Business Works for Development Development Works for Business

Growing Inclusive Markets

A UNDP-LED PARTNERSHIP FOR PROGRESS TOWARD THE MILLENNIUM DEVELOPMENT GOALS

Introduction 1

Growing Inclusive Markets 2

Missing out 5

Why Access Matters 6

Where Markets Are, and Aren’t 7

Meeting—and Overcoming—Constraints 10

Shared Experiences: The Case Studies 11

The Big Picture 13

A Provocation to Action 16

Advisory Board and Case Study Authors 17

CONTENTS

June 2007

The United Nations Development Programme (UNDP) would like to

acknowledge the contributions of partner organizations to ”Growing

Inclusive Markets”. Each partner organization is contributing in different

ways and the views and recommendations expressed in this brochure

are not necessarily shared by each of those partner organizations.

Further, the views and recommendations expressed in this Brochure do

not necessarily represent those of the UN, UNDP or their Member States.

Copyright © 2007

United Nations Development Programme

One United Nations Plaza, New York, NY 10017, USA

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system or transmitted, in any form by any means,

electronic, mechanical, photocopying or otherwise, without prior

permission of UNDP.

Design: Suazion, Inc. (N, USA)

Production: Scanprint (Denmark)

Growing Inclusive Markets

By bringing milk to market via one of Tiviski’s innovative collectionhubs, the country’s nomadic camel herders get a reliable source ofincome without forgoing their traditional occupation.

Several years ago Dora Nyanja, a Kenyan nurse, was thinkingabout quitting her profession because it paid so little. Then sheheard about HealthStore, a foundation that manages for-profitclinic franchises. Now she is a nurse franchisee with a clinic in theSoweto area of Kibera, one of Kenya’s largest slums. She earns adecent living, and the people of Soweto have access to improvedand affordable healthcare.

Under the leadership of Héctor Ureta, Cemex’s Social SolutionsDirector, Construmex began helping thousands of Mexican migrantsin the US improve, build or buy a house—for themselves or theirfamilies—in Mexico. The initiative, which has generated overUS$12 million in construction-material sales, is enabling migrants tohelp their families back home while pursuing their own goals abroad.

Bindheshwar Pathak is an Indian entrepreneur who refused toacknowledge social and technological boundaries. He foundedSulabh, a company that offers inexpensive sanitation, as well astraining and rehabilitation, to some 60,000 poor people who wouldotherwise have none. Today, 1.2 million households are livingcleaner and healthier lives thanks to the low-cost toilets theybought from Sulabh, and Sulabh sustains itself on those sales andthrough the 6500 public pay-per-use restroom facilities it operates.

Nancy, Dora, Héctor andBindheshwar, like many millions ofother businesspeople around theworld, have perceived a market andtaken advantage of it, leveraging theirinnovations and energy to make aprofit. But unlike many of theirpeers, they are driven by more thanthe pursuit of wealth. The peopleintroduced above run self-sustaining,profitable businesses that also supportthe communities where they operate,often in partnership with governmentsand civil society. Their goods andservices give people a better chanceto participate in the economiccycle—to join in the process ofgrowth. Success stories such asthese form the foundation ofGrowing Inclusive Markets, a newinitiative led by the United NationsDevelopment Programme and backedby an unprecedented coalition ofthinkers and doers in the fields of business, academia and humandevelopment. In these pages, weoffer a preview of this intersectionof exciting possibility: The privatesector, governments and civil societycooperating in a common space as never before, with long-term,sustainable benefit for all. Join us.

1

Nancy Abeiderrahmane has changed the face of the

dairy industry in the African nation of Mauritania. Her camel

dairy, Tiviski Dairy, is turning a profit and in the process

has changed the lives of thousands of Mauritanians.

Introduction

2Growing Inclusive Markets

increasing global trade flows andlight-speed technological advanceshave cleared the way for unprece-dented flows of resources and ideas,while business is increasingly recog-nizing a social obligation. Politicalwill to foster a more equitable distribution of the world’s wealth isstill in too short a supply, of course,but also lacking is knowledge—understanding of how business can at the same time find profit and improve people’s lives. Througha bank of innovations distilled from a broad pool of case studies andinsights from a mapping tool identifying the unmet needs of thepoor, Growing Inclusive Markets is designed to make a substantialcontribution to both businessstrategies and human development.

