201712

Reflecting on inclusive business - progress and what is next?

December 2017 Blog Series

What do we mean by ‘inclusive’?

What do we mean by ‘inclusive’?

Our teams in Mumbai have been working on the opportunity—and the challenge—of inclusive markets for over 11 years. In that time, we have wrestled with some tough questions. What business models can really serve and benefit the poor? How do we develop and grow these to have large-scale impact? 

In the last couple of years, we have been grappling with a new one: what does it actually mean to have an inclusive market? This is no trivial question, particularly as aspirations across our sector are increasingly raised up to encompass systems change in whole markets. If we are to be involved in a process of systems change, we must necessarily engage with the question of what our desired outcomes are for the system itself. For many of us, concepts of social inclusion and equity very much underpin this vision, but to what extent do we make this explicit and cultivate a strong orientation towards this in our work? 

When our inclusive markets work began in 2006, we focused on significantly improving the products and livelihoods available to low-income populations in India. We recognised that these groups were already participating in various markets, but received the lowest-quality goods and services and faced challenging livelihoods. We wanted to find ways to deliver something better to low-income households, and grow those mechanisms over time. We helped to build new markets in sectors such as housing and housing finance, and we conducted research into and advised on other areas, such as agricultural value chains. 

But as some of these improved markets took off, new concerns emerged. In the housing market, we saw that weak consumer protections led to incidents of predatory and exploitative commercial behaviour, causing some customers to lose their savings and their chance of owning a decent home. We also saw clearly that wealth and income was only one dimension of marginalisation: most of the new affordable housing projects were open only to the majority Hindu community and not to minority Muslim households.  

 

housing

 

In agricultural value chains, we have observed how new schemes are being set up to provide greater market access to smallholder growers. But some of these have a single large buyer with a tremendous level of power in relation to the fragmented base of smallholder suppliers—a classic, problematic monopsony. This has consequences for the way in which economic value was shared between grower and buyer in the value chain, but it also creates a high degree of risk and vulnerability for the growers: what if the buyer decides tomorrow to walk away, leaving the growers high and dry? What if increasing monoculture makes households more vulnerable to climate and disease shocks? And what if these activities lead to greater incomes today but degrade the environment in a way that compromises livelihoods for future generations? 

These are difficult questions, to be sure, and there is no certainty that any market system (or indeed any other social system) will be able to fully address every aspect of exclusion and inequity. But we believe these questions should be asked. If we are working to help market systems be more inclusive, we must pay close attention to all the dimensions that matter to us. Greater awareness gives us the ability to make decisions that are more in line with our intentions, as well as to monitor and mitigate the risks that inevitably arise. It might also help us to explicitly acknowledge necessary trade-offs where it is unlikely we will achieve all of our desired goals in tandem, rather than continue in blissful (or, worse, self-congratulatory) ignorance of the harms we might be causing, or inequities we might be exacerbating.  

We are also beginning to realise that progress against multiple inclusion goals is not likely to be driven by an individual enterprise or other actor, but instead emerges from a web of complementary actors and forces across a market system. In our recent research into actual cases in history where transformative market change towards inclusion has been achieved, we saw that these shifts resulted from a panoply of innovative efforts beyond the enterprise itself, including but not limited to community development, social movements, ethical consumerism campaigns, and laws and regulations that actively promoted inclusive behaviours in the marketplace.  

Our best hope of achieving truly inclusive markets will therefore come from taking this wider, ecosystemic perspective, and tapping into a multiplicity of forces rather than expecting one actor alone to drive all of the change. 

 Endnote: 

The recent FSG research referred to in this post was conducted in partnership with the Rockefeller Foundation. The Rockefeller Foundation has also developed an inclusive economies framework that proposes a number of characteristics of an inclusive economy, and may be a good starting point for those interested in developing a stronger, more multi-dimensional perspective on economic inclusion.  

Harvey Koh

Harvey is a Managing Director of FSG, and a leader of FSG’s Inclusive Markets practice. He has worked with funders, investors and entrepreneurs, to develop and scale market-based approaches that benefit poor and marginalized populations.

