Markus Dietrich - Inclusive Business

7/27/2019 Markus Dietrich - Inclusive Business

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Unlocking the massive potentialimpact of Inclusive Business in

Agriculture in the Philippines

Presentation at Social Business Summit on 2 October 2013

For further questions, please contact

Markus Dietrich, ASEI, Tel 02-2398216, [email protected]

GK Enchanted Farm - Bulacan, Philippines

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Social Business Summit 2013


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There is high growth in the Philippines

but it is not inclusive:

High level of poverty in the ASEAN context

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Singapore

Malaysia

Thailand

Indonesia

Vietnam

Philippines

Poverty Incidence (2009)


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High growth but no poverty reduction

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2009 2010 2011 2012 2013Q2

GDP growth (annual

%)*

Poverty Incidence

Among Families, NSO

(%)

Self rated poverty

SWS


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High and rising inequality

0.34 0.36 0.38 0.4 0.42 0.44 0.46

Vietnam

Malaysia

Indonesia

Singapore

Thailand

Philippines

Gini Coefficient (2009)


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Persistent and high un- and underemployment

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2009 2010 2011 2012 2013Q2

GDP growth

(annual %)*

Unemployment

rate

Underemployment

rate


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The private sector can make growth

more inclusive

Decent jobs and income Goods and services relevant, affordable and accessible for the poor

Strong Social Consciousness Weak Engagement as Business

300,000 NGOs20,000 Social Enterprises

70% of companies haveCSR programs

50% of companies havecorporate foundations

70 companies in ADB studywith inclusive businessmodels


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Reasons to engage the BoP

1. Increase growth and profitability2. Localize supply chain3. Strengthen reputation and brand

1. Poor regulatory environment forIB and lack of targets

2. Problems to access capital3. Lack of government incentives4. Lack of social appreciation on

the role of IB in inclusivegrowth (media, government,civil society)Benefits to the company

1. Create shared value2. Improved sales3. Improved reputation

Private sector engagement in IB

Benefits Obstacles


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Inclusive business - core business activity that integratesthe low-income segment within its value chain assuppliers, consumers, distributors and/or employees in sucha way that it creates shared value, addresses pressing

social (and environmental) issues and contributessystemically to poverty reduction.

Low High

Social Impact

Low

High

MainstreamBusiness

Socialenterprise

Inclusivebusiness

Finacialr

eturns

Inclusive Business


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- Reach- How many people in the low income segment does it reach

- Depending on sector and mode of engagement

- Depth

- How intensive is the project impact on the poverty situation- Job generation: Stability, Sustainability, Quality- Access to products/services: Relevance of products/services

- Relevance and Systemic Contribution- How relevant is it to the countrys poverty situation

- How systemic is does the model contribute to poverty reduction- Scale- Replicability

Social Impact


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- Innovation- How innovative is the model

- What other benefits brings the model to the low incomepopulation

- Participation- Gender empowerment

Social Impact


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18.4% = 16.9 millionUS$ 1.25 per day/capita(Philippines poverty line)

41.7% = 38.1 millionUS$2 per day/capita(self rated poverty (SWS) /minimum wage; ca PhP12,000 per family per month)

62.5% of population = 57.4million people withincome/expenditure of lessthan US$3 per day/capita(ca 18,000 PhP per familyper month) in internationalPurchasing Power Parity

Source: PovcalNet / 2005 PPP USD, 2009 data

What is the Base of the Pyramid

(BoP) in the Philippines?

62% of the Philippine Population (57 million)with family income below PHP 18,000


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Source: FIES, 2009 data, Top 10 expenditure items

Base of the Pyramid (BoP) Market

BoP consumes US$ 33.4bn (48% of total PH expenditure)

16,292

5,830

3,077

1,935

1,437

677

507

506

490

435

0 5,000 10,000 15,000 20,000

Food

Rent/Rental Value of Dwelling Unit

Fuel, Light and Water

Transportation and Commun ication

Personal Care and Effects

Clothing, Footware and Other

Medical Care

Gift and Contributions

Household Operations

Education

US$ Million


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Findings of ADBs IB Country Study

IB in the Philippines is in a nascent state

Low awareness of IB among business community Many IB models are early stage IB eco-system does not exist 70 IB companies of which only 30 are investable at the moment

Low awareness in finance community Only 3 deals with total of US$ 5 million in last 3 years

Low awareness among government and donor community

BUT, there are good examples demonstrating potential of IB


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IB Potential in Agriculture - Job generation

Agriculture and Agribusiness Coffee for Peace sourcing coffee from indigenous HH Rocky Mountain Coffee sourcing of coffee MCPI sourcing seaweed from fisherfolks Coco Technologies sourcing coco fiber from coconut farmers Kennemer Foods sourcing of cacao Unifrutti Rainforest Alliance certified Cavendish banana sourcing

Food & Beverage Jollibee Farmer Entrepreneurship Program

Nestle sourcing of coffee beans RFM sourcing of ube

Manufacturing Gandang Kalikasan Sourcing for Human Nature cosmetics


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IB Potential in Agriculture Products and Services

Agriculture and Agribusiness SL Agritech Affordable Hybrid Rice tripling farmers income


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IB Potential in other Key Sectors Job generation

Manufacturing All Home Design Subcontracting handicraft production

Retail Microventures Hapinoy Sari-Sari store program Julies Bakeshop Micro kiosk franchising program

Tourism Islands Banka Cruises Small boat operators


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IB Potential in Key Sectors Provision of Products andServices

Finance Climbs affordable life and non life insurance

Globe BanKO mobile microfinance products

Energy Powersource Group Rural electrification SURE Rural electrification plus job generation

Health Generika Drugstores low cost medicine Family Vaccine Clinic affordable rabies vaccination


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IB Potential in Key Sectors Provision of Products andServices

Information Technology Smart and Globe Mobile Phone plus

Encash Deployment of ATMs in rural areas

Education STI technical and vocational courses Phinma quality and affordable education

Urban Development Phinma Properties On-site relocation PPP with Q.C. Clean Engines affordable retro-fitting of motorcycle engines


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Recommendations of IB Country

Study

Development of enabling environment

Business associations Promote IB among members

Government Remove barriers promoting ease of doing business Integrate private sector in development planning and

implementation with meaningful target setting

Legislators

Incentives for IB

Development Partners Support with Technical Assistance

Financing

Investment opportunitiesGK Enchanted Farm - Bulacan, Philippines

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Progress Report

IB is gaining momentum

More companies identify themselves as IB

Business associations and NGOs are committed to inclusive

business and inclusive growth agenda PBSP, LCF and GK

Government is working with private sector DAR

Senators with social entrepreneurship agenda were elected

Impact investors are focussing on the Philippines

Conferences are organized 1st and 2nd ADB IB Forum Social Business Summit


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Conclusion

A lot still needs to be done

Develop the network and eco-system

Aligning inclusive growth agenda with inclusive business

initatives

Bringing investment to inclusive business


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Maraming salamat po

For further questions, please contact

Markus Dietrich, ASEI, Tel 02-2398216, [email protected], or

Armin Bauer, ADB, Tel: 632-5550; [email protected]


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Markus Dietrich - Inclusive Business