Thursday
December 5
2013

Carolin Schramm and Caroline Ashley

Unlocking Scale: How seven inclusive businesses are creating their own keys

‘What does it take’ and ‘how long does it take’ for an inclusive business to reach scale?

Persistence, adaptation, and many years are the obvious answers, but there is a lot more besides. Some answers to these questions emerge today with the launch of a series of case studies, exploring the journey to scale of seven frontier inclusive businesses supported by the Business Innovation Facility (BIF).

‘Scale’ is a term much used, but rarely defined. The seven businesses in the case study series are truly diverse – ranging from start-ups to multinationals, African and Asian, sourcing from smallholders or selling to base of pyramid consumers. Not surprisingly then, what they target as ‘scale’ is diverse too. None of the businesses have reached scale in BoP markets yet, but are determined to get there eventually.

The two models that source from smallholders aim to reach 4,000 to 5,000 farmers within the next three years from now. Consumer-focused models like iSchool providing e-learning materials to Zambian students and teachers or mKRISHI®, which is providing access to information for farmers in India, are aiming to reach hundreds of thousands and millions within similar time frames (see table below).

Yet while targets differ vastly between different models, scale is critical to realise commercial success across them all.

Inclusive business Current status Plans for viability and scale For further detail see
JITA, Bangladesh: Rural distribution network Launched in December 2011 employing 4,700 sales women (aparajitas) Achieving break even in 2013 (ahead of schedule). Grow to 11,000 aparajitas reaching 7m BoP consumers within the next 5 years The JITA sales network: An inclusive business on the rise
Universal Industries, Malawi: Production of High Quality Cassava Flour Commenced operation in 2012. Sourcing from 25 smallholder farmers in year 1 Revenue projections are of $190k and 4,000 farmers reached by the end of year 4 (2015/16) Commercialising cassava: New opportunities for Universal Industries and Malawian smallholders
MEGA, Malawi: Micro-hydro power supply First site operational mid-2013.
427 households to be connected from first site within 1 year
Break even forecast with six sites operational (Year 6). Reaching up to 520,000 individuals with 10 sites MEGA: A commercial approach to off-grid power in rural Malawi
iSchool, Zambia: E-learning Three year not-for profit pilots reaching 3,548 students. Commercial launch in September 2013 Generation of net profit forecasted from 2015. Estimated to reach over 150,000 BoP students by 2015 and 500,000 by 2017. iSchool: Transformative learning in the Zambian classroom
mKRISHI® India: Technology platform for farmers Pilots in 3 Indian states, 2013 (follows earlier pilots) not yet on fully commercial basis Break-even forecasted in two years and profit in 2016.
Projected to reach 1.8-2.6m farmers within the next 10 years
Evolution of mKRISHI®: A technology platform for Indian farmers
Stanbic Bank, Nigeria: Smallholder Finance Scheme Pilot in 2013 with 540 farmers Small operating profit expected for end of 2013. Scaling up to over 10,000 farmers by 2016 and 5m farmers in the long term Collaborating for smallholder finance: How is Stanbic closing the loop?
ACI, Bangladesh: Contract farming First pilot mid-2013 involving 50 farmers Scaling up to reach 5,000 farmers and $500,000 revenue within 3 years ACI Agribusiness: Designing and testing an integrated contract farming model in Bangladesh

Key factors to reach scale vary. For mKRISHI®, a prerequisite of reaching scale will be a variety of farmer-oriented services successfully developed within the technology platform. Much like the growing number of apps that are driving smartphone sales, an increasing number of BoP-oriented services will drive the adoption of mKRISHI®. The successful operation of cassava flour production for Universal Industries in Malawi depends on significant increase in the volumes farmers growing cassava, hence building a trusted relationship with the smallholders plus access to seedlings will be crucial for scale. Other models, like iSchool and MEGA are likely to require further external investment to reach the forecasted growth. After its first pilot with limited success due to crop loss and failed partnerships, ACI in Bangladesh is determined to build on the valuable lessons from its pilot in order to get a model ready for scale.

The specific drivers of scale vary in each business, but across them all it will take further partnerships, continued iteration of the mode, investment and perseverance. So far the particular companies seem to have those ingredients at hand.

The case studies are part of a series of ‘deep dives’ that seek to understand inclusive business in practice. The series explores eight businesses, all of which have been supported by the Business Innovation Facility. Find out more and download all these case studies on the Practitioner Hub for Inclusive Business.

Carolin Schramm is a manager in the Private Sector & International Development team at PwC UK.

Caroline Ashley is director for Inclusive Business Results in the Business Innovation Facility.

Categories
Education, Entrepreneurship
Tags
Base of the Pyramid, business case, business development, research