The fastest growing economies are in developing countries. People with a daily income of less than US$ 8 represent a market value of US$ 5 trillion. In these markets you will find consumers seeking value for money and entrepreneurs eager to do business. Yet it is challenging to enter these markets. Private businesses need to become aware of the opportunities and most local and international SMEs need business development support and investments. How can inclusive business (IB) be fostered by government?
1. Invest in knowledge dissemination and networking
- Train Foreign Affairs staff
Policy and embassy staff should be aware of IB opportunities. Through training they should get the insights in what IB is and how it differs from regular business. Training should also cover the topic of innovations and the potential for local Base of the Pyramid markets.
- Support IB one-stop-shop
Knowledge of the IB ecosystem is crucial to bring the right partners together. The Ministry should help improve the ecosystem because it is currently still too fragmented. A one-stop-shop for IB instead of competing initiatives will help.
- Include IB component in trade missions
Trade missions in developing countries should have an IB component to allow participants to network with BoP entrepreneurs and see opportunities in scaling up or replicating successful businesses.
2. Get innovations for the Base of the Pyramid out of the league of ‘small potatoes’
- Invest in Technical Assistance in the first stages
Conventional product development and innovation strategies are incompatible with the conditions and constraints at the Base of the Pyramid. Inclusive innovation is about harnessing science, technology and innovations that address the needs at the Base of the Pyramid. The private sector should play a pivotal role in these developments. Only few initiatives achieve scale or find the financial means necessary to replicate.
The challenge seems that most interventions remain small and isolated. This makes IB less interesting for investors or larger companies and this is a self-perpetuating cycle. To overcome this, government policies should focus on the technical assistance to make business plans interesting for investors.
- Actively include academia, private businesses, NGOs and public authorities in a shared innovation agenda
To tailor innovative products and services for the Base of the Pyramid, the four A’s need to be addressed: Affordability, Accessibility, Availability and Acceptability (the fit with needs and local culture). Only when these are taken into account, it is possible to develop truly inclusive innovations and business models.
The complexity of this challenge requires the commitment of a diversity of actors to a common innovation agenda. Necessary pre-conditions for the common agenda are: BOP awareness-raising and capacity-building; research; information-sharing; and public policy dialogue. While large donors and development finance institutions are doing important work in this regard, powerful leadership should also come from companies and the government. Policies are needed to agree on the innovation agenda for the Base of the Pyramid.
3. Identify and replicate best practice examples
Pilots yielded numerous best practices that could be replicated. A good example is the off-grid lighting sector. And in the food sector corporations such as Britannia in India and Tanga Fresh Ltd. In Tanzania reach numerous BoP consumers while including many smallholders in inclusive value chains. The success depends on three ingredients: impact, scalability and the viability of the business.
Government policies that foster these include:
- Education in professional management, business modelling, marketing and distribution;
- Value chain analysis and value chain optimization; and
- Strengthening of local policy institutions, regulatory frameworks and institutional arrangements such as quality standards, market information, fiscal regimes and banking.
This article is written by Irmgard Jansen and Myrtille Danse of the BoP Innovation Center and was published first by the Include knowledge platform on inclusive development policies.