About 2.6 billion people in the world(figure for 2004) living on less than$2 a day (in 1993 PPP) are trappedoutside of the global economy,looking in. They lack access to mostmarkets, and therefore to manyopportunities.The reverse is also true:Their lack of resources discouragescompanies from providing the basicgoods and services—things likeconsumer products, banking andtelecommunications—that wouldempower them and improve theirlives. What they don’t lack is ideasand energy, but too often, thatpower never gets a chance to go towork. What if, by finding ways toprovide basic goods and services,and offer better opportunities forthese people to put their minds andmuscles to work, businesses couldmake a profit—and also do theirpart for human development?

In 2006, UNDP convened a diversegroup of institutions with interest andexpertise in the larger area of theprivate sector’s role in development aspart of the Advisory Group for theGrowing Inclusive Markets initiative.Building on existing research, UNDPand its partners believe that moreneeds to be done to generate andassemble information and analysesof the markets of the poor, to betterunderstand the constraints to inclu-sive growth of markets, and identifyinnovative approaches to removingthose constraints. They also believedthat UN leadership is critical to the overall legitimacy to reach keyaudiences of business and policydecision-makers in the South.

Growing Inclusive Markets is driven by our strong conviction that in

the race to achieve the Millennium Development Goals by 2015, the

greatest untapped resource, for both investment and innovation, is the

private sector. We stand at a threshold of enormous opportunity:

Growing Inclusive Markets

THE CHALLENGE

A PARTNERSHIP RESPONDS

Growing Inclusive Markets

There has of course already been a great deal of work in the larger area of business’s role in development, including by some of the leading organizationsinvolved in Growing Inclusive Markets. The new initiative is designed to complement and build upon existing work, as well as to bring the key messagesof inclusion and mutual advantage to decision-makers and inspire action. Sowhat’s new about Growing Inclusive Markets?

¥ UNDP and its partners will focus on companies’ core business activities,as the long-term boost to development is likely to be greatest in the areaswhere commercial activities in their basic execution also beget humanprogress.These areas also tend to lend themselves more readily to replicationand scaling up. Southern businesses—multinational and small and medium-size enterprises, or SMEs, operating both formally and “underthe radar”—are, of course, hubs of economic activity, providing goods,services and job opportunities to the poor, and so will be studied extensivelyby Growing Inclusive Markets.

¥ The initiative is imbued with a Southern focus from the core at the outset:50 company case studies from researchers and academics in Southerndeveloping countries will contribute a wealth of real-world experience.This ground-level cache of knowledge will anchor a broad network of ideas on the subject of inclusive growth, bringing in development practitioners, policy makers, business and civil society actors and others.Over the longer term, this and other networks from the South, includingrelevant UNDP country offices, will play a greater role in the initiative.

¥ Country-level replication is a top priority. UNDP’s success in “localizing”its series of highly successful Human Development Reports, helping shapenational agendas and effecting real policy changes in countries around theworld, inspires us to follow suit. UNDP’s Egypt Country Office is a pioneerin this regard, having already begun a national process, which is itself contributing to the design and implementation of the overall initiative.

Growing Inclusive Markets builds aplatform for action. Its initial prod-ucts: data, catalogs of experience andanalysis intended to help us betterunderstand the developing world’smarkets—their composition, oppor-tunities to expand their reach, andchallenges in doing so. Our ideal: Adeveloping-world entrepreneur orpolicymaker picks up this brochure,or the report to follow, or clicks on our website, and studies a market“heat map” that shows where thepoor aren’t seeing their needs met inher country or region. She reads acase study and learns how a pioneerovercame obstacles to profitablymeet those needs and supportdevelopment. And then, inspiredand informed, she goes to work.

3

OUR PRODUCTS

VALUE ADDED

4Growing Inclusive Markets

Here is what Growing Inclusive Markets has to offer:

1. A web-based storehouse of data and information on low-income markets, including:

¥ Market heat maps — A poverty-mapping tool that illustratesthe economic activity of the poor, including demand andsupply of key goods and services.

¥ Case studies bank — The true stories of achieving progressand profit: A repository of business cases illustrating effortsto reach low-income markets by providing goods, servicesand jobs, and sourcing from the poor.

