.9 20.6 54 / 180 Population: Population: 129 / 182 1997–2007: (2010 estimate) (2009 estimate) (2009 estimate) (2009 estimate) arket data arket 30.9 % 74.4 % GDP (nominal): size size Market Market of total income: of total M GDP / per capita CPI ranking 2009: HDI ranking 2009: 24% Unemployment rate: rate: Unemployment 6.2 7.0 7.9 8.7 8.1 2.4 Gini coefficient 2009: Percentage of income Percentage xpenditure Expenditure in $ billion 40.3 $10,100 with an income < $3,000 49.1 million (in purchasing power parity) power (in purchasing (in purchasing power parity): power (in purchasing (by purchasing power parity): power purchasing (by Percentage of the population Percentage Total per year, GDP growth Average $280.6 billion South Africa Africa South Overview Independent Most-known well business 500 Income segment Income 3,000 2,500 2,000 1,500 1,000 Annual expenditure in the income segment in the income segment Annual expenditure (2000) $3,000 per year below South Africa has the strongest national economy in Sub-Saharan Africa. the first general Since elections in 1994 mark- ing the end of apartheid, the country has become a flourishing part of the global economy. South Africans proudly dem- onstrated their openness to during the the world soccer world The government, cup which passed a law in for 2010. laid has empowerment”, economic “black the foundation for an assistance program designed to include “historically underprivileged sections of the largely excluded population”, during apartheid, in the economy. Still, three out of four South Africans live on less than $3,000 a year. For historical reasons, the percentage of those in living poverty who are black is considerably higher than those who are proximately half live in rural regions and white. Ap- the other half in cities. The slums close to cities have developed out of the townships, the places where blacks lived during apartheid. Supplying the townships with adequate housing, electricity water and is an enormous challenge. Other basic services are also lacking. Only 46% of the population has access to financial services. (CDE) and Enterprise Development for Centre consultancy and It organization. research looks at national and economic growth to issues and their relationship development | www.cde.org.za democratic development (NBI) Business Initiative National CSR in South Africa. It projects and encour for initiative coordinates ages voluntary sustainable to business commitments in relation | www.nbi.org.za development. 73 Examples e uid G ss ne usi ve B % % % % % % usi 8.5 Incl Of which in the income segment $3,000 per year below 45.8 30.9 29.4 40.6 13.8 | Institute of the University of Stellenbosch produces affordable medicine 1.8 6.4 6.7 5.4 endeva 37.9 14.4 installs water and sewage pipes in in $ billion An initiative of the Southern Africa Trust providing tools tools providing Trust of the SouthernAn initiative Africa Total expenditure expenditure Total is the largest brewery in South Africa and Africa South in brewery largest the is extends credit with favorable terms so is the largest paper recycler in South Africa. South in recycler paper largest the is ontacts Energy Health ICT Housing Water Food Household expenditure Household expenditure sectorby (2000) B4D Pathfinder | business development inclusive for www.b4dpathfinder.org Lab South BoP Africa Learning C Business School about that encourages knowledge exchange and information business in South Africa.inclusive | www.bop.org.za The company has overhauled its business model: instead of only working with its own employees, the company also supports local small and croentrepreneurs. It mi- buys waste paper from 3,000 suppliers via 117 offices. Mondi SABMiller operates globally. It buys its raw materials from 16,800 small farmers, mainly in South Africa, but also in Uganda and Zambia. In addition to giving pledges to buy certain volumes, the company, in cooperation with seed suppliers, NGOs and coop- farmers. the for advice and training offers eratives, that mostly “historically underprivileged sections of the population” can finance a highertion. educa- Since its formation in 1996, served 500,000 customers. Eduloan has Eduloan Amanz’ abantu Aspen Pharmacare including a drug that fights HIV/AIDS, the most has company The country. the in illness prevalent become the largest manufacturer of medicine in southern Africa. slums. The customers get drinking water from a central location (max. 200 meters from smart card. and pay with a cashless home) 74 endeva | Inclusive Business Guide

2.895 billion Sectors with potential

2,500 billion $

The sector profiles show The sector profiles are structured as the various opportunities follows: and potential solutions for inclusive business ventures Overview: Characterization of the sector in broken down by sector. relation to the market at the base of the pyramid. Profiles of the following sectors are provided: Market size: Total size of the consumer seg- 2,000 billion $ ment in the sector with an income of less • Energy than $3,000 per year and the size in the • Financial services regions. The estimates are taken from the • Food and agriculture study “The Next 4 Billion”, published by • Health WRI and IFC in 2007. • Housing and construction Poverty penalty: Describes where people • Information and living in poverty have to spend more time communications or money for access to products and ser- technology (ICT) vices in the sector, where only lower qual- 1,500 billion $ • Water ity is available or where they don’t have any access at all.