Blog post

Agribusiness: inclusive intentions, not yet core business

Joost Guijt focuses on 'inclusive agribusiness' and calls for more real evidence on how models work, to ensure smallholders really gain and businesses have enough information to take risks. Looking ahead to the ongoing transformation of smallholder…
Joost Guijt
Table of contents

graphic summary

GRAPHIC SUMMARY

A visual summary of progress our contributors think has been made in inclusive business and on what is next. Learn more about these aspects by reading this edition of the online magazine on inclusive business! The illustration was developed by…

editorial

In the burgeoning inclusive business space, some core questions remain

From the Practitioner Hub’s inception in 2010 to now, Founding Editor Caroline Ashley has seen inclusive business grow and evolve. As she steps down from her editor role this month, she reviews the contributions from this month, and a few from years gone by, to reflect on the essential questions that remain : How much impact is good enough? What is needed to drive scale? How can corporates successfully adapt their business models?

Caroline Ashley

feature story

Inclusive business - Quo vadis?

At the end of the year 2017, we asked practitioners and thought leaders working in inclusive business for their personal opinion on the state of the sector currently and what they think is in store in 2018 and beyond: We asked what is going well, what is missing, and where inclusive business is going next. Read the short answers of our contributors, to see why they think technology, environment, fine-grained impact, SDGs, investment, and much more are top of the list.

Inclusive Business Action Network

What do we mean by ‘inclusive’?

What do we mean by ‘inclusive’? An unwelcome but important question is posed by Harvey Koh, Managing Director of FSG, as he reflects on 11 years wrestling with inclusive models in Mumbai, he asks: 'What if an inclusive business model harms low-income people with unfair terms or discrimination? His answer: not blissful ignorance, but focus on building inclusive market systems, not just stand-alone inclusive enterprises.

Agribusiness: inclusive intentions, not yet core business

Joost Guijt focuses on 'inclusive agribusiness' and calls for more real evidence on how models work, to ensure smallholders really gain and businesses have enough information to take risks. Looking ahead to the ongoing transformation of smallholder agriculture, he also wants to see inclusive business linked to transitions out of primary production.

Progress but time to get more sophisticated in the detail

Armin Bauer draws on years crafting and investing in inclusive business deals inside the Asian Development Bank. Lack of clarity on social impact is one of the two big gaps he identifies, calling for a clearer focus on the bottom 40%, alongside more sophisticated shaping of deals.

Scaling business to tackle malnutrition - making progress but policy action needed

The policy context and role of government is highlighted by Ndidi Nwuneli, a social entrepreneur and investor in Nigeria. AACE Foods is an example of a business that is achieving signficant scale, sourcing from over 10,000 smallholders, while tackling malnutrition. But Ndidi highlights 2 key policy actions needed to unleash local sourcing at scale: incentives and infrastructure.

The Inclusive Business Space in Pakistan

Dr Iffat Zafar Aga, founder of Sehat Kahani, gives an upbeat assessment of how technology has unleashed a raft of inclusive businesses in Pakistan, but a candid view from personal experience of the collision between requirement of entrepreneurs and norms for women in Pakistan. More digital, fewer barriers are the way forward.

Creating a more inclusive agricultural sector in India

KC Mishra is founder of eKutir, which provides 'soil to sale' services to farmers, to create a connected non-exploitative agricultural market. In our exclusive interview, KC argues that such social enterprises can provide a key piece of the jigsaw going forward; partnering with farmers, designing around their needs, and partnering with corporates who lack such ability to differentiate and accomodate.

2018: Next Challenge for Inclusive Business in Nigeria

Progress so far in Nigeria

So far in Nigeria, the term “inclusive business” is not well known since most have come into it quite by accident.

Delivering on the Promise of Inclusive Business

Zahid Torres-Rahman, Founder and Director of Business Fights Poverty, argues that delivering the promise of inclusive business means taking it deeper into corporate, into commercial and operational teams. And where necessary, jettisoning the language of inclusive business. Alongside this deepening, wider and more agile partnerships are needed for scale.

Effectively Using Synergies among Public and Private Stakeholders to Advocate for the Implementation of Inclusive Businesses and Improve the Lives of the Very Poor

It is not the global but the national companies that are flagged by Markus Dietrich, senior advisor within the Inclusive Business Action Network. His priorities for the future include more support to national medium/large companies, clearer linkages with SDGs and alignment with the fast-emerging impact investment market. He also gives a great update on the growing policy support for inclusive business, seen for example in Filipino Government legislation and adoption of principles and commitments by ASEAN, APEC and G20.

Editor's Choice: The Best Blogs of 2017  

Finally, our Editor's Choice flag up the top blogs of the year, with the Hub team explaining why they are our favourites.