¥ Innovations bank — An inventory of public and privateinnovations (from business models to institutional reforms)that can make low-income markets more dynamic and inclusive.

2. A series of global flagship reports and methodologies for developing national reports and a kit of diagnostic tools that examine the inclusiveness of markets in individualcountries. (These reports will be loosely modeled on UNDP’sglobal and national Human Development Reports.) The firstglobal Growing Inclusive Markets report will be released at theend of 2007.

3. In the next phase, UNDP and its partners will move fromdata gathering and analysis to implementation. The initiativewill be launched in a number of business-in-development ‘hotspots’ around the world. The UN will work with private-sectorleaders, national policymakers, and civil society to seed andgrow national processes to spread the wealth of innovation andexperience, and inspire public and private actors to work togetherto realize the mutual advantages that have been discovered.

Growing Inclusive Markets wasconceived in 2006, following the success of 2004’s UnleashingEntrepreneurship: Making BusinessWork for the Poor, which was prepared by the Commission on thePrivate Sector and Development at the request of UN Secretary-General Kofi Annan. The currentinitiative grew out of a need to buildon Unleashing Entrepreneurshipand other existing literature for abetter understanding of how market-based approaches to human devel-opment can ‘do good’ for people living in poverty while also beinggood for business.

ROOTS

Growing Inclusive Markets

However, poverty is not solely defined by a lack of income. Viewingthis challenge from a human development lens, Amartya Sen writes:

“Human development is about much more than the rise or fall of nationalincomes. It is about creating an environment in which people can developtheir full potential and lead productive, creative lives in accord withtheir needs and interests. People are the real wealth of nations.Development is thus about expanding the choices people have to leadlives that they value. And it is thus about much more than economicgrowth, which is only a means—if a very important one—of enlargingpeople’s choices. Fundamental to enlarging these choices is buildinghuman capabilities—the range of things that people can do or be in life.The most basic capabilities for human development are to lead long andhealthy lives, to be knowledgeable, to have access to the resources neededfor a decent standard of living and to be able to participate in the life ofthe community. Without these, many choices are simply not available,and many opportunities in life remain inaccessible.” *

The extent of people’s deprivation is multidimensional and varies fromcountry to country and community to community. Among the manyfactors that conspire to keep the poor in a poverty trap are lack ofeducation, health, employment opportunities, nutrition, and shelter.

The poor have limited economic opportunities and, accordingly,are unable to contribute to or benefit from growing market economies.

Furthermore, even when employmentor entrepreneurial opportunities dopresent themselves, the poor areunable to take advantage of theseopportunities because they oftenlack good health, education, or credit.The poor are also extremely vulnerableto various types of shocks—they oftendo not have the means to efficientlyprotect themselves from the effects ofnatural disasters, conflicts or economicdownturns. They are equally vulner-able to additional shocks, includingillness and deaths in the family, whichmay keep them out of the workplace.In certain cases, the poor face almostimpossible choices to adapt to theseshocks—through such means aspulling children out of school andsending them to work, investing less in healthcare and nutrition, orforegoing investment opportunitiesaltogether.These conditions combined,which frame the lives of the poor,typically leave them feeling powerlessand voiceless, with little control overtheir lives and often trapped in acycle of deprivation and poverty.Under these circumstances, the bestthat they can do is to struggle tosurvive from one day to the next.

5

Missing outWith about 2.6 billion people (figure for 2004)

living under $2 a day (in 1993 PPP), almost half of the

world’s population remains desperately poor.

---------------------------------------------------*United Nations Development Programme (UNDP). 2006.“What is Human Development?”Posted on the Website of the Human Development Report Office. [http://hdr.undp.org/hd/].

6Growing Inclusive Markets

Consumers raise their standard ofliving through access to credit marketsand financial services, insuranceproducts, information and knowledge,and mobility. As producers, the poorimprove their income-generatingpotential by joining value chains assuppliers of raw and refined materials,employees, distributors and entre-preneurs. Although the poor alreadyparticipate in some markets to someextent, they often do so in ways thatare more exploitative than beneficial.As such, market access has to belinked with strong governance andsocial conscience in order to fulfill itspotential as a driver of human progress.