Solutions: The existing examples provide some initial models for how the sector can be “unlocked” as a market. These are summarized here in brief.

Examples: Provides a list of published case studies. 1,000 billion $

Additional information: References publications, websites and other additional sources of information.

Household spending in the income segment 500 billion $ under $3,000 per year in $ billion PPP 433 billion 332 billion 158 billion 51 billion 20 billion ICT Food Water Health Energy Housing

p Asia p Latin America p Africa p Eastern Europe Source: IFC, WRI (2007) The Next 4 Billion The “Where” nergy E e Grameen Grameen Shakti, has shown how to uid G ss achieved by using energy-efficient prod- ne 2 usi ve B usi Incl | Research Center (USA) Aprovecho teamed up with Sheng- endeva ucts and producing energy from renewable raw materials can be sold via certificates in emissions trading. Solutions such as collective electricity meters cards and can smart be used to bill slums. for electricity supply in urban The growth of the market for biofuels means that opportunities are emerging for people in rural regions to earn in- who Farmers plants. oil and starch sugar, selling from come costs. use biomass to generate energy have fewer Reductions in CO Energy-efficient products such as better stoves or compact fluorescent lamps or LED lamps benefit the environment and save money. commu- or household on solutions mini-grid Decentralized nity level with electricity generated from wind, water, sun or biomass can guarantee a decentralized energy Linking supply. projects to financing solutions can facilitatenecessary investments. the OSRAM has opened solar-powered electricity kiosks in Ken ya. OSRAM’s battery-powered, energy-saving lamps can be inexpensively recharged at the OSRAM O-HUBs along with cell phones and radios. The Bengali company, successfully sell high-tech products in rural regions with its manu- were systems 220,000 than More system. home solar factured and sold with the help of microfinancing. The zhou Stove Manufacturer (China), to design a stove reduces the that amount of wood or coal needed by up to 40% to 50% and reduces emissions by up to the by price affordable very a at 70%. sold is it product, produced As a mass- spin-off company Stovetec. olutions

• • • • • Examples 17), (p. INENSUS presented: been already have examples Four MicroEnergy International (p. 39), D.light Design (p. 45) and BSH Protos (p. 55). • S • • 75 www

www emissions are harmful 2 www www arket size arket verview urther reading: Comparative Study on Rural Electrification Policies in Electrification on Rural Study International Agency (2010), Comparative Energy Policies Successful to Economies-Keys Emerging Business Model the BoP! Generator - Inclusive Energy endeva (2011) Energize Sector Africa Energy Electricity in Asia, Sources: Renewable Energy GTZ (2002), Producing from Amerikaand Latin the Base of the Pyramid for Hystra Energy to / Ashoka (2009), Access The energy solutions available are much more expensive than expensive more much are available solutions energy The electricity supplied from the grid. In Bangladesh, the cost of energy (kerosene, batteries, etc.) in off-grid areas is lent equiva- to $1.95 per kilowatt hour, i.e. 10 times the price a private consumer in countries most pays Western for electricity. income monetary their of 50% to up spend households Many on energy. to the environment. • F • • • The fumes emitted when kerosene or wood is burned indoors WHO, the to According health. human to threats serious pose or fire of risk The result. a as everyyear die people million 1.6 injury is also high. the Moreover, CO Poverty penalty Poverty For the 1.6 billion people without electricity, machines and modern means of communication would are otherwise be available useless. for work or school Time is spent on that the laborious task of collecting firewood. 1.6 billion people around the world do - power heating, not cooking, for need they energy The electricity. have access to ing machines and generating light comes from gasoline, gas, wood or batteries. Fuels like kerosene are not only inefficient harm- are and problems health cause also they expensive, and ful to the environment. When it comes to Af- energy supply, for Uganda, or Rwanda In problems. serious most the has rica electric- to access with households of percentage the example, ity is under 10% in rural regions. O Total 433.4 Total in $ billion 350.9 p Asia America 30.5 p Latin 26.6 p Africa 25.4 Europe p Eastern M energy Spending for 76 endeva | Inclusive Business Guide

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 standardized 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

Several examples have already been described in detail: M- PESA (p. 13), Grameen Bank and SKS Microfinance (p. 19), Smart Mobile Banking (p. 41), Allianz microinsurance (p. 51) Source: P. Honohan, July 2007 and Barclays Bank (p. 53).

