Inclusive business donor partnerships: reaching new markets and marginal communities
ACI’s first donor collaboration was in 2010 with DFID’s Business Innovation Facility, which supported them to develop a contract model for farmers. Since then they have worked with Sida’s Innovations against Poverty, the World Bank and have received grants from USAID, the Netherlands government project Geodata for Agriculture and Water (G4AW) and Katalyst.
How beneficial has donor engagement been in helping to grow your business?
There are two issues here. One is, we are a public limited company. So even if we want to, we cannot engage ourselves with development work. That means, we have to show return on investment in every project. Even for the case of donor funded projects. But it is our experience that the location where we are going through donor funded projects; those regions have not been touched before commercially as they were not feasible or too remote. This is an advantage for us, as we can create new markets with less investment from our end. If we had not been supported by donors, then we may not have considered those markets. If its market development with only our own funds, in such situations, we try to capture the low hanging fruits. But with donor funds we can reach remote areas and marginal communities.
So you have accessed those markets which would not have been commercially viable unless you had that donor funding.
Yes, in that way market penetration happens. Donor funding has also allowed us to be more innovative. For example in the G4AW project, we created a decision support mechanism for farmers which is a satellite based weather prediction system. In that system an early warning can be given to farmers that adverse weather is expected and they should take precautionary measures for their crops. Doing something this innovative requires huge investment. And when we do this with donor funds it gets easily approved by the (ACI) management. If donor provides around 50% of the cost, we can easily give the rest. This allows us to work jointly and create something innovative.
So, as a business entity you benefited but would you say the benefits of donor funding reached the low-income people you ultimately aim to support?
Yes, we have seen positive impacts on these projects. When we went to the remote areas and targeted the farmers, they were really poor, like marginal farmers. We showed them the advanced cropping system which allows them to grow two or three crops on the the same resources (land) that they were using for just one crop. After we showed them, some were successful. But regardless of whatever they achieved, we were there to show them the ropes. We contributed towards their income generation.
And we have also seen that in our training a lot of women participate. We found this very encouraging. Because in case of knowledge dissemination women can play a vital role. When we started the homestead gardening project, women took seeds from us. It was later seen that the majority of the women adopted this technology. So this was a new learning for us and has opened a new door. Through women we can expand our markets.
How difficult have you found it to access donor support? What has helped you access and secure donors?
The difficulty that we face is, we are experts in regular business operation. When a call for funds from donor is announced, we do not have the necessary capacity or expertise to write the proposal for getting these funds. We find this very challenging. In the case of G4AW, SNV supported us. In such cases, we have to get support by taking NGOs as partners. Even then sometimes we can’t find the right support. For example, we are currently writing a proposal to the Netherlands Government for increasing water efficiency but we haven’t had the time to find the right partner and are, therefore, finding the proposal very difficult.
This is not actually your core competency. NGOs are also struggling to generate funds. Even though they have writers for proposal writings and they are highly paid. But this kind of personnel is absent in the commercial sector.
Apart from trying to find appropriate partners, what has helped you to access and secure the funding that you got?
Another benefit that we got in working with USAid is that we could attend a training where they brought a consultant to train us on grant proposal writing. In that training, we learnt how an activity becomes an outcome and later generates an impact. And many other issues which we would have to be aware about for writing the grant or funding proposal. We had this training in this topic for two weeks. This helped us a lot in our overall understanding.
Once you have secured the donor funding, how have you found the actual engagement with donors?
Our experience is very positive. Donors have given us plenty of input to align the objectives at the initial stage of the project. Engagement with the donors includes reporting, completing milestones, and reporting after the completion of the milestones, etc. If this is done correctly and the donors see that these are being correctly implemented then we do not face any problems.
One fact worth mentioning is the experience we had when working with USAID for the AVC project. They broke down the project into three month clustered activities. They were giving the funds on a rolling basis. When we do a fixed two year plan then we cannot change or customise anything midway through the project, especially the outputs or milestones. This is challenging because it is only when we start a project that we understand what customisation is required. The rolling plan was a very good experience for us and this has also helped us a lot.
I believe you experienced some difficulties when working with SIDA Fund, there was a bit of a hassle from the Bangladesh Bank to release the funds?