Far too many people are excluded from markets and their accom-panying opportunities. In terms of basic goods and services, morethan one billion people do not have access to clean water, and 2.7 billion lack access to adequate sanitation. While 100% of developed-country populations have access to sanitation, only 52%of developing-country populations do—and of these, the numberslips to 35% in rural areas. Trends in market access also reveal deepgender inequalities: In India and Guatemala, for instance, only35% of women participate in the economy. The digital chasmbetween richer and poorer countries is also wide: AlthoughInternet access is recognized as one way to help the poor take partin the economic cycle, only 11 per 1,000 people in the LeastDeveloped Countries (LDCs) are Internet users. Similarly, only14.2% of the population of sub-Saharan Africa have fixed lines ormobile phones, two important drivers of economic empowerment.Just setting up a business is disproportionately burdensome inmuch of the global South: As a percentage of national income percapita, the cost of business start-up procedures in the LDCs is169%, whereas in the OECD countries it is only 5%. In short,billions of people are excluded from markets, the core driver ofeconomic advance—and broader human development.

Markets, of course, are not the sole solution to the problems of the poor, but the benefits of

market inclusion cannot be underestimated. As consumers, the poor see their lives get better

as they become able to fulfill basic needs for nutrition, health, education, housing and sanitation.

Why Access Matters

Growing Inclusive Markets

Here, Growing Inclusive Markets aspires to make a significantcontribution, by compiling and framing the current body ofknowledge and also by augmenting that cache with new data setsand tools for analysis. In finding and highlighting the strengthsand weaknesses, success stories and cautionary tales, of the market-access challenge, we empower policymakers, businesspeople andcivil society to make smart choices that beget mutual advantage.

Like most development challenges, market access tends to varywidely from country to country, and even from village to village orneighborhood to neighborhood.There are also significant differencesbetween access in cities and rural areas, among men and women,and between low-income and higher-income markets.

Filling the gaps requires different kinds of actions from policymakers, public-service providers and businesspeople. Filling the gapsalso presents different opportunities for different actors. For the privatesector, unmet demands mean business opportunities. For the publicsector, these gaps signal areas in which policy needs to be amendedor improved. But recognizing and understanding where marketsreach, and where they do not, is essential for everyone at the tableto find value, and offer value, to these underserved communities.

Too often, the process of filling theseholes in access in viewed strictly in asingle dimension: Poor people aregiven a chance to buy goods andservices, gain benefit from them,and in doing so deliver benefit to thecompany providing them. But it’simportant not to limit poor peopleto a consumer role: To truly partakein the economic cycle, they can andshould also produce. Meaningfulopportunities to produce, in the formof jobs, credit or access to technology,for example, deliver as much, or more,development impact as opportunitiesto buy. Growing Inclusive Marketsis driven by a strong belief in thisdual empowerment.

7

Where Markets Are, and Aren’t

The first step in expanding market access in the developing world is understanding

existing markets and market opportunities; this initiative thus endeavors first and foremost

to shed new light on the current state of Southern markets serving the poor.

8Growing Inclusive Markets

Growing Inclusive Markets will ofcourse take into account the consid-erable existing corpus of knowledge onthe market-access challenge.Moreover,it aims to bolster this knowledgewith a new market-mapping tool thathelps to characterize the economicactivity of the poor by sector andcountry. Based on data obtainedfrom international organizationsand national statistics, this newtool—we call it a market heat map—provides a useful bird’s-eye view ofthe reach of markets in differentgeographic areas, and, particularly,the extent to which they take thepoor into their embrace. In doingso, this initiative aims to buttressthe essential understanding ofwhere we need to build inclusion,for both consumers and producers,to build real growth.

With a single glance, we can now get a snapshot of where markets are and aren’t reaching

the poor.

The heat maps, one of the first innovations of Growing Inclusive Markets, work like this:

In a simple chart, like the ones at right, sectors of need—education, water, microfinance,

etc.—are paired with color bars indicating the degree to which those needs are being

met. More economic activity would be analogous to more “heat” (more color in the

figure)—a greater share of poor consumers being reached. Less heat, and a lack of color

indicates a larger share of the poor—either as consumers or as producers—marginalized

in the markets examined.

The variables of the heat maps can be manipulated based on the needs of the users.

