In the burgeoning inclusive business space, some core questions remain
What progress are we really making in inclusive business?And what's got to change in 2018 to realise the promise?
Are you head down, flat out, out of breath building inclusive businesses? Pause for thought as we approach year end to think about these questions and hear views from our great contributors. This month we have a lot of thoughts to share from practitioners who are pausing, reflecting, and challenging us all. We hear from three successful African and Asian entrepreneurs, global leaders in the field such as Harvey Koh and Zahid Torres Rahman, and a compilation of vox pops from many more. I too am pausing for thought, as I complete my 8th year of editing the Practitioner Hub, and my last monthly blog as Editor.
Looking back to 2010, the Practitioner Hub launched as a platform for sharing lessons from one inclusive business facility, with the UK's Department for International Development funding technical advice for a portfolio of inclusive businesses. It was cutting edge, new territory, so much unknown: how to combine social and commercial return, how to drive scale, whether technical assistance was useful given entrepreneurs' demand for finance. Well, the last question has been answered: the value of technical assistance alongside money is clear. But the first two questions remain very relevant, despite the burgeoning of the inclusive business space.
There is way more experience of inclusive business now than there was in 2010, and even more talk, a bit more policy support, and probably still a huge amount of hype. As inclusive business has multiplied, even faster evolution can be seen in the impact investment space. Much of the core 'plumbing' is now in place. I see both inclusive business and impact investment as sectors that have evolved into diverse ecosystems. The divergences within them and need for sophistication have grown too.
Two core questions remain central, and underpin our excellent blogs this month.
- What does social impact actually look like? How much is enough? The sub-text here is that inclusive business has often been defined in terms of 'participation' of people at the Base of the Pyramid, but with growing sophistication, that is not enough.
- What will drive inclusive business beyond a few examples to real scale? And two important sub-questions of this are: is it commercial enough? What more is needed beyond commercial return to drive scale?
How much impact is good enough?
An unwelcome but important question is posed this month by Harvey Koh, one of the original authors of "From Blueprint to Scale' and conceivers of the 'Pioneer Gap'. As he reflects on 11 years wrestling with inclusive models in Mumbai, he asks 'What if an inclusive business model harms low-income people? What if the terms are unfair or discrimination affects who gains?'. His answer is not to remain in blissful ignorance, but focus on building inclusive market systems, not just stand-alone inclusive enterprises. Tackling multiple goals or addressing trade-offs will need more than one actor.
One of the first voices I heard really pushing inclusive businesses to go beyond 'just participation' of the poor was Armin Bauer, until recently lead on inclusive business as the Asian Development Bank. His blog is a rapid tour of progress, gaps and trends in the inclusive business landscape, again picking up the need to focus on the bottom 40 per cent, and look beyond who many people participate. A recent report, which was Editor's Choice in October, actually suggested several enterprises do reach the bottom 40%, but this may not be the norm. Either way, it is high time we moved away from simply making assumptions about who benefits and how. If inclusive business is going to be part of SDG financing, fiscal incentives, changing investor expectations and new economic pathways, we need better understanding of impact.
Another voice questioning how much we know about the impact of inclusive business models, Joost Guijt focuses on 'inclusive agribusiness' - a term with growing traction. He 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 on-going transformation of smallholder agriculture, he also calls for inclusive business to be linked to transitions out of primary production. I agree. Sometimes I find myself in narratives about economic development pathways, sometimes in discussions about business models, but rarely both.
What is needed to drive scale?
Our contributors have diverse ideas for what is needed to truly scale inclusive business.
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 significant scale with farmers and tackling malnutrition. But Ndidi highlights two key policy actions needed to unleash local sourcing at scale: incentives and infrastructure. I like this because her asks are clear. But also because the Hub serves as a record of just how AACE has grown. This blog, by Carolin Schramm from 2012, reports on how it had just established links with a ginger-producing cooperative since 2011, and was just moving from its initial small factory. Today AACE sources from over 10,000 smallholders. Not bad in 6 years.
Dr Iffat Zafar Aga, founder of Sehat Kahani, a health enterprise in Pakistan, 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. Sehat Kahani uses digital technology to overcome barriers for both the women founders and their female patients. Going forward, let's have more digital but fewer barriers please.
KC Mishra, founder of eKutir, explains how social enterprises can play a key role in the ecosystem. As a social business, eKutir provides 'soil to sale' services to farmers, aiming to provide a connected agricultural market instead of an exploitative fragmented one. 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 accommodate. The linkage between corporates and SMEs is certainly one of the newer but hot topics on the block. For a long time they were seen as two different types of inclusive business, but now attention is being paid to how they can transact and reinforce each other in multiple ways.
Corporates struggling to adapt their business models is a recurring theme.
From Nigeria, Soji Apampa, long-time facilitator of inclusive business, Hub contributor, and activist for transparency, argues that pilots are happening but need to shift to scale. That will require scale agents, such as technology solutions, or federated cooperatives. But the biggest challenge is internal - can companies, particularly marketing departments, really engage the huge BoP market effectively, listening and adapting to them?
Zahid Torres-Rahman, Founder and Director of Business Fights Poverty, delves into what scaling inclusive business would really mean for corporates. He argues for deeper engagement with commercial and operational teams,where necessary jettisoning the language of inclusive business but integrating the ideas into operations. We have not seen many large companies manage this, and I think it is a huge unresolved impediment in the sector. Alongside this deepening, Zahid also calls for wider and more agile partnerships that are needed for scale - which is an area where Business Fights Poverty invests.
It's not the global but the national companies that are flagged by Markus Dietrich, drawing on years facilitating inclusive business in Asia and now senior advisor within the Inclusive Business Action Network.His priorities for the future include more support to national medium/large companies, clarify linkages with SDGs and align better 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.
If this wasn't enough, enjoy our Vox Pop compilation for a whole lot more. We asked what is going well, what's 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.
Finally, our Editor's Choice this month continues the reflective theme.I flag up the top blogs of the year, with the Hub team explaining why they are our favourites.I've also looked back on the Editor's Choice picks of 2017, to pick out my favourite. Read on to see what I picked and why.
All this means I haven't done a new report as a December Editor's Choice. If I did, I think it would be 'Shaping Inclusive Markets' - the research that underpins Harvey Koh's blog, and calls for an array of connected innovations, and shifting formal policy and social norms, to complement inclusive businesses.It's not just that it is well written in usual Monitor style. Or that it draws on a unique historical data set from a few inclusive markets that really have scaled, such as tea in Kenya. Or even that, for some reason I don't fathom, this most recent report from this stable, 'Shaping Inclusive Markets', seemed to get less worldwide traction than the predecessors covering the Pioneer Gap and from Blueprint to Scale.
The reason is that, for me, the exploration of inclusive markets is reflective of the past eight year journey in inclusive business.We still need to unpack details of business models that work, the commercial structures and nature of impact, but have gone beyond exhorting specific business actions.Only when we link it all up, with policy-makers, investors, bankers, infrastructure builders, business associations, and societal expectations, will we be able to say we have shifted the very nature of business. That we have shifted the foundations of economic assumptions, to unleash a better model of business in an economy that works for all.
Notes
This blog is part of our December 2017 series with a range of contributions on progress in inclusive business. See the December 2017 Editor's Choice for the 'best of' 2017 blogs.
I am stepping down from Editor, but continuing an editorial advisory role, as the Inclusive Business Action Network takes forward the Hub platform. More news on that to follow soon!
The Practitioner Hub was founded in 2010 as part of the Business Innovation Facility. More information is in the archive section. AACE Foods was one of the first investees in Nigeria.