Yes, this was also the case but only at first. There is a mandate by the government which states that to get funds from abroad permission from the government is needed. What we did is we contacted the Commerce Ministry and from there we got an official approval letter. Once we got that letter we did not face any more barriers. All the funds directly flowed in from abroad with ease.
Donors and businesses often have different objectives and different matrix for success. How difficult or easy it is to come to an agreement or way of working that is mutually beneficial?
We haven’t faced trouble here. Basically, we found out that are objectives and the donors are actually same. Because our vision is creating wealth for farmers. If this is our objective, then the objective of our donor is also same. The way we execute maybe different. How an NGO or donor executes, a private company does not do it the same way. So, execution maybe different but objective remains the same. And nowadays donors have made this flexible and much more business oriented. They want ROI, business case, continuation, sustainability, etc. This has greatly benefited us as we can turn it into a business case.
If we go back to the example of the USAID Agriculture Value Chain (AVC) project. In the list of activities which are directly paid by the donor, there was marketing and communication, advertising, promotion, these budgets have been allocated directly by the donors. This was not even from our contribution. So, that is the extent to how much business oriented donors have become. It is because they have understood the values of these tools, and they are supporting it. So I would say that this is very helpful for us as we can work very flexibly.
What advice would you give to companies that are seeking to engage with and get support from donors? What are the main challenges they are likely to face and do you have any tips on how they could overcome?
For new companies, what is mostly needed is the matchmaking program. We have regular matchmaking programs with donors. At present this is done by the Dutch Embassy. This is helpful for us. They called ACI too on the water funding program to give our G4AW presentation so that everyone understands the different types of partnerships that exist in such a project and how the work has been done jointly. So match making programs as such are very important. So if frequent match makings can be done involving private sector companies, particularly those who are working directly with the farmers, garments workers, etc. and like minded donors, and arranging such programs would help a lot. If this can be done then other big companies would also understand that this too is an area to explore.
Another key thing is to engage NGOs who would give project management support, plus grant proposal writing support, then it becomes easy for the private sector. Like the NGO can take care of the proposal writing and grant fund, and the implementation can be done by the company.
But it is not free. Say for example, we can write proposals well, but unfortunately we are not resource rich that we would do it for free.
We actually did not face this later. When we worked with Practical Action or SNV, SNV invested heavily. They engaged senior consultants from Netherlands for the proposal writing. When we went to work with Practical Action, their local Bangladesh team and London team, both teams supported us in the proposal writing. If this money comes, then we both get benefited. In that case, they are doing it for their own sake. And the funds which are coming nowadays, 40% contribution must be made from the grantee side. An NGO can never make this contribution but a private sector company can.
So, there is a mutual understanding. Private sector is contribution 40%. NGO is writing the proposal. Plus they give us support in lots of areas. So in this way these are getting designed and written.
In my experience, a number of organisations have very specific needs and search for funding accordingly but they don’t have a very high success rate with that strategy. What strategy do you adopt when applying for donor funding?
Applying for specific needs like this is very difficult. If we give our example, I know that this is my business. Agriculture Value Chain is my business. That means the other five business wings, they are giving inputs to the farmers and my business is to create the market linkage for those farmers or to add value on their product, so that that product gets a good market. So once we have fixed this scope or mandate of ours and when there is a call from donors, we try to identify what is there in the fund for our business. So that we can align that with our business.
The fund we had for AVC, I saw that there is a huge gap on backward linkage. And the fund can support this. So we aligned this accordingly. Therefore, whenever there is a donor call first it should be seen which part of the donor mandate fits in with the business. But donor funding will not come so easily for a fixed specific issue.
Yes, donors themselves have fixed mandates as well. They have a five year plan, they have a strategy. They want something specific and they cannot fund outside that.
That is not a problem. Because there will be some area or gap to fit in. When they see the business set then that understanding occurs.
Anything else you want to add?
In general, I would refer to the MDF. If we could create a forum where private sector, donors and NGOs can work together, particularly those parties who work with the development sector. It could be private sector, it could be consultancy firm. Whenever there is an opening in the forum then that information would be shared. Whenever we need a partner we can easily get one through this forum and do the matchmaking. A forum like this is very much needed.
This blog is part of the January 2017 series on how, and why, donors and businesses work together for development impact. For more candid opinions on what works, and what doesn't, read the full series on demystifying donor-business collaborations.