Variants of heat maps could consider the poor as producers or consumers, and apply their

measuring tool across different sets of data and interactions. One could assess how

different supply-side actors are reaching the poor; another could indicate potential

consumers of products or labor.

While providing only a partial picture, and not intended to be interpreted in isolation,

heat maps could nevertheless become a powerful aid to policymakers and other stake-

holders, notably business and civil society, as a first step to better informed and more

sophisticated policy analysis, as well as clarifying possible market opportunities for the

private sector. With better data and greater involvement by different actors, these maps

could also develop into effective monitoring and powerful advocacy devices to help track

and evaluate the impact of business and civil-society initiatives as well as policy actions in

moving toward greater market inclusion. All Country Heat Maps and Sector Heat Maps

will be available at www.growinginclusivemarkets.org later this year and several will be

included in the first Global Report.

Sample Heat Maps

Figure 1 illustrates a potential heat map, offering a rough first impression of the financial-

services landscape in the Dominican Republic, notably vis-à-vis the poor. The map focuses

on access to credit, revealing how formal suppliers (banks) in general still play a relatively

small role when compared to other suppliers of credit in the country. The map shows that

the poor still seem to be largely deprived of bank access compared to wealthier peers,

and rural-urban divides appear to accentuate this pattern. Digging deeper into the use of

credit, and complementing the heat map, figure 2 reveals that investments in business or

production seem to constitute a smaller portion of the poor’s use of credit. Of those who

did have a loan among the poor, a significant portion of them seemed to have channeled

the funds toward the consumption of food and other non-durables. In a quick glance, we

get a rudimentary but potentially valuable sense of where markets are present, and missing,

and are equipped for further study.

SURVEYOR’S TOOL: THE MARKET HEAT MAP

Growing Inclusive Markets

9

Figure 1. Access to Credit, Dominican Republic (2004) Figure 2. Use of Credit, Dominican Republic (2004)

Rural

Urban

0 20 40 60 80 100

No credit

Shopkeeper, villager, relatives or friends, other

Moneylender, microcredit institution, credit union

Bank

Non-poor

Living on less than $2 a day

Non-poor

Living on less than $2 a day

6 9 7 78

PERCENTAGE OF HOUSEHOLDS WITH AT LEAST ONE LOAN, BY SOURCE

(1) 6 7 86

5 6 4 85

13 9 6 72

Rural

Urban

0 20 40 60 80 100

Non-durable consumption

Housing, education, durable goods

Agriculture business, other business

Non-poor

Living on less than $2 a day

Non-poor

Living on less than $2 a day

21 36 42

USE OF CREDIT, BY SOURCE

19 17 64

23 27 50

17 38 45

10Growing Inclusive Markets

Meeting—and Overcoming—Constraints

Once we understand where markets are missing,

or not reaching as many people as they should, we

turn to ask why and identify what is in the way.

The constraints to inclusive growthvary, of course, from place to placeand situation to situation, but thesebarriers often have a lot in common,too, and often can be overcome insimilar ways.

Growing Inclusive Markets takeson these constraints from theground up. First, we will look at theexperience of various Southern firmsin encountering and surmountingbarriers as they built businesses thatserved their communities and earneda profit. Later, we will see whatthese constraints have in common,and begin to explore how responsesto them might be replicable on abroad scale.

Meeting—and overcoming—constraints is something Nancy Abeiderrahmane

knows quite well. When setting up Africa’s first camel dairy in a poor and

sandy Mauritania, she was confronted by many different challenges that

seemed almost insurmountable: bad cultural perception towards milk

selling, dispersion of suppliers who were nomadic herders, lack of business

knowledge among the supply chain, disorganized business sector with no

pre-existing supply or distribution networks, hostile climate and poor land

transportation facilities, difficulty to secure financing, lack of government

support and regulation of the milk industry. But Nancy managed to find

innovative solutions to overcome each of those constraints by building her

own supply network, investing heavily in transportation and technology,

providing financing schemes to her suppliers and providing a range of

support services to livestock owners, including animal feed credits, veterinary

care, medicine and extension services.

She ultimately succeeded in setting up a profitable business model with

at the same time “the satisfaction that [she is] making a big difference for

a lot of people”. But the lessons learned from this success story go far

beyond Mauritania. As Nancy explains,“our experience is very simple,

very reproducible: I have seen so many cases where this type of business

does make a difference in all sorts of countries. It does give an income to

poor people and it does give them hope”.

