There is exciting work happening as the global development community prepares to take on what is now known as the post-2015 Development Agenda. This new framework will require some creative thinking about how to engage the private sector, and how to utilise the emerging evidence that more inclusive business models – ie those that engage poor people – can spur economic development for those who need it most.
With recent evidence suggesting that inclusive business models can provide strong benefits to those living at the base of the economic pyramid (BoP), it seems shortsighted not to fully examine how to support them. But why are so few inclusive businesses reaching scale? For many practitioners in both the public and private sectors, the answer lies in the supportive environment that develops through what has become known as an ecosystem.
The Philippines has been at the forefront of supporting innovation ecosystems for inclusive business. With the understanding that inclusive business models can engage people at the BoP as consumers, producers and entrepreneurs, the Philippines has emerged as a prime example of how the private sector can support inclusive growth. To capture the benefits of inclusive business, government agencies, entrepreneurs and companies are looking for new ways to mobilise stakeholders through inclusive business ecosystems. These communities of practice support inclusive business and shared value while reducing poverty and spurring inclusive growth.
At the heart of this support is the “ecosystem diamond” – concrete practices that governments and national policymakers should engage in to generate pro-poor development. The Philippines has proven itself an excellent example of a nation’s capacity to overcome market constraints and support ecosystem development – a model that could easily be replicated in other countries.
Here are four ways that the Philippines is supporting inclusive business:
- Providing information: If indeed information is power, key players in economic development including the government must work together to support companies with the tools, knowledge, technology and training required to operate in low-income markets. This includes market research on opportunities within specific sectors. Market research both entices potential investment and sets the stage for further interest from entrepreneurs. At the same time, some of the mystery can be taken out of development by providing knowledge products illustrating how inclusive business dovetails with private-sector interests. The Philippines’ largest corporate membership-based organisation, Philippine Business for Social Progress (PBSP), has collaborated with major stakeholders like USAID and the Business Call to Action to commission sector-specific studies in areas like socialised housing and health, to understand market dynamics at the BoP.
- Everyone needs some encouragement. For business this means creating incentives! To support companies with potential, pioneering governments like that of the Philippines have developed supportive policies that encourage companies to adopt inclusive business models. In fact, PBSP has been instrumental in facilitating dialogue between public and private partners: hosting workshops, providing technical assistance and sharing knowledge. These efforts go a long way toward building an ecosystem as well as fostering enabling policies. In the Philippines, where support for inclusive agribusiness and housing is a national priority, industry consultation sessions have been held to address infrastructure concerns and production barriers in key sectors such as coffee, rubber and cacao.
- Money, money, money; investment and financial support cannot be ignored. In successful ecosystems, financial guarantees are often required to help businesses see the value of entering low-income markets. If companies are to succeed in these new markets, they must have greater access to financing. And while BoP markets can provide strong returns, it is unlikely that all levels of business will be comfortable exploring this new customer base. Recently, PBSP held a financing forum to discuss how private commercial and government banks can support inclusive agribusiness efforts. Just this week, the Board of Investments (BOI), a key component of the Philippines government announced plans to work with the Asian Development Bank in designing inclusive business incentives. This new partnership will provide incentives for companies to adopt inclusive business models within their operations, which could be a real game changer.
- Get down to the nitty gritty; provide real-live support for project implementation. The Philippine government has been creative in helping inclusive businesses to generate knowledge so that they can ultimately flourish. It is encouraging to observe how the government has led efforts to mainstream inclusive business within the country. And now, the government is working with PBSP and its member companies to support the private sector in areas like logistics, transactions, marketing and communications; this involves micro-business support to help inclusive businesses grow in challenging environments.
Further support for inclusive business can take the form of technical support, small-business incubators, shared platforms, disseminating best practices, devising industry standards and infrastructure investments. Platforms like the Business Call to Action and the PBSP can also assist in building ecosystems and promoting a greater understanding of the benefits of inclusive business.
This is just the tip of the iceberg, but there is much to be done if we are to succeed in building viable ecosystems. By showcasing inclusive business models, we can demonstrate to governments the potential for addressing gaps in job creation and delivering affordable services in poor communities that also want to do business. In the Philippines, the future looks bright, with major companies like PHNMA Property Holdings, Hapinoy and Kennemer Foods demonstrating how their core businesses can address poor people’s needs – and provide social and economic returns.
As UNDP looks to replicate the success of its country-level collaboration in the Philippines through the Business Call to Action, it is also looking to collaborate with WDI (as part of the BoP Roadmap) to develop a comprehensive framework on the role that ecosystem development partners can play in overcoming market constraints.
The BCtA initiative is the result of a unique partnership between the Dutch Ministry of Foreign Affairs, the Swedish International Development Cooperation Agency (Sida), UK Department for International Development (DFID), US Agency for International Development (USAID) and is hosted within UNDP.
Karen Newman is senior communications consultant, Business Call to Action Alliance and Sahba Sobhani, global programme advisor-private sector, UNDP
More from the Business Call to Action partner zone:
- From emerging to multinational: leaders shaping new models to meet the BoP
- Low-cost tablet PC looks to aid education in poor communities
- Empowering farmers through mobile communication in west Africa
Content on this page is paid for and provided by Business Call to Action, supporter of the role of business in development hub
Launched at the United Nations, the Business Call to Action (BCtA) is a global alliance hosted by the United Nations Development Programme headquarters in New York. Follow: @BCtAInitiative
