Jeroen van der Linden, Inclusive Business Programme Manager at the IBA Mozambique hub within SNV, gave us an overview of the environment for doing business with a BoP impact in Mozambique. Conclusions? The inclusive business environment is emerging slowly, with the support of organisations working to strengthen the ecosystem. A coordinated approach to include the BoP is still missing.
What does the Inclusive Business ecosystem look like in Mozambique?
“The ecosystem is still under development. There are a number of companies (both bigger companies part of an international holding structure, and local SMEs) active in IB, but there is no critical mass yet available. This translates into limited supportive IB services available in the market. For example, inclusive finance is yet to take off.
Also, financial supportive mechanisms for SMEs to assist them with developing innovative business models, products and services with which they can effectively target the BoP market, are not tailored to the need of the market or very difficult to assess. Professional BDS services are available however few BDS providers seem to be able to take the long-term and commercial perspective of the prospective client.
To really help SMEs to build a financially feasible and commercially viable Inclusive Business case, BDS providers need to be able to identify themselves with the long term strategy of the companies and understand the challenges these companies face in entering this BoP market. It requires also a thinking of being able to create a market in the BoP segment for these companies´ services or products – to that end we assist our consultants with understanding consumer behaviour. Next step is then to influence this behaviour.”
Which are the key sectors which you find most promising?
“The majority of our portfolio of IB projects and IB companies is related to agriculture. There is ample scope to translate traditional out grower models into genuine IB models with a long-lasting partnership between producer and off-taker. To that end we, for example, leverage our experience gained with sustainable Value Chain Development and designing partnerships between producer organisations, the private sector and the public sector (so-called 4Ps).
Other sectors which are fast emerging are the (renewable) energy and the ICT sector. These hold vast potential for us to experiment with innovative finance, distribution, marketing models based on experience gained in other countries. We also see the WASH sector, despite or maybe due to being public-led, holding potential for applying innovative IB approaches. Think for example of the need in this sector to come to lasting changed behaviour of “beneficiaries” (e.g. need to wash their hands, build proper toilets, etc).
Long-lasting change can be reached by, again, first really understand the current behaviour of these potential consumers. To see a change in habits in the long run, you have to relate to their long-term needs or desires. A classic example is that people do not prioritise nice and fancy toilets in their house, but they do prioritise upgrading their home whenever spare money is available. Hence an opportunity to integrate proper toilets in a low-cost housing concept which you offer as integrated package. Companies in Latin America have already discovered this market some time ago.”
Who are the key players to work with, besides IBA?
“We work with and exchange information with all players which we see can provide value to the IB discussion and/or provide concrete support to our clients. These include working groups (WG) for the private sector (PSWG), for the energy sector (ESWG) and the agriculture sector (ABWG), umbrella organisations representing SMEs in Mozambique (APME, IPEME, PLAMA for water sector), media (SOCIO, through which we annually contribute in awarding best IB company of the year), national development bank BNI and commercial banks and funds, bilateral and multilateral donors and organisations, etc.”
Tell us about some of your key achievements realised this past year
“We are very proud to say that in the past few months, on top of increasing our impact at the bottom of the pyramid, we have made the right steps in developing the right conditions for a strong local ecosystem. We have trained 13 BDS providers using IBA tools, supported 21 SMEs with advisory services, and received very high ratings and feedback for these activities. We look forward to fine-tuning our tools and providing more efficient support through market intelligence and long-term strategies.
Apart from that, we have contributed to the discussion related to what kind of finance mechanisms are most needed by the private sector to spur IB in the country. We will continue to make the case to several banks and donors on the need for mid-long term support (both finance and TA/BDS) to help companies to capitalise on their innovations.”
Jeroen van der Linden is the Programme Manager for Inclusive Business at SNV Mozambique.