Poverty penalty • Compartamos, the commercial Mexican bank, charges relatively high interest rates of up to 50% per year. In 2007, the Access to financial services continues to be limited. Despite company put 30% of its shares on the stock market and the strong growth of microloans, they only reach around 155 generated the equivalent of $450 million. million customers. Bank accounts and insurance are scarce. Conventional banks usually do not extend credit without • BASIX is one of the first MFIs to offer crop insurance in India. some sort of material collateral. People with low incomes Instead of assessing claims on-site, the premium is paid out have had to rely on the services of traditional moneylenders on the basis of a weather index which drastically reduces who charge annual interest rates of up to 700% per year. Oth- administrative costs. er financial services are also expensive. Fees for money transfers from abroad can be as high as 45% of the total amount • In Fiji, the ANZ bank has joined forces with the UNDP to transferred. offer banking services to customers in rural regions. Mobile “bank branches” in small trucks drive to where the customers are and tell them about the different services available to them.

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 The “Where” - www www www e uid G Food and agriculture and Food ss ne usi ve B usi Incl | endeva Developing better production factors such as resistant seeds resistant as such factors production better Developing or robust irrigation systems. Access to these materials can be guaranteed by setting up regional sales and distribution networks and providing microloans. Training on the effective use of productive methods and products. To improve marketing opportunities for small farmers, it can be useful to set up cooperatives, give access to credit, provide Internet or mobile-based information services and establish direct trade relationships. Fair trade, in particular, uses these elements effectively. farm- small for easier it makes insurance property and Crop ers to manage risk. Developing affordable food products fortified with vitamins with fortified products food affordable Developing and minerals eliminates malnourishment. Food is often sold in single-portion packages (sachets) so that income in poor households is not tied up in stockpil- ing goods. olutions urther reading: Harvard University John Kennedy School’s CSR InitiativeHarvard and FSG Social Impact University (2008), John Kennedy Advisors School’s Sector Opportunity & Beverage in Expanding Economic Food The Role of The and Action Regoverning Markets Markets: Evidence (2008) Inclusive Business in the Agrifood

the Poor Chains and Empower Value Food Enhance to gies The Next (2009), The Billions: Business Strate Group Consulting and Boston Forum Economic World F • • • • • • • S On the consumer side: • • On the producer side: 77 Danone devel- Grameen Grameen Foundation and In Bangladesh, the Fair Fair trade uses tools such as premium prices, organization into cooperatives, access to financing and training.opens up This access to export markets for small farmers with good terms. 1 million farmers and workers are already ben- efitingfrom participating in fair trade. The in billion $4 to total revenue amounted products certified with generated 2008. oped a yogurt fortified with nutrients. The product is sold door-to-door by a network of women vendors. arket size arket verview

• • Examples in previous sections include: Natura (p. 21), Ritter (p. 23), Tiviski (p. 27), SAFO (p. 43), ATOS (p. 49) and ITC e- Choupal (p. 63). Examples The producer side is characterized by low productivity and poor risk management. Small farmers rarely sell have and systems irrigation or access loans interim seeds, high-quality to have they because prices poor at middlemen to products their inabil- or failure crop as such Risks market. the of overview no thus and help outside without absorbed be cannot work to ity threaten the existence of families. In poor households, people eat a lot of inexpensive carbohy- drates A like balanced diet grain and consisting sugar. of fruit and vegetables, dairy products and fish or meat is rare. The resulting malnourishment adversely affects the development solidifies poverty. and growth of children which frequently Poverty penalty Poverty The food sector is interesting for inclusive business ventures on two levels: individuals on low incomes can be integrated as producers. into value chains both as consumers and O Total 2.894 Total in $ billion 2.236 p Asia 244 Europe p Eastern 215 p Africa America 199 p Latin M and agriculture food Spending for 78 endeva | Inclusive Business Guide

Market size Health Spending for healthcare in $ billion

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.

• Micro-health insurance provides access to healthcare and Poverty penalty prevents poverty.

