NGOs and inclusive business
When we started to identify projects for the Business Innovation Facility to support we were pretty sure that we need to have a ‘private sector lead’ in each case. As one of our eligibility criteria we state:
‘Private sector led initiative (eligibility for cost-sharing) Whilst the project that links to core business operations may have NGO and other partners playing important roles, even as the first-mover in an initiative, we expect to see a company having a lead in the project and in putting the proposal forward.’
We did note, however, that we needed to define ‘private sector’ and that we might include business representative organisations in this. In the last few months, however, and in particular as we have been researching and developing our strategy for working in Bangladesh, I am wondering whether we need to look again at this subject. The Shell Foundation has introduced the concept of ‘business DNA’ as: ‘taking the best from the private sector and applying it to development objectives’ and that the value from business DNA is ‘business thinking, models and disciplines.’ It seems to me that an inclusive business approach is about the same thing, but also including more overtly the ‘business function’ of seeking a return on capital – i.e. using this business DNA to create a profitable business opportunity as well as bringing about positive development outcomes.
I have recently visited some highly innovative Bangladeshi NGOs that are working commercially within product markets. RDRS, for example, in the Rangpur and Dinajpur districts of northern Bangladesh have created RDRS Enterprise Private Limited as a joint stock company under the Bangladesh Companies Act. Its core business activities include provision of high quality seed and other inputs such as animal feed and high yielding 1-day old broiler chicks to local farmers. It also trains handloom shuttle workers and other handicrafts, and provides credit and marketing services to them.
So is RDRS Enterprise an inclusive business?
In the Facility’s definition of inclusive business we say that: ‘The term “inclusive business‟ refers to profitable core business activity that also tangibly expands opportunities for the poor and disadvantaged in developing countries.’
RDRS Enterprise is doing what is does as a business and its core business expands the opportunities of poor farmers to increase their returns from their farms and poor women to develop a home-based income. It aims to make a surplus on these activities, so it is potentially ‘profitable’.
Our definition continues: ‘Such business models can engage the poor as employees, suppliers, distributors or consumers....’ - RDRS Enterprise exists to do this- ‘Is this different from normal business in a developing country? “No‟ and “yes‟. “No‟, because inclusive business is part of commercial business operations. It is not a separate “add-on‟ in the way that philanthropic activity is.’
This latter element of our definition is perhaps where we may see a different picture emerging, if by inclusive business we mean the private sector deploying private capital for a private return. RDRS Enterprise uses a civil society’s capital and is controlled by civil society, such that whilst it is a commercial operation in the sense that its competing successfully in a market to sell its products, its dividends are not then shared with a private investor, but used to social (development) ends. It could benefit in many ways from being part of the RDRS family, both reputational but also through practical support from RDRS development workers. For example, if the hand shuttle loom home-workers are selected and trained by the NGO.
Finally, our definition of inclusive business suggests that: “Yes it is different‟ from most business. Inclusive business models are often highly creative solutions that buy from, or sell to, substantial numbers of poor people. Innovation is often achieved through engagement with non-traditional business partners such as producer associations or non-profits, enabling companies and other stakeholders to pool financial investment, skills, contacts and other resources.’
RDRS Enterprise absolutely fits this part of the definition. So the reason it isn’t inclusive business (if it isn’t) seems to me to be around its ownership, control and motivations. This brings us back to ‘business DNA’. I think that RDRS is taking a private sector approach, and has underlined this by making RDRS Enterprise a joint stock company. I also think that the Business Innovation Facility can offer help to such NGO-owned companies by helping to increase the ‘business DNA’ by deploying our private sector management alliance members and other business consultancy options. Therefore, whilst we may not change our criteria, I think perhaps we should extend our definition of ‘private sector’ to include NGO owned or controlled companies that are using business thinking, models and disciplines.