Armin BAUER

Dr. Armin Bauer is a development economist and was the former coordinator of ADB's Inclusive Business initiative.

How Asia (and ADB) can Learn from Latin America (and IADB)

9. Jul 2015

By: Dr. Armin Bauer, Principal Economist and coordinator of the Inclusive Business initiative in the ADB

ADB and IADB are working together to promote inclusive business in Latin America and Asia:

BASE FORUM III: On 31 June to 1 July 2015, the Inter-American Development Bank (IADB) organized their third regional forum on private sector investments for the Base of the (income) Pyramid (BASE III). More than 500 business representatives came to Mexico to discuss investment opportunities for the low income people in the region, the bottom 60-70% income groups. The said event discussed key factors on how innovative business models can be successful, sustainable, and achieve scale. It also discussed challenges of business models and how to respond effectively. This time, the conference also featured - in a special event - IB replication from Asia to Latin America, and gave - in another session - examples how Asian governments align their industry policies to promote more Inclusive Business (IB) investments.

Institutional partnership: In 2012, the IADB and the Asian Development Bank (ADB) engaged in an inter-agency partnership to promote Inclusive Business in their regions. The Presidents of the two banks, Mr. Takehiro Nakao from ADB and Mr. Luis Alberto Moreno from IADB, jointly launched a report showing how Asia and ADB can learn from the IB dynamics in Latin America and in IADB.[1] Since then both institutions exchange knowledge on IB, do joint studies, present their experiences in inter-regional conferences and policy dialogues, and facilitate investment opportunities from Asia to Latin America and vice-versa. In addition, IADB advices ADB on best institutionalize inclusive business.[2]

IADB’s Opportunities for the Majority (OMJ): IADB was the first development bank that discovered the Base of the Pyramid (BoP) as a key investment area for the private sector. Recognizing the powerful role that the market can play in substantially improving the lives of the poor and low-income people, IADB launched – in 2007 – the “Opportunity for the Majority” (OMJ) program under the special leadership and attention of President Moreno. The OMJ program focuses on engaging the private sector to develop sustainable and innovative business models with the goal of bringing the poor into the formal economy, increase productivity, and bring quality goods and services to low-income segment. Since then the OMJ has invested more than USD 450 million in 60 innovative IB projects in Latin America. It also produced various knowledge products, and impact assessment studies. IADB is also in the Board of advisors of ADB’s Inclusive Business Initiative.

Recommendations for ADB: The joint IADB/ADB report made the following key recommendation for ADB to set up a successful inclusive business promotion program:

  • Set up a dedicated unit to coordinate IB promotion in the institution;
  • Develop implementation modalities, a strategic commitment, and a rollout plan with clear targets ;
  • Set up IB as a separate business line, and develop operational targets for IB investments;
  • Promote internal learning and staff training on the specifics of IB investments;
  • Set aside a dedicated technical assistance fund for doing due diligence and impact studies on IB investments, and for preparing sector and market studies; and
  • Actively facilitate partnerships.

ADB’s IB initiative: Learning from IADB, the ADB set up its Inclusive Business Initiative in 2012.[3] It included IB in its recent corporate Strategy 2020 Update and prepared a separate IB action plan. As the first and so far the only development bank, ADB’s IB initiative comprises not only the promotion of private sector investments, impact analysis and knowledge products and partnership building, but also public sector support for non-sovereign IB investments. In 2013 and 2014, ADB invested $320 million in 11 private sector IB deals (out of 50 approved in that time), and further 8 deals worth 200 million are currently in preparation. In addition ADB supports IB accreditation and policy work in Indonesia, Myanmar, Pakistan, the Philippines, Tajikistan, and Viet Nam, and is currently preparing 3 public sector IB support programs in the Philippines (under a $200 million rural job generation loan), Pakistan (a $30 million Islamic finance loan) and Indonesia (as part of a $300 million infrastructure policy loan). ADB is also preparing its 2nd Asia Inclusive Business Forum for end January 2016, in which IADB will also play a major role as partner organization.

For more information on ADB’s IB work, please contact the coordinator of ADB’s IB initiative, Armin Bauer (Principal Economist in ADB) at abauer@adb.org, or Tel: 0063-2-6325550, or visit the ADB IB website. For more information on IADB’s IB work, visit the OMJ website.

This blog is a part of our July 2015 series on inclusive business in Latin America and the Caribbean. View the full series for more from practitioners, inclusive businesses and researchers in the region.

 

[1] ADB/IADB (Nov 2013): Working Together in Pursuit of Inclusive Business: Sharing the Latin American and Caribbean Experience with Asia and the Pacific.

[2] Other institutions ADB is closely partnering with on IB are the International Finance Corporation of the World Bank (IFC), World Business Council for Sustainable Development, the German (KfW) and the French development banks (AFD), the Swedish International Development Agency (SIDA), and Credit Suisse, among others.

[3] ADB defines Inclusive Business as commercially viable core business models that provide - in scale - systemic and innovative solutions to the relevant problems of the poor and low income people. IADB defines IB as private sector investments for solving problems at the BoP.