CASE: Tivisky Dairy (Mauritania)

Growing Inclusive Markets

11

Shared Experiences:The Case Studies

Overview: Danone is a leading

producer of dairy products, beverages,

biscuits and cereals.

Constraint: The low purchasing

power and relative lack of nutritional

awareness of Danone’s customer

base was a significant barrier

to growth.

Solution: Danone entered into a

number of innovative partnerships—

including with a state healthcare and

nutrition agency and the nation’s

largest food retailer—to deliver

affordable and nutritious milk porridge

to children of low-income families.

CASE: Danone (Poland)

Overview: Construmex helps

thousands of Mexican migrants in

the United States purchase and build

homes for themselves and their

families back in Mexico.

Constraint: Construmex recognized

that its earlier model of serving low-

income clients in Mexico would not

work for migrants in the U.S., as

the latter approached commercial

transactions with extreme caution.

The company lacked adequate

market research to determine how

best to proceed.

Solution: Construmex partnered

with Mexican Consulates in the U.S.

to conduct market research on the

needs of the migrant population.

Following these surveys, it devel-

oped a new “cash-to-asset” transfer

service that was offered through

migrant associations.

CASE: Construmex (Mexico)

Overview: The company cultivates certified organic mangos.

Constraint: Farmers could not afford the initial investments to establish

mango farms.

Solution: The company provides technical assistance and interest-free

loans to help get started.

CASE: Integrated Tamale Fruit Company (Ghana)

Growing Inclusive Markets offers awealth of experience in the form of50 Southern case studies, written by Southern authors. From them,an inspiring picture emerges:Companies and individuals takingon daunting challenges, and findingways to overcome them, and helpthemselves and their neighbors.Below, a preview of some of the casestudies to be highlighted in GrowingInclusive Markets.

We can learn to help grow markets

not just from the data in tools like

heat maps, but also from experience.

12Growing Inclusive Markets

Overview: Aspen was built to

become a major pharmaceutical

manufacturer capable of supplying

the South African market with

affordable medicines.

Constraint: Ensuring steady

access to pharmaceutical ingredients

was difficult.

Solution: Aspen established joint

ventures with Indian generic manu-

facturers to ensure an uninterrupted

supply of ingredients, and purchased

chemical manufacturers.

CASE: Aspen (South Africa)

Overview: VCP is a major pulp and paper company that engages poor

rural communities in the production of eucalyptus trees.

Constraint: VCP faced resistance from community groups concerned

about large-scale agribusinesses cultivating large tracts of agricultural land.

Solution: The company built a “social license” to operate in rural

communities by developing business partnerships with small-scale farmers.

CASE: Votorantim Celulose e Papel / VCP (Brazil)

Overview: Mt. Plaisir Estate Hotel has redefined ecotourism, transforming

the poor rural village of Grand Riviere into a vibrant, self-sustaining

community.

Constraint: The hotel’s distance from the capital city and the two-hour

drive to the nearest airport made the shipping costs for supplies and

materials prohibitive.

Solution: The hotel’s owner overcame these barriers by creating a

culture of self-reliance--recycling old curtains into tablecloths, and sourcing

lumber and food locally.

CASE: Mt. Plaisir (Trinidad and Tobago)

Overview: Smart Communications is a leading wireless service provider

in the Philippines.

Constraint: The majority of the low-income market was unable to access

mobile technology because of expensive pre-paid phone credits—the

lowest denominations were US$6.

Solution: Smart Communications offered credits in units as low as

$0.60. This made mobile communication widely accessible and allowed

entrepreneurs to buy in bulk and remarket the minutes.

CASE: Smart Communications (Philippines)

Growing Inclusive Markets

The places where the global poor live—often urban slums andrural villages—are challenging market environments. These challenging environments require innovative solutions from bothprivate and public actors.

Growing Inclusive Markets seeks to gather experience and data,and help it make its way to people—in government, in business, incivil society—who can put it to work, and work together, for the “win-win” advantage we’ve cited in these pages. Commonexperience, both in terms of challenges and responses to them,enables developing-world actors to better connect, and to findreplicable solutions to the problems that keep billions of peopletrapped in poverty.

