Day 0 at the IB Asia Forum
Today was Day 0 - the day before the formal start of the second IB Asia Forum, hosted by the Asian Development Bank in Manila. But today was not just a day for photocopying, stapling and arranging chairs - there was plenty of brain-work and content.
Bankers from commercial banks attended a full day training on what inclusive business can mean for them and their investment. Noah Beckwith and colleagues led them through what to expect, avoid, and creative structuring of deals.
Intellecap hosted a Sankalp session for South East Asia building on their Jakarta session in November 2015, seeking to build a stronger social enterprise ecosystem in the region.
Smaller inclusive businesses gathered in a session hosted by the Inclusive Business Action Network to share their specific problems - often of course shared problems - and discuss solutions.
And players in the agriculture and seafood sectors were convened by CSR Asia to discuss their value chains and strategies for involving poor farmers and shrimp-harvesters.
Amidst all that of course, old connections were revitalised and new ones made. Discussion has been lively. It's also been relaxed, knowing that the full audience and more crowded agenda arrives tomorrow.
So what has struck me so far?
So many conversations end up exploring 'where is the synergy'. The synergy between commercial and social return, the synergy between two corporates who might align their IB practice. synergy between IB deals and bank mandates, synergy between the ever growing range of players. A few years ago all we talked about was partnerships; we have transitioned to being 'synergy seekers'.
Challenges of shifting from incremental growth to a 'hockey stick' curve and market penetration
Investors talk about the 'hockey stick' or j-curve of business growth, anticipating the period of rapid growth and increasing profitability, represented by steeply rising lines on a graph. The small enterprises in our IBAN session today offer diverse products: soil sensors, biochar fertiliser, ceramic water filters, renewable energy, and livelihood opportunities from water hyacinths, honey and other biodiversity-based forest products, and farmers' co-ops. However they shared a common challenge: shifting from incremental growth to rapid scale. Their incremental growth is based on the demonstrated value of a decent product and as much extension of supply chains and marketing as over-stretched teams can manage. Rapid scale is what would enable them to reach perhaps 1% of the vast target market that lacks clean water, energy, agricultural support and sufficient livelihood opportunity.
The same theme arose in the agricultural session: one company that has reached 60,000 smallholders with ICT-enabled solutions was challenged on what it would take for them to make a dent on the Indian farming sector of millions of farmers.
In discussing 'solutions', the SME conversation ran through all the usual tips: product demonstrations and demonstration plots, building product awareness through partners, aspirational marketing, partnering with complementary products or distribution networks, avoiding dilution of the brand, incentivising customer loyalty or word-of-mouth marketing. Sharing information on what others have done was useful, and surprisingly often there were businesses in Africa doing similar things so useful contacts could be suggested. But no 'solutions' discussed are ever going to be quick solutions.
Some participants had raised finance - but it had taken many months. Most wanted finance, either grant finance for investing in innovation (while keeping the core business running), or commercial finance for growth. But the fundamental challenge remained - small over-stretched teams that can't afford to prioritise fund-raising while ignoring marketing, or to prioritise marketing while ignoring production quality. People say the accelerator innovation space is crowded and the workshops and networking are too plentiful. Today suggests to me that the demand for innovation support, impact investment and business to business peer learning is high, and the suppliers of these are still only reaching a fragment of this market.
Africa - SE Asia contrasts
I know much more about inclusive business in Africa than in South East Asia. Those based in this region say social enterprise is much less developed in South East Asia than in South Asia (mainly India) despite the better-off base of pyramid which you would expect to provide a fertile market. I was surprised by how some fundamental tenets of conversations in Africa were not common ground today. It was great hearing one social entrepreneur explain Kiva lending to the rest of the group. More surprising, was that all the consumer products sold by the SMEs, ranging in price from $25 to $700, are sold on a cash up-front basis. Mobile payments and payment by instalments, which have driven renewable energy in East Africa and are now penetrating other sectors, simply don't seem to be the norm among the Philippino, Vietnamese and Indonesian SMEs discussing terms today. I'm curious to hear from experts in this region whether cracking the mobile payment system would enable the J-curve to be steeper for businesses here.
A different kind of conference
I've been to too many conferences with excessive 'blah'. This conference is already set up to be different. The conference pack is rich with short briefs and blogs, with new comparative regional data on inclusive business. It's black and white printing, not remotely glossy, but worth carrying home. The panellists have their instructions, have been told no more than 5 slides, and many have already sent them over. On the new IB in Asia Hub launched by the ADB at the Forum, you can already find multiple blogs and presentations.
I give credit to the Asian Development Bank and the IB leader, Armin Bauer, for pulling together this agenda and set of diverse participants from banking (commercial and DFI), business (large and small) and public sector (national and international). Armin's aim is for all of us - his institution and all the others - do to more and more together as a result of this Forum. Grist to his mill was provided by one ex-banker in the Agri session today. He commented that it's easier to get development banks to finance $300 million for a highway than $15 mn for an inclusive business. And so the need for banker training - which is where the day started.
Read our February mini-series on Inclusive Business in Asia for insights and analysis from leading IB experts in Asia