Looking through the lens of 'inclusive business'
Many of the commendable improvements in human, infrastructure and policy indicators stand testimony to the significant level of efforts and resources that have flowed into global development. However, development impacts could be greater. Although the 2010 Edelman Trust Barometer survey shows that 70 percent of 4,875 informed members of the public are saying that trust in NGOs across the globe has increased over the last decade. The fact is that despite over US$ 1 trillion in aid flowing into underdeveloped countries over the last three decades, poverty and inequalities are still at large – for instance, the World Bank estimates that around 44 million people have been driven into poverty in the second half of 2010 due to rising food prices alone. The message is clear. There exists now, more than ever, a clear case for significant new thinking – one that is characterised by innovative, integrated and value-enhancing alliances between the private sector, government, NGOs, and a myriad of other stakeholders and actors in the ecosystem, centred on sustainable business and development practices.
The aforementioned hypothesis from the Wall Street Journal has almost started taking a concrete and real shape already and Bangladesh turns out to be a front liner! Keeping in mind that poverty alleviation and strong business are each interdependent on the sustainability of the other, in Bangladesh, CARE has been one of the pioneers for emphasising the role of the private sector in sustainable development, forming partnerships and working with them over the last 10 years to create mutual sustainability gains for businesses as well as the poor, so far hardly recognised by the market. The key is enabling each group to utilise the strength of the other to ensure synergy, through an unfamiliar concept called 'inclusive business'. The multi-dimensional approach through which CARE works includes (a) sourcing products and services from rural and urban population at the bottom of the pyramid and creating sustainable market access in the process; (b) developing sustainable distribution systems that seek to divide the cavernous gap between formal market systems and the poor, and in the process reach out to them with products and services that they need to thrive socioeconomically as citizens; and (c) building opportunities for millions of unskilled men and women to form part of the mainstream labour economy as productive and dignified wage-earners. The approach has allowed CARE and the private sector to identify and implement innovative solutions to the most pressing development challenges of our time. CARE brings to the table the concept of 'inclusive business' backed by a long experience of 55 years of grassroots level engagement; technical understanding of what works and what does not at the bottom of the pyramid; bottom-up innovations that can potentially engender transformative business models; and credibility in delivering social and business impact for all. Equally enough, private sector partners invest top-down ideas and help development initiatives reach people at scale; they contribute valuable resources, skills and expertise; ensure sustainability through inclusive business models and team up with CARE to influence other members of the development ecosystem to own the approach, in a common goal to fight poverty. At the end of the day, in a fast changing world that is incrementally turning over to a new leaf, it is this very convergence and coming together of bottom-up and top-down innovation that enables CARE and its private sector partners to try, test, fail and succeed in transforming systems and the way things work – a transformation that is unfolding organically around the world now, as you shall see – a couple from Bangladesh are documented below.
The first example focuses on the capacity building and empowerment of the poor as capable workforce. European buyers and entrepreneurs looking to decentralise production units in rural areas (potentially reducing migration) in their supply chain in Bangladesh suffer from the lack of availability of skilled workers and experience huge unmet demands, low production volumes and profit margins. Poor and disadvantaged women in rural areas are excluded from the mainstream economy due to lack of productive skills and access to dignified employment and income opportunities, among other things. CARE partnered with the buyer and local entrepreneurs, and using co-investments trained up 1,000 plus extreme poor women with export market-oriented production skills. These investments also help set-up decentralised production units, within a few kilometres of women's homes – the outcome? Women now earn at least Tk 4,000 per month and save around 500; local entrepreneurs experience growth by production volume of up to 15 percent month; and the European buyer happy making profits, has invested back over 350,000 Euros to expand this supply chain and address the health, safety, security, and nutrition needs of workers and their families.
The second example draws on the market inclusion of the rural poor. Bangladesh's highly informal rural marketing system is not inclusive of the majority poor; depriving them access to products and services of need – failing to reach rural consumers. Companies on the other hand are increasingly looking to design, develop and sell these products (such as sanitary napkins, fortified nutritious food, mobile talk-time, soaps and detergents, quality seeds and agri-inputs, etc) to consumers within this large untapped market. CARE made a win-win convergence happen simply by training marginalised women as rural sales agents, who sell private sector products door-to-door, and by setting up rural enterprises that procure from private sector suppliers and sell to rural saleswomen in turn. The project, which began in mid 2000s, follows a sustainable business model where actors, including rural poor women accumulate wealth based on a viable commission structure. The initiative was so successful that in 2010 it was transformed into a social enterprise with investment support from Danone Communities – now soon-to-become a global brand name, “JITA”. As of now 3,300 rural women earn as much as Tk 3,500 a month, while the total sales figures of private sector products has increased from Tk 963,000 in 2005 to Tk 157 million in 2012! The enterprise now plans to create employment and income for 12,000 marginalised women; serve as alternate marketing-distribution outlet for 1,000 rural SMEs; deliver agri-inputs and information to 10,000 farmers; make products-of-need available to around 2 million rural consumers; and companies are expected to continue to expand markets – a truly win-win scenario!
Whilst some evidence and impact of inclusive business practices is manifested, there is more to be done. We all know how companies and NGOs speak different languages and often find it hard to begin to talk, let alone achieve something together. Good news is that things are changing and there are examples out there of how opposite forces can attract to work towards designing, implementing, and expanding on creative solutions that create “shared value”, a term now popularised by none other than business authority Michael Porter. Nevertheless, numerous challenges remain – these mostly center on integrated programming with companies for the purpose of “women empowerment and poverty alleviation”; on beginning to speak a common language and create spaces for both NGOs and companies to understand each other, respect priorities and grow; on exploring and rolling out sustainable business models to address challenges and bank together on impending opportunities; and on creating an evidence base, to foster more strategic investments from the private sector, donors, institutional investors, and NGOs – particularly in the exciting new realm of inclusive business at the “bottom of the pyramid”.
.............................................................
The writer is Coordinator, Private Sector Engagement, CARE Bangladesh.