Inclusive Business offers a 21st Century solution to the intractable problem of poverty in Latin America.
BY NEIL GHOSH
Growing up in Calcutta (now Kolkata) I saw poverty first hand, so I naturally admired my father’s commitment to implementing social justice to helping the poor citizens. Dad’s opposition to Prime Minister Indira Gandhi’s economic and social policies landed him in jail during India's Emergency rule in 1975.
I moved to the United States in 1984 and experienced the benefits of capitalism. I watched with excitement India’s move to globalization and hoped that this also would benefit the less fortunate. Like many, I’ve believed that although the private sector can’t solve the poverty problem, poverty can’t be solved without the private sector.
However, I became disillusioned with the efforts made by existing corporate and individual wealth to have a sustainable impact on poverty. I remember a brief, discouraging conversation with Mother Teresa in a year before her death in 1997 about the role of the private sector in poverty alleviation.
I first heard the term Base of the Pyramid a decade later when I met University of Michigan professor and global corporate strategist C.K. Prahalad, who wrote the book The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. The core concept involves reaching the roughly 4 billion people with per capital incomes below at or below US$1,500 and bringing them into the formal economy. In Latin America that amounts to about 25 percent of the total population.
It was all new to me, although I had been in the US private sector and government for more than 20 years. Now I find myself wondering why so many individuals with long involvement in economic and social development field are equally ignorant about this concept. Since the idea was introduced, the list of corporations changing their business models to reach the majority market has expanded. Business-NGO partnerships are becoming common as well as business-NG0-government partnerships. But there is still plenty of poverty around the world, and in most impoverished communities, effective business remains alien.
To be sure, others are thinking and talking about the idea and looking at the base of the pyramid not just as consumers but also as suppliers, distributers and entrepreneurs. . It falls into the context of what Bill Gates, speaking at the World Economic Forum annual meeting ‘08, called “Creative Capitalism.” The next step has to be a serious commitment to developing close and mutually dependent partnerships between companies that want to sell products or do business with the low income citizens. It means finding ways to bring poor people into the supply chains, distribution paths and work forces and raising their capacities and their incomes.
Recently I spoke with the Nobel Prize winner Muhammad Yunus who believes much more can be done to alleviate global poverty if the dynamics of capitalism could be applied to humanity’s greatest challenge. In his latest book Creating a World Without Poverty, Yunus goes beyond the idea of microcredit to pioneer the idea of social business.
At the NGO where I now work, the Netherlands development organization known as SNV, we call that Inclusive Business (www.inclusivebusiness.org), an idea that is finding traction both among small and medium-sized business enterprises and multinationals. A study commissioned by SNV and the Inter-American Development Bank, to be released shortly, will show that Inclusive Business is an idea being embraced by companies in Central and South America. There is an opportunity waiting for global companies that want to reach this majority market.
Inclusive business can offer long-term sustainability based on a relationship of trust between the parties involved. It can lead to greater profitability for the companies involved and improved living conditions and greater access to goods and services for poor populations.
Our organization in partnership with the World Business Council for Sustainable Development (WBCSD) is working with the private sector in poverty alleviation by including lower-income communities within its value chain while not losing the sight of the ultimate goal of business, which is to generate profit.
We broker new business opportunities that benefit low income communities and work to help companies develop successful business models that create work and wealth for the poor and new profits for the firms involved.
At the moment we’re working with coffee growers and fishing micro-entrepreneurs in Peru, the dairy industry and woodworkers in Ecuador, fruit and vegetable suppliers in Central America, and in information technology and banking in Bolivia, to name a few projects.
But many other new opportunities exist for companies that want to participate, and for foundations and philanthropists who want to channel resources and expertise toward this uniquely entrepreneurial approach to combating deprivation .
SNV and the Business Council recently joined forces with the Inter American Development Bank to catalyze and scale-up inclusive business opportunities that will benefit the majority. It will be an important topic of discussion this week when the Inter-American Development Bank meets in Miami. Bill Gates speaks on Friday and my SNV colleague Robert de Jongh on Saturday.
It’s a certainly not the policy that my father unsuccessfully advocated for in India, but Inclusive Business offers a 21st Century solution to the intractable problem of poverty in Latin America and the rest of the developing world.
Neil Ghosh heads the Washington office for SNV, the Netherlands Development Organization., He can be reached at [email protected].