Why is the government of the Netherlands fostering inclusive business?
The importance of inclusive business stems from the imperative that development has to be inclusive. Economic growth is a strong engine for development as it creates jobs, generates income and provides necessary services, as long as those in need share these benefits. Not all investments have an equal impact on development. Jobs for the poor and women have a higher impact than those for the middle class as the additional income they make is invested directly in the family. Inclusive business is one way of stimulating business that explicitly focuses its market approach on the base of the pyramid. It engages with poor men and women as entrepreneurs, producers or clients in business models that enable these groups to increase their livelihoods and improve their wellbeing.
What are some of the key issue areas that the government will look to in the near term? What is the role of the private sector in this forecast?
Fostering private sector development is a key priority in the Netherlands development policy. Companies, particularly SMEs, face various constraints while doing business, including poor infrastructure, poorly developed markets, and lack of access to financial services. So we work to assist countries to improve their business environment. For example, through Trademark East Africa, we strengthen customs facilities and regulations for regional trade. In collaboration with Rabobank, we are enhancing the capacity of financial institutions to extend their services and products to rural entrepreneurs and farmers. And we invest in public infrastructure like harbours, roads and energy facilities.
Often the private sector is a direct player in improving the business environment, as is the case with the Rabobank. In other cases, the private sector can be an important source of knowledge and information to help create a business climate that favors companies. Therefore, engaging in an ongoing dialogue with the private sector is crucial.
We believe that the Dutch private sector can contribute greatly to the agenda of inclusive business. Many of these companies feature prominently in the Dow Jones sustainability indices. For example, to address malnutrition, Royal DSM, a leading producer of micro-nutrients and vitamins globally, has partnered with KeBAL, a Mercy Corp food cart program initiated in Indonesia that provides nutritious and high quality food options through a franchise, while raising awareness around nutritional issues. The program has plans to develop a self-sustaining business model that can be scaled-up to create employment opportunities for local Jakartans.
Companies often face last-mile constraints in their inclusive business model, like high transaction costs and unfamiliarity with local realities. Partnerships with micro-enterprises, microfinance institutions and with non-for-profits have proven to be an effective answer to these challenges. The Netherlands is actively promoting such partnerships through challenge funds in the area of food security and water. Moreover, inclusive business models often require innovation, facilitation and networking. By focusing on supportive business development, the Netherlands fosters new initiatives in the area of inclusive business.
So, inclusive business has a great potential, but it is of equal importance to capture the lessons learned and to continue to invest in knowledge generation.
What changes do you see on the horizon in terms of development and how governments including the Netherlands will collaborate with the private sector and NGOs?
The realities of developing countries are changing and therefore our relationship with them has also evolved over time. Many developing countries are transforming their economies, and classical donor-recipient relationships will increasingly evolve towards collaboration modes based on mutual interests. The Netherlands is pursuing a specific agenda that combines aid, trade, and investment in response to this changing landscape.
A clear sign of this is the fact that Minister Ploumen is the first Dutch minister for development cooperation who is also responsible for foreign trade. This offers new opportunities for scaling-up our efforts towards poverty reduction and achieving the SDGs in the post-2015 period through sustainable business development. This often requires a combined engagement of companies, NGOs, knowledge partners, and governments.
Opportunities for inclusive business exist in all sectors, whether it is the provision of clean water and sanitation, maternal and child care, local energy generation, or securing access to healthy food. However, the division of labour between stakeholders may vary and require tailor-made solutions. The Netherlands is working to develop a strong practice in this field together with other donor governments and interested parties. In this context, the BCtA is an important vehicle of which we are glad to be part.
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