Economic development and employment: Reducing poverty with innovative business models
Companies are using inclusive business strategies to integrate people on lower incomes and improving their lives permanently as a result.
Expensive services are often beyond the reach of people living in poverty. Yet change is possible – with inclusive business models that offer affordable products and new jobs. Ideas like this need courage, supportive partners and knowledge, challenges an entrepreneur from Nigeria has succeeded in rising to. Her mission is health care for all.
Outside a rural hospital, a transport drone is coming down to land. It is carrying life-saving blood supplies, much to the relief of the medical staff awaiting them. Making scenes like this a normal occurrence in Nigeria and Kenya is the goal of the innovative company LifeBank. It specialises in rapid delivery of blood and oxygen to hospitals, by motorcycle, car, ship and drone. More than 750 partner health care institutions are already benefiting. And that is just the beginning.
LifeBank’s work is based on a special business model that uses tiered supplier charges and a pricing structure that differentiates between buyers. Private clinics purchase premium services such as additional security measures and quality assurance, which they then offer to their clients. The extra revenue generated is used to cross-subsidise services at reduced prices for low-income communities. ‘I started working like this because I wanted to support the people with the lowest incomes,’ says Temie Giwa-Tubosun, LifeBank’s founder and managing director, of the philosophy behind her company.
A way out of poverty
Focusing on those with the lowest incomes is one of the basic principles of Inclusive Business (IB). The approach enables people with low earnings to be integrated into companies’ business models. In LifeBank’s case, the company charges a price for fast blood and oxygen deliveries that even patients with very little money can afford. At the same time, the Nigerian start-up is creating attractive jobs for people with no vocational training, whom it employs as delivery staff, for example. They are then able to buy food for their families and bring money into their communities, which in turn can be invested in roads and schools. The ideal outcome is a circular system that permanently reduces poverty.
This explains why the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH began promoting IB models six years ago, on behalf of the German Development Ministry (BMZ) and cofinanced by the European Union (EU). The need is great. Four billion people worldwide live on less than eight US dollars per day. They have scant prospect of better income opportunities and cannot pay for essential goods and services. Their plight is reinforced by what is known as the poverty penalty – people with low earnings often have to pay more for goods than wealthy population groups. Without a regular income, it is not possible to plan purchases over the long term or buy goods in larger quantities at lower prices.
Success as an inspiration for more companies
To improve the prospects for people living in poverty, GIZ is leading the way internationally with its digital IB platform – the largest in the world. Developed in partnership with international organisations, inclusivebusiness.net provides a space where entrepreneurs can gain knowledge and build networks. It offers expertise, impact stories and training courses. The platform has more than 8,700 visitors each month, from 165 countries.
At the same time, GIZ is working to improve the overall conditions for people with low income to engage in and benefit from economic activity. Its IB programme on policy development brings together representatives from politics, civil society and the private sector.
In Cambodia, for example, this has led to the development of a national IB strategy, which is now improving the environment for IB companies. State Secretary Heng Sokkung from the Ministry of Science, Technology and Innovation is convinced that the concept is working. ‘By innovating and opening up new market segments, IB is contributing to the transformation of our economy. Benefits are emerging at three levels: for the companies, for the people living in poverty and for society as a whole. GIZ is an important strategic partner for us in putting IB into practice.’
Similar processes have been launched in other countries in the region by GIZ in cooperation with the Association of Southeast Asian Nations (ASEAN). Lessons learned will be shared with Nigeria and Zambia.
LifeBank is also benefiting from GIZ’s network – it is one of 131 companies that have taken part in training and other formats on IB. ‘Many companies using an inclusive business approach struggle to expand their innovative business models. GIZ provided us with the resources we needed to develop a strategy for extending our model to Kenya in future,’ says Temie Giwa-Tubosun. The start-up founder has big plans. She would like to carry on growing her company, giving even more people access to rapid emergency and health care – while contributing to equality of opportunity with attractive jobs.
As at: August 2021