The constraints and innovations we see in the case studies mostlyfall into a few broad categories, and so can be addressed, in manycases, with common, replicable approaches. Below, we offer a sample highlighting a few of the emerging trends.

KNOWLEDGE, EDUCATION,AND SKILLS

A grasp of information is an important prerequisite to make useof the opportunities a market canoffer. For example, consumers willnot buy a product if they do notunderstand its benefit; a farmer whocannot read cannot use the internetto get weather forecasts. Naturally,companies cannot employ people wholack the necessary skills for a job.

13

CONFRONTING CONSTRAINTS

The Big Picture

If the underserved markets where the poor live represent

such a great opportunity, how come so few businesses

take advantage of it? The answer: because it is difficult.

14Growing Inclusive Markets

PHYSICAL INFRASTRUCTURE

Without roads, products cannot bedelivered to rural areas where 70%of the poor live. Nor can the farmer'sproducts be brought to market.Without transportation systems,people cannot go to the market orto the company site to take on a job.Without a digital data network,consumers find little value in purchasing cell phones or internetcomputers and cannot access thecontent provided on the web.

ACCESS TO FINANCE

The poor often cannot access credit,because they lack the required collateral or formal documentation.As consumers without access tocredit, their lives are more expensive.For example, they can only buy construction materials in small portions, and materials may be lost orstolen before the project is completed.Needless to say expensive productslike computers may be entirely outof reach. The same is true for thepoor as producers, who cannotimprove their productivity for lackof investment capacity.

Ultimately, discussing the constraintsis most valuable when consideringthe ways the actors in the case studieshave managed to overcome them.Potential solutions are limited onlyby the creativity of the individualentrepreneur.That said, some patternshave emerged from the experiencesthis and other initiatives havecatalogued. A few of which are presented below:

FINDING SOLUTIONS

Overview: EDF, the French electricity utility company, set up with its partners two

“Rural Energy Services Companies” designed to install and manage local electricity

generating systems.

Constraint: With low levels of literacy and business management capacity in the

rural areas, the training of employees and managers was a real challenge.

Solution: The companies set up a partnership with a French public agency that

provides training and orientation to communities seeking electrification.

CASE: Rural Electrification (Mali)

The constraints we see in the case studies mostly fall into a few broad categories, and so can be addressed, in many cases, with common, replicable approaches.

Growing Inclusive Markets

LEVERAGE SOCIAL NETWORKS

Quite often, the raw materials forboosting participation in the economyand growing markets are alreadypresent in societies. Slums and vil-lages may not have good physicalnetworks, but they often have excellent social networks. Strongcommunities can go a long way inreplacing missing infrastructure.Organizing villages into consumergroups, for example, can help tolower distribution costs and simplifybilling procedures.

ADAPT PRODUCTS OR ROLES

Products and job requirements can often be adapted to the localcircumstances. For example, tocounter the information gap goodscan be made more intuitive to useand jobs easier to carry out.Information and communicationtechnology can often be leveragedto replace missing infrastructure;electronic billing via cell-phonesavoids the need for a bank accountand pre-paid time can be solddirectly via SMS.

INVEST IN ENABLING CONDITIONS

Sometimes, the expected benefitsjustify a private investment intoenabling conditions that can be usedby everybody. Training farmers inbetter quality management improvestheir own products, but also theiroutputs for those receiving themdown the value chain.

15

Overview: THTF developed an affordable computer for rural users through a low-cost

operating system and self-developed software.

Constraint: Rural farmers had never experienced the Internet before; they lacked

basic computer skills and a computer-friendly environment, and therefore were

inclined to steer clear of them.

Solution: THTF set up “Rural Information Centers” in villages to offer training, and

added special characteristics to its computers (such as incorporating a special odor to

repel rats from wires), making the interface and maintenance of the computer easier

for rural customers.

CASE: Qinghua Tongfang Computer / THTF (China)

categories, and so can be addressed, in many cases, with common, replicable approaches.

16Growing Inclusive Markets

from Southern business leaders and policy makers, to local entre-preneurs, multi-national corporations, academic communities anddevelopment organizations—will champion the messages andopportunities for action on the ground.

Our ongoing challenge is to recognize that solutions for tacklingpoverty through business innovations will vary from country tocountry—and they will take time. Replicating the most successfulinnovations presented in Growing Inclusive Markets in other low-income markets will require a profound commitment andentrepreneurial spirit by private and public actors alike.

