Project description Inclusive Business Platform 2013.6253.2
Current situation
In many developing and emerging countries, poor sections of the population normally do not have any income-generating or employment opportunities, nor do they have access to essential products and services such as water, electricity or health care. Three billion people live on less than USD 2 per day, and a further billion survive on less than USD 8. Together, these people represent the ‘base of the global income pyramid’ (BoP) . The challenging economic and political risks involved mean that companies are reluctant to invest in these BoP markets. Inclusive business models (IBM), which could be used to create access on both the demand and supply sides for poorer sections of the population, are barely used or remain stuck at the pilot stage. The services and products they offer are restricted to traditional markets with clients who have a relatively high and regular income. Companies often face obstacles when entering markets at the BoP; these include high transaction costs in identifying strategic partners, poor infrastructure, insufficient information and experiences, regulatory frameworks that are either overly complex or absent and a lack of financing mechanisms for scaling successful pilot schemes.
Objective
In their business activities in emerging and developing countries, companies are increasingly adopting IBM that involve poorer sections of the population as consumers, suppliers, distributors or employees.
Indicators:
1. 70 companies rate the information and experiences provided via the peer learning formats as helpful for implementing their business activities at the BoP in emerging and developing countries.
2. The contribution made by German development cooperation to financing a liaison office for the IB network and its activities is reduced to 25%.
3. The IBM supported by the network involve 50% more people at the BoP as clients, suppliers, distributors or employees.
Methodological approach
Inter-company cooperation and close coordination between companies and the BoP as well as with other local companies and stakeholders (NGOs, impact investors) are required not only in the development of IBM but also in their implementation and scaling. The programme forms part of the BMZ strategy for cooperation with the private sector and private sector promotion and builds on the experiences of German and international development cooperation to date in promoting IBM (e.g. BoP sector dialogues, G20 inclusive business workshops). The programme is active at a global level, establishes an international network of companies and other public and private stakeholders and uses peer learning formats to support both the further development and the spread of IBM. The programme develops and offers services (advice, learning and exchange formats) and, together with companies, promotes the implementation of IBM in partner countries.
Impacts
Owing to their size and positive forecasts for growth, BoP markets are extremely attractive both for local and international companies. At the same time, they are able to actively contribute to poverty reduction and attainment of the MDGs by means of innovative business models, product developments and services. Applying these business models reduces poverty since a greater range of products and services leads to increased competition; lower prices and/or better quality products and services increase the purchasing power of low-income consumers while the integration of poor sections of the population also creates additional opportunities for employment and sources of income. Furthermore, these business approaches are a financially sustainable and, potentially, a highly scalable solution for development and poverty reduction.