Who pays and what works? The changing market of Inclusive Business Development Services
Business Development Services for Inclusive Business is an immature but fast changing market.This month we have 24 blogs from practitioners who reflect on how they have provided or used business development support, with a great array of examples and views. We've compiled this in partnership with Inclusive Business Accelerator, who are seeking to upgrade and professionalise this market.
Our focus on 'Inclusive Business Development Services' (IBDS) ranges from incubation services for new ideas, to technical assistance delivered alongside equity investment. Our updated, searchable listing of organisations offering financial and technical support to inclusive business shows at first hand the diversity of this sector, if indeed it can be called that.
There is consensus amongst our contributors that the IBDS market itself is still immature, still catching up with the explosion of inclusive business and social enterprises over the last two decades. Much is needed - and quite a lot is already happening - to professionalise it.
Our bloggers share their views on the main gaps, challenges and lessons learnt from offering IBDS is young markets. Many of our contributors share their top lessons for making IBDS more effective. Two questions receive different answers: (1) who pays for IBDS? (2) do inclusive businesses need anything different from mainstream business?
Why is payment for IBDS such a problem? The need for IBDS is huge at early stages, from innovation to securing investment. But the returns are only captured later, once investment is secured and profits flow. So who pays for inputs needed now?
Simon Meier looks at this issue, focusing on the pre-investment technical assistance that is needed to unlock impact investment in East Africa. He introduces FSG's new report, which calls for a market-sensitive donor funded facility to secure up-front payments for commercial IBDS. Ross Masood of DFID provides welcome assurance that DFID sees the need for donor funding here. Jon Shepard from EY explains the logic for providing international IBDS at 'low-bono' rates, on the premise that support that comes free is often wasted. Karen Smith outlines the challenges that come with dependence on donor-funded business support in Malawi, which can mean support that is inappropriate and inflexible.
What type of BDS do inclusive businesses actually need, and is it what is being offered? I enjoyed Noah Beckwith's ruthless analysis that the current IBDS offer is too focused on the specialist skills of the providers, the social aspects of business, and not the core business planning needs of entrepreneurs. Not 'either or', but 'both', argues Sarah Marchand from Technoserve. The technical assistance fund they run for agricultural investees provides both core business TA and inclusive business TA. Peter Masaba, running B-Space BDS services in Uganda, puts business management and entrepreneurial skills at the top of the list of SME needs, while highlighting the importance of entrepreneur-to-entrepreneur exchange in the classroom. Peer-to-peer learning is highlighted too by Anais Mangin and Clara Hidron, with examples from epOnsite. Mark Ingram comes with a different view, looking at the particular challenges of a business models that bakes social impact 'into the cake itself' rather than as icing. This in turn calls for IBDS providers skilled in navigating unusual terrain.
The immaturity of the IBDS market is well described by Christian Pirzer. Drawing on ecosystem mapping by Endeva, he highlights that the much maligned policy context for inclusive business is actually ahead of the IBDS system for IB. Mayke Harding from Inclusive Business Accelerator explains the gaps in IBDS supply and how 'professionalisation' is needed through guidelines, training and accreditation. Mayke's colleagues explain that this means in practice: how tools are created to help entrepreneurs and BDS providers work through key steps (reminding us that tools tell you what to do, but training teaches you how to do it). Two IBA-certified trainers, Frank Kitonga and Guustaf van de Mheen, recount their own experience, using tools to successfully challenge entrepreneurs to rethink their value proposition or target market.
IBDS comes in all shapes and sizes. Carolin Schramm focuses on initiatives that support entrepreneurs to innovate or partner, and what Connect to Grow learnt from mapping 70 such programmes. Stefanie Bauer from Intellecap looks at the niche of corporate support for SME acceleration and incubation, reporting on the astonishing growth of this segment. Apollo Segawa from CURAD, Uganda, explains that acceleration for agribusiness needs to offer something different, including physical space for operation.
The overwhelming message from our contributors is of testing, challenging, and inching forward. I confess at this point that in 2005, a colleague and I sought to convert a donor-funded programme providing technical support to inclusive tourism operators in South Africa into a sustainable fee-based entity. We failed. So the questions of what entrepreneurs really need, who pays for BDS, and how the IBDS ecosystem will evolve, has been around for a while. It looks like it will be around for at least the next decade too.
This blog is part of the September 2016 series on Inclusive Business Development Services, in partnership with the Inclusive Business Accelerator. Don’t miss the whole series on support available to inclusive business from practitioners, donors and intermediaries including Afrilabs, DFID, Endeva, EY and many more…