But that replication is paramount. Bringing the products ofGrowing Inclusive Markets—knowledge, data, experience—tobear, with real, tangible, effect, on the persistent economic anddevelopment inequalities of the global South, is our single mostimportant goal, and a major reason that UNDP is leading the initiative. UNDP will leverage its presence in 165 countries,and its deep local knowledge and experience, to turn the ideas and analysis of this initiative, and the wealth of experience andexpertise represented by its Advisory Board, into real action, on theground, for the poor.

Growing Inclusive Markets willformally launch in business-in-development ‘hot spots’ aroundthe world from 2008 onwards.Individual country launch eventswill be planned, which will includedialogue, presentations of our marketresearch and analytical products(including the case studies, innova-tions bank and market heat maps),and the release of our first GlobalReport. At that time, UNDP, inpartnership with private-sectorleaders, national policymakers, civilsociety organizations, will also launchnational processes designed to shareexperiences and knowledge of effec-tive business models that benefit the poor, and encourage public andprivate actors to take action to repli-cate and scale up those innovations thathave successfully grown inclusivemarkets. All of these activities willalso mark the beginning of a multi-year process, which we feel confidentwill lead to real change: more inclu-sive markets, and a better chance toparticipate in the cycle of growth,for the poor.

Growing Inclusive Markets seeks to gather information,

disseminate knowledge and inspire action. It uses the

UN’s convening power and presence around the world to

move the agenda of the poor and concomitant business

opportunities into a new space. Our network of partners—

A Provocation to Action

The following are the Advisory Board members that have formed the core of Growing Inclusive Markets, providing invaluable guidance, insights and inputs over the past two years.This list of institutions is expected to evolve along with the overall initiative. In particular, it will grow to include a greaterrepresentation of Southern institutions.

¥ Agence Française de Développement

¥ Business for Social Responsibility

¥ Cornell School of Business

¥ Dalhousie University, Faculty of Management,School of Business Administration

¥ ESSEC Business School, Institute for Research and Education on Negotiation in Europe

¥ European Foundation for Management Development

¥ Global Compact

¥ Global Development Alliance, USAID

¥ Harvard Business School, Social Enterprise Initiative

¥ Harvard University, Kennedy School of Government,Corporate Social Responsibility Initiative

¥ Institute of Business, University of West Indies, Trinidad & Tobago

¥ International Business Leaders Forum

¥ International Chamber of Commerce

¥ International Finance Corporation

¥ Overseas Development Institute

¥ South South Unit, UNDP

¥ United Nations Foundation

¥ Universidad Católica, Chile

¥ University of Michigan, Ross School of Business,William Davidson Institute

¥World Business Council for Sustainable Development

¥World Economic Forum

¥World Resources Institute

ADVISORY BOARD

¥ Farid Baddache – France

¥ Claudio Boechat – Brazil

¥ Juana Brachet – France

¥ Pedro Franco – Peru

¥ Bing Ganchero – Philippines

¥Mamadou Gaye – Senegal

¥ Dr. Tarek Hatem – Egypt

¥ Dr. Prabakar Kothandaraman – India

¥Winifred Karugu – Kenya

¥ Prof. Li, Ronglin – China

¥ Robert Osei – Ghana

¥Melanie Richards – Trinidad & Tobago

¥ Boleslaw Rok – Poland

¥ Loretta Serrano – Mexico

¥ Dr. Shi, Donghui – China

¥ Courtenay Sprague – South Africa

CASE STUDY AUTHORS

“The private sector can play a critical role in development. With strong and effective political and social institutions,the vitality of the private sector leads entrepreneurs,firms, and households to take risks that promoteinnovation and investment, and contributes to thecreation of decent jobs. Through decent jobs and theflows of income and creative energy that they generate,people can be lifted out of poverty, as productive capacityexpands and provides a basis for long-term development.”

UNDP Administrator Kemal Dervis, 21 May 2007

For more information on Growing Inclusive Markets:www.growinginclusivemarkets.org, gim@undp.org

United Nations Development ProgrammePrivate Sector Division, Partnerships Bureau One United Nations Plaza, 23rd floor New York, NY 10017, USA

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