Roundtable Discussion Report - Katalystkatalyst.com.bd/wp-content/uploads/2015/02/... · BRAC Bank’s BKash banking services for the poor, Nestle Bangladesh Limited’s popularity

Funded by the UK Government, SDC and Danida Implemented by Swisscontact | Swiss Foundation for Technical Cooperation

Roundtable Discussion Report Inclusive Business in the Context of Bangladesh:

Prospect and Challenges

Volume 1 Issue 1 February 2015


Disclaimer This report is an output of the workshop/ discussion event/ seminar organised by Katalyst. The views and opinions

expressed in this report are those of the author(s) and do not necessarily reflect the official policy or position of Katalyst. Assumptions made within the analysis are also not reflective of the position of Katalyst or its

implementing and funding organisations.


Authored by

Dr. K G Moazzem and Ms. Kashfi Rayan

This report is one of a series of discussion events that seeks to understand inclusive business in practice. The series explores the prospects and challenges of Inclusive Business in Bangladesh and facilitates the promotion of Inclusive Business through relevant public and private organisations.


About Katalyst Agri-business for Trade Competitiveness-Project (ATC-P), branded as Katalyst is a market development project that aims to contribute to increasing the income of poor men and women in rural areas. It does this by facilitating changes in services, inputs and product markets, which in turn increases the competitiveness of farmers and small enterprises. Katalyst is co-funded by the Swiss Agency for Development and Cooperation (SDC), the UK Government, and the Danish International Development Agency (Danida). It is implemented by Swisscontact under the umbrella of the Ministry of Commerce, Bangladesh.

About the Author(s)

Kashfi Rayan is working as a research associate at Centre for Policy Dialogue (CPD), Bangladesh, researching on issues related to trade, inclusive growth, connectivity, apparels sector and various macroeconomic issues. She finished her undergraduate and postgraduate studies in Economics from University of Dhaka. Then she did a major project on “sustainability in higher education” from Monash University, Melbourne for her degree on ‘Master of Corporate Environmental & Sustainability Management’.

Dr. K. G. Moazzem is the Additional Research Director at the Centre for Policy Dialogue (CPD), Bangladesh. As an industrial economist by profession, his major research interests include SMEs, global and regional value chain and the analysis of trade and industrial policies. As a member of various committees, Dr. Moazzem regularly contributes in formulating national and international policies. He is also a member of board of editors of the International Journal of SME Development.


Contents

Executive Summary ............................................................................................................... 1

Glossary ................................................................................................................................ 2

Background ........................................................................................................................... 3

Highlights of the Keynote Presentation .................................................................................. 4

Definition and Framework of Inclusive Business ................................................................. 7

Relationship of Inclusive Business with Private Sector ........................................................ 9

Policy Recommendations to Improve Inclusive Business ................................................... 12

Key Issues Discussed in the Open Floor Discussion ............................................................ 15

Issues on Definition and Framework of Inclusive Business ............................................. 15

Issues on Relationship of Inclusive Business with Private Sector .................................... 15

Remarks by the Special Guest .............................................................................................. 16

Remarks by the Chief Guest ................................................................................................. 17

Conclusion ........................................................................................................................... 18

1 Funded by the UK Government, SDC and Danida Implemented by Swisscontact| Swiss Foundation for Technical Cooperation

Executive Summary

Reduction of poverty – the most critical development challenge, has been addressed worldwide through various initiatives over the last several decades; as a result the global poverty level has declined. Conventional approaches for poverty reduction usually set strategies in a targeted-manner with limited market linkages. Worldwide, economic growth particularly in the developing countries led to reduction of poverty and contributed to making changes in the composition and structure of poor. As a result scopes for applying market-based approaches are increasingly becoming pertinent in addressing the issues related to poverty.

‘Inclusive business’ is a new concept of development where market-based tools and techniques are applied to help integrate low-income communities in the production networks. There are other poverty reduction approaches such as social business and corporate social responsibility (CSR) where focus and means of addressing the poverty are different. In fact Inclusive business is settled in the middle of those two approaches as its purpose is to attain economically profitable business while benefitting the community. It’s a win-win model where both entrepreneurs and poor people involved in the business earn proper share for their contribution. Hence, inclusive business models earn benefits for

companies, consumers, low income communities and governments.

There are some challenges regarding implementation of the inclusive business model, as innovation and creativity which are two core elements of this business model, is difficult to integrate in the operational process in many developing countries. The possible strategies for the promotion of inclusive business could be analysis of the market and identification of business opportunities, investment for removal of market constraints, leveraging the strengths of the poor and engaging in policy dialogue with the government etc.

The concept of inclusive business needs to be promoted among the business groups and other key stakeholders including policy makers and bureaucrats. Although there is intrinsic support for inclusive business in the current policy environment, specific provisions need to be included in respective national policies which include Industrial Policy, SME Policy and Equity and Entrepreneurship Fund (EEF) and National Social Protection Strategy (NSPS) 2014. With a view to move from ‘business as usual’ approaches towards incorporating inclusive business model in the development process, building partnership among key stakeholders including private sector, NGOs, development partners and international organization is essential.


Glossary

Bottom of the Pyramid (BoP): The BoP indicates the people who live on less than $2.50 a day (World Bank, 2014). The BoP is the largest, but poorest socio-economic group. In global terms, this accounts for 3 billion people. The phrase BoP is used in particular by people developing new models of doing business that deliberately target that demographic, often using new technology. This field is also often referred to as the ‘base of the pyramid’ (http://en.wikipedia.org/wiki/Bottom_of_the_pyramid)

Corporate Social Responsibility (CSR): The CSR refers to the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as

well as of the local community and society at large (Lord Holme and Richard Watts, 1999).

Social Enterprise/Business: It is a business model designed to meet a social goal. This kind of business models operate under the principle of selling products at prices that make it self-sustaining. The owners or shareholders of the company can get back their initial investment over a period of time but do not get any profit as dividend. The profit generated in the business