Inclusive Business prompting multisectoral collaboration in Myanmar

RECOMMENDATIONS

After decades of military rule and the shift to a more democratic government, evolving economic and political trends in Myanmar are forging a steady path to growth in recent years. Inclusive business can play a transformational role in expanding Myanmar’s economy, and create triple wins for the poor, the government, and the private sector. The country has a large base of the pyramid market (40% of its 53 million population), which presents significant opportunities for IBs exploring rural income generation (i.e., agribusiness, tourism, and job placements linked to skills training), and low-income consumer models in key sectors such as health, education, energy, microfinance, and urban housing.

Establishing an IB ecosystem in Myanmar requires coordinated efforts among the public, private, non-government, and impact investment sectors for greater social impact. This study of 176 businesses recommends the following to secure and attract more IB investments in Myanmar:

1. Craft IB policy framework. Government should work with representatives from the private sector, business associations, investors, and development partners who are promoting IB, social entrepreneurship, and impact investing to craft IB-supportive policy and implementation frameworks.
2. Broaden IB awareness. Expose stakeholders to IBs and their value in creating broad social impact. IB knowledge-sharing and promotion through IB-centered awards, business branding, and case studies can be jointly undertaken by the public and private sectors.
3. Provide technical assistance in IB development and monitoring. IBs require assistance in accessing financing, strategic policy work, and impact monitoring and reporting, and can be delivered through one-stop centers or hubs that handle IB-related TA inquiries, and concerns related to IB accreditation, incentives and other support programs. Impact monitoring can be facilitated by an IB certification system, which can also be used to vet IBs availing of government incentives.
4. Facilitate and prioritize public procurement of IB goods and services, where possible. Government procurement can deliberately support companies with inclusive business lines to substantially enhance opportunities for inclusive growth.
5. Establish impact investment fund. A fund can be set-up by government and co-managed with selected partners. Seed funding can be sourced from grant contributions from development partners, and additional capital can be raised from regional or bilateral development banks, foundations, and Corporate Social Responsibility (CSR) funds. Financing can be structured as a convertible grant, where companies receive grants along with equity and debt from other parties to be used as patient capital to be repaid based on company’s success.

The negative impact brought about by Myanmar’s long history of authoritarian rule, ethnic conflict, and economic isolation present numerous challenges to the private sector in the country. The biggest hurdles underscored by the 2018 report on Doing Business of the World Bank include access to finance and land, stable power supply (electricity), lack of skilled labor, burdensome regulators, political instability, taxes, transportation costs, and a lack of investor protection. However, favorable characteristics such as Myanmar’s geostrategic location and young population (median age is 27 years old, with a literacy rate of 93%) present business and investment opportunities to companies and enterprises looking to take advantage of the country’s untapped consumer and labor markets.

Myanmar’s IB landscape is at a nascent stage. This study assessed 176 businesses that already function as inclusive businesses or have the potential to become inclusive. Of the 176 companies, 56 were identified as either real or potential inclusive businesses (21 of the 56 companies were found to have innovative models, initiatives and activities that have large-scale social reach and depth, and also make good financial returns), 94 companies were mainstream businesses, 16 were social enterprises associated with non-governmental organizations (NGOs), and 10 involved CSR activities. The World Giving Index estimates that 91% of the country’s population donates to charity, and there has been a large increase in donations since 2015 attributed to philanthropy by private individuals. This culture of philanthropic giving and private sector volunteerism can be harnessed by government in promoting more inclusive business practice.

The study also found that while awareness of IB is still low, there is growing interest in IB promotion in government, within the business community, and among development agencies operating in the country. The study also reveals viable markets for IB in agribusiness, tourism, job placements linked to skills training, and consumer models particularly in the health, education, energy, microfinance, and urban housing sectors.

The emergence of social entrepreneurship, especially among the youth, is becoming a business alternative to conglomerates set up under military rule. This is supported by the government’s increasing openness to doing things differently and having independent social businesses. Increasing acceptance to technological change led to a booming mobile phone industry.

Impact investing is an important source of financing for IB, which comes in three forms--philanthropy, funding for NGO-driven social enterprises, and funding for IB models and initiatives. Currently, impact investing often takes the form of donations made by philanthropic organizations, angel investors or CSR funds to civil society organizations or to individuals (social entrepreneurs). More strategic IB investment mechanisms should be developed.