Illnesses often go untreated, preventing people from working or even resulting in death. One example is cataracts, which Examples can lead to blindness if left untreated, or HIV/AIDS, the onset of which can be delayed by drugs. The following examples are provided elsewhere in this report: SAFO (p. 43), ATOS (p. 49), Aravind (p. 61) and VisionSpring Doctors and pharmacies are particularly hard to find in ru- (p. 65). ral areas. Government healthcare facilities are often poorly staffed. Many families cannot afford the journey to the next • In Kenya, CFW has created a network of franchise shops hospital, which may take days to reach, or pay for an in-pa- operated by local nurses. It sells low-priced medicine and tient stay in a place far from their home. But if this is un- products such as malaria nets. avoidable, the high costs drive families all too often into bitter poverty. • Insurer Allianz provides health insurance in Tamil Nadu, South India. CARE International helps to set up mutual health insurance groups that organize most of the administration and claims. Local subsidiary Bajaj Allianz steps in for larger claims like surgeries and hospital stays.

• Siemens India sets up mobile clinics to supply healthcare. People are examined and treated locally in “medical camps”. Since 2002, more than 800 “medical camps” have been set up and a total of 60,000 patients have received care.

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 The “Where”

www ADAPT builds on construction Housing and and Housing Challenges and Opportunities – e

Saraman in central Iran designs, fab- uid www G ss ne usi ve B www usi Incl | endeva Affordable pre-fabricated houses improve the housing. quality In of some cases, recycled good insulation and used. Energy-efficient solutions ensure building materials are ventilation. , Cemex a company that manufactures building materials, provides low-income customers in Mexico with financing, architectural advice and affordable building materials part of as its “Patrimonio Hoy” program. The “Construmex” program makes it possible for immigrants living in the US to invest directly in home construction for their families. Microfinance institutions grant affordable loans with long repayment periods to construct homes. Solutions for home construction are sold instead of build- the microloan, a to addition in includes, This materials. ing regular supply of building materials, training for housing construction and advice from architects and construction workers. In Egypt, local architecture consultancy local materials and manpower to supply low-income fami- collaborates ADAPT solutions. housing sustainable with lies sec- informal the from builders master entrepreneurial with tor and trains young people to build ecological and inexpensive homes in their own communities. Nedbank in South Africa provides funding for large-scale affordable housing development projects. The start-up company ricates and erects affordable, earthquake-proof prefabricat- ed steel structures for houses, schools and hospitals. olutions dditional information: Business for Sustainable Urbanisation (2007), Business for UN-HABITAT The Challenge of Slums. Global Report Challenge of Slums. (2003), The on Nations Human Settlements Programme United Human Settlements Stephanie Schmidt and Valeria Budinich (2006), Housing Solutions Serving Valeria Low-Income Schmidt and Stephanie Action for A Framework Populations:

• • A • • Examples • • • • S • • 79 if the au- – arket size arket verview Poverty penalty Poverty People who live in poverty frequently do not have ficial any proof of of- ownership for their house or land. As a result, they sell can’t their property or they operate in a gray market where sale prices are Property poor. is thus “dead capital”. It is also often impossible to access municipal services such as proof formal require providers the because water or electricity of the existence of the house. The market for “housing” at the base of the global pyramid is concentrated in cities. The number of slums in the rapidly growing metropolises in the southern hemisphere is on the that means which houses, own their build usually People rise. construction progress is dependent on the (irregular) family construct- when quality in made not are Investments income. ing homes as a result of the ill-defined legal status O Total 331.8 Total Many people at the bottom of the income pyramid work in the construction sector. Informal construction outlined above. face the same issues of supply and financing companies in $ billion 171.4 p Asia 60.8 Europe p Eastern America 56.7 p Latin 42.9 p Africa from down torn be can house the slum, a out” “clear thorities one day to the next. The poor quality of construction, however, increases the risk of property loss in extreme climate changes. conditions. This risk is increasing as the weather M housing and construction Spending for 80 endeva | Inclusive Business Guide

Market size Information and Spending for ICT 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 • Microfinance solutions make it possible for new customer Transport 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 services can make mobile telephony particularly Spending for ICT increases disproportionately with increasing income which attractive for poor households: cross-border mobile banking leads to expectations of strong market growth in the future or market information, weather forecasts and teleshopping, etc. create additional value, help fight poverty and can also Source: IFC, WRI (2007), be sources of income for companies. The Next 4 Billion

Additional information • Beth Jenkins, Bill Kramer and Rob Katz (2007), The Role of the Information and Communications Technology Sector in Expanding Economic Opportunity www • Boston Consulting Group (2007), The Next Billion Consumers: A Road Map for Accelerating Telecommunications Growth in Brazil www The “Where” Water e uid G ss ne usi ve B usi Incl | endeva Marketing technologies such as filters or chemical purifica- water tion for decentralized treatment of drinking Amanz’ abantu installs water kiosks in slums and rural areas of South Africa. The customers get drinking water with from pay and home) a from meters 200 (max. location central a cashless smart card. supplies IAWDCO more than 3,000 households in the slums well-devel- a through water with Manila of outskirts the on oped network of sub-contractors. More than 200 “aguadores” supply end customers with water to their homes using from themselves water the purchase aguadores These hoses. meters in central Water this the water sys- IAWDCO tower. tem are not installed home in or the on buyer’s the buyer’s premises, as is usually the case, but at the beginning of the for incentive an creates This premises. supplier’s the on line the customers to check their supply hose for illegal water removal. Forming cooperatives to invest in infrastructure Local water companies can contract microentrepreneurs to maintain infrastructure, collect payments and provide customer service Prepaid solutions at water kiosks Billing groups instead of individuals olutions

• Examples Examples are provided in the previous sections including the Kiosk (p. Com- 35) Siemens and Safe the Water Manila Water pany (p. 59). • • S • • • • 81 A Sector Review of the Opportunity for – www arket size arket verview dditional information Community-Scale Social Enterprises All for Water Drinking (2008), Safe Al Hammond et al. A • Most slums do not have a central water expensive not are connections household though even supply cause, system be- in living people Many high. are costs investment maintain, to mi- from water expensive buying on rely to have thus poverty them- water get to distances long walking or croentrepreneurs riv- from taken water the because common is Diarrhea selves. ers and lakes is not treated. Poverty penalty Poverty The infrastructure for water supply and wastewater removal is removal wastewater and supply water for infrastructure The many are there result, a As countries. developing in poor often microentrepreneurs that provide water using wheelbarrows, kiosks or trucks, particularly in urban areas. While quantity is the primary problem when it comes to agriculture, quality is the problem for drinking water. The water often contains germs that can spread illnesses or it heavy metals. is contaminated with O Total 20.1 Total in $ billion 6.4 p Asia 5.7 p Africa America 4.8 p Latin 3.2 Europe p Eastern M water Spending for 82 endeva | Inclusive Business Guide

The “Inclusive Business Guide” is primarily in- tended as a guide for companies. This publication therefore brings to light the added value that Outlook inclusive business can offer this target group and shows the courses of action open to it. It’s important, 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 poverty.

The most important question is: Do inclusive business ventures truly make a measurable contribution to fighting poverty? Or, are they merely a clever marketing strategy? There is evidence of a direct positive impact for many ventures: Aravind has given 2 million customers their sight back over the last 30 years, Manila Waters has connected 1.5 million households to the water supply in a 10-year period, Tiviski has generated income for more than 1,000 families in Mauritania by buying and processing camel milk. To date, there have been few studies on the indirect effect of these results on people’s quality of life. A study conducted by the World Bank in Bangladesh found that 48% of microloan recipients managed to rise above the poverty line within the 8-year period of the study. O

83 endeva | Inclusive Business Guide u t look ontest Photo: Adam Rogers / UNCDF Adam Photo: GAP Microfinance Photography C Photography GAP Microfinance Bild rechts: Malik Asim Mansur, 2008 C MalikMansur, Asim Bild rechts:

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 institutions have a vital role to play here. 84 endeva | Inclusive Business Guide

Reference materials R

85 endeva | Inclusive Business Guide ma eference t er i als 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) Discusses ways of integrating small and medium-sized development organization) 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 make to fighting poverty GRI Global Reporting Initiative 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) A Framework for Action (2nd edition) www cooperation) 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 Estimates the size of the global low-income market by IFC International Finance Corporation in Untapped Markets www sector and country on the basis of household surveys Recommendations for developing business to fight IRIS Impact Reporting and Investment Stan 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 The Fortune at the Bottom of the Pyramid – MFI Microfinance institutions A Mirage www Business Fights Poverty OECD Organization of Economic Co-Operation Takes a critical look at the BoP approach Social network for inclusive business and Development http://businessfightspoverty.ning.com Monitor Institute (2009) 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

WRI World Resources Institute 86 endeva | Inclusive Business Guide

List of supporting organizations

Local implementation Contacts and networking Experts and academic institutions

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 ADB Asian Development Bank; finances private ESE Platform for Strategy and Sustainability 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 poverty www.acumenfund.org Jane Nelson (Director) , 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 Massachusetts Institute of Technology D. Lab in Africa , www.afdb.org many countries ,www.wbcsd.org 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 Competitions ,http://web.mit.edu/d-lab 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 http://home.tudelft.nl/en > Faculty for “Industrial IFC International Finance Corporation; finances socially-oriented entrepreneurs sponsored by Ashoka , 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

SEED Initiative competition and support for social and environmental entrepreneurs ,www.seedinit.org R

87 endeva | Inclusive Business Guide ma eference t er i als Endnotes

Literature references to books and magazine articles 18 Fiona McWilliam (2000), state the full reference information. Dairy for a Developing Country Online publications are cited only with the author, (available at http://rolexawards.com/) year and title and are indicated by a www. 19 Muhammad Yunus, 7. Nelson Mandela Annual To find these publications, the name of the source Lecture in Johannesburg, July 11, 2009 www document just has to be entered in a standard search engine. 20 Siemens Sustainability Report 2008 www

1 Kofi Annan, former General Secretary of the UN, 21 The study Creating Value for All is based Financial Times, September 14, 2005 on 50 case studies of successful inclusive business ventures. These were analyzed with a view to 2 Interview with ArunSarin, CEO of Vodafone, for strategic solutions. www the Business Call to Action (available at http://bcta- initiative.org/media-resources/videos/) 22 elvie Grace Ganchero (2007), Smart Communications: Low-Cost Money Transfers 3 Safaricom (2008), for Overseas Philippino Workers www M-PESA Documentary (available at www.youtube.com) 23 D.Light Design: www.dlightdesign.com

4 Shaohua Chen and Martin Ravallion (2008), 24 Allienz SE (2010) The Developing World is Poorer than We Thought, Learning to Insure the Poor – Microinsurance Report but No Less Successful in the Fight Against Poverty www 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

12 UNEP DTIE (2004), Natura Ekos www

13 Millennium Ecosystem Assessment (2005), Ecosystems and Human Well-being: General Synthesis www

14 The analysis was published in the report Creating Value for All in 2008. It is based on 50 case studies of successful inclusive business ventures from various sectors and countries that look at the challenges the companies faced and the solutions they found to overcome them (available at www.growinginclusive markets.org).

15 World Bank: Doing Business (available at www. doingbusiness.org)

16 World Bank (2008), Safe, Clean, and Affordable Transport for Develop- ment – The World Bank Group’s Transport Business Strategy for 2008–2012 www

17 International Telecommunication Union: World Telecommunication Indicators (available at www.itu.int) About endeva

endeva’s mission is to inspire and enable endeva was founded in November 2010 as a suc- enterprise solutions to development chal- cessor to the “Emergia Institute” whose work in lenges. inclusive business it will continue. Between 2008 and 2010, we carried out numerous projects with As an independent institute, we work partners from the public, private and non-profit closely with partners from all sectors, sector. The results of these efforts have been in- including development agencies, foun- corporated into, among other things, the publica- dations, large and small companies, and tions “Creating Value for All – Strategies for Doing universities. With them, we build, share Business with the Poor” with the UNDP, “Towards and apply knowledge about how to devel- Triple Impact – Toolbox for Analyzing Sustain- op, implement and grow inclusive busi- able Ventures in Developing Countries” with the ness models. UNEP and “Learning to Insure the Poor – Microin- surance Report” with Allianz SE. We rely on a global network of experts to carry out our projects. endeva also orga- You can find more information about our work on nizes the BoP Learning Lab Germany. our website at , www.endeva.org. Acknowledgements

To begin with, we would like to thank everyone who contributed to this publication.

ISBN 978-3-00-032960-9

How to to How Business Develop and Poverty Fight Christina Gradl and Claudia Knobloch

Inclusive Business Guide

How to Develop Business and Fight Poverty Fight and Business Develop to How — Guide Business Inclusive ISBN 978-3-00-032960-9 Supported by