Four ways to build an ecosystem to support business in low-income markets: How the Philippines is crafting a model worth replicating
There is exciting work happening as the global development community prepares to take on what is now known as the Post-2015 Development Agenda. The Post-2015 Agenda refers to a process led by the United Nations to define the future global development framework to succeed the Millennium Development Goals (MDGs), a set of eight global development targets which come to an end in 2015.
This new framework will require some creative thinking about how to engage the private sector, but also about how to leverage the emerging evidence that more inclusive business models – i.e. those that engage poor people – can spur economic development for those who need it the most.
Considering the recent evidence suggesting that inclusive business models can provide strong benefits to those living at the base of the economic pyramid (BoP), it seems shortsighted not to fully examine how to support them. With so much potential benefit, why are so few inclusive businesses reaching scale? For many practitioners in both the public and private sectors, the answer lies in the supportive environment that develops through what has become known as an ecosystem.
Business Call to Action (BCtA) and its country-level development partners in the Philippines have been at the forefront of supporting local innovation ecosystems for inclusive business. With the understanding that inclusive business models can engage poor people living at BoP as consumers, producers and entrepreneurs, the Philippines has been a prime example of how the private sector can work to the support the inclusive growth agenda. The BCtA initiative is the result of a unique partnership between the Dutch Ministry of Foreign Affairs, the Swedish International Development Cooperation Agency (Sida), UK Department for International Development (DFID), US Agency for International Development (USAID) and is hosted within the United Nations Development Programme (UNDP).
To better capture the benefits of inclusive business, government agencies, entrepreneurs and companies are looking for ways to build more networks and mobilize stakeholders who can be part of inclusive business ecosystems. Think of a community of practice that supports inclusive business and shared value as businesses achieve commercial success while addressing widespread issues of poverty and inclusive growth.
At the heart of supporting inclusive business is the Ecosystem Diamond – concrete practices that governments and national policymakers should engage in to generate more pro-poor development practices.
The Philippines has proven itself an excellent example of a nation’s capacity to support ecosystem development, a model that could well be replicated in many countries. As UNDP looks to replicate the success of its country-level collaboration through the Business Call to Action Initiative in the Philippines, it is establishing a collaboration with the William Davidson Institute as part of the BoP Roadmap Initiative to develop a comprehensive framework on the role that ecosystem development partners can play in overcoming the constraints in the market environment.
Here are four ways that the Philippines is supporting necessary inclusive business policies:
1. Providing information: If indeed information is power, key players in economic development and government must work together to support companies with the necessary tools, knowledge, technology and training required to operate in low-income markets. This includes supporting market research on opportunities within the country in specific sectors. Market research both entices potential investment and sets the stage for further interest by companies and entrepreneurs.
At the same time, it is useful to take some of the mystery out of development by providing knowledge products illustrating the role of inclusive business and how it dovetails with private-sector interests. The Philippines’ largest corporate membership-based organization, Philippine Business for Social Progress (PBSP), has taken a lead role in collaborating with key stakeholders like USAID and the Business Call to Action initiative to commission sector-specific studies. These have included research into agriculture in conflict-affected Mindanao, socialized housing and health care to understand the market dynamics at the base of the economic pyramid.
2. Everyone needs some encouragement; for business this means creating incentives! To support companies with potential, pioneering governments like the Philippines have been active in developing supportive policies and encouraging companies to adopt inclusive business models. In fact, Philippine Business for Social Progress has been instrumental in facilitating dialogue between public and private partners: hosting conferences and workshops, providing technical assistance and sharing knowledge. Such efforts go a long way toward building an ecosystem and demonstrate governments’ support of companies interested in inclusive business by fostering enabling policies. In the Philippines, where support for inclusive agribusiness and housing models is a national priority, industry-consultation sessions have been held to address infrastructure concerns and production barriers in key sectors such as coffee, rubber and cacao.
3. Money, money, money – in this case, investment and financial support cannot be ignored. In successful ecosystems, financial or investment guarantees are often required to help businesses to see the value of entering low-income markets. If companies are going to succeed in these new markets, they must have greater access to financing. And while poor markets can provide strong returns, it is unlikely that all levels of business will be comfortable exploring this new customer base. Recently, Philippine Business for Social Progress held a financing forum to discuss how private commercial and government banks can support inclusive agribusiness efforts. Just this week, the Board of Investments (BOI), a key component of the Philippines government, announced plans to work with the Asian Development Bank in designing inclusive business incentives. The BOI is creating a program to grant company incentives for companies to adopt inclusive business models within their varied operations. This could be a real game changer.
4. Get down to the nitty gritty: provide real-live support for project implementation. The Philippines has been creative in supporting businesses and helping them to generate greater levels of knowledge so that they can ultimately flourish. It is encouraging to observe how the Philippine government has provided leadership to mainstream inclusive business within the country. This involves working with Philippine Business for Social Progress and their member companies to support the private sector in areas like logistics, transactions, marketing and communication. It also involves micro-business support services that help inclusive businesses to grow in challenging environments.
Further support for inclusive business can take the form of technical support, small-business incubators, facilitating shared platforms, disseminating best practices, devising industry standards and investing in much-needed infrastructure. Platforms like the Business Call to Action can also work to build ecosystems and promote a greater understanding of the benefits of inclusive business. The Business Call to Action has vigorously supported Philippine Business for Social Progress, and recently three companies from the Philippines have made commitments to the Business Call to Action in agriculture, social housing and health and we look forward to engaging more companies as part of this collaboration.
This is just the tip of the iceberg, but there is much to be done if we are to succeed in fostering inclusive business and related initiatives, which are prerequisites for building ecosystems. Such models offer great promise: Enabling business growth in markets that cover an estimated two-thirds of the world’s population, while creating economic opportunities and better standards of living for poor people at the same time.
Sahba Sobhani serves as Global Programme Advisor-Private Sector, at the United Nations Development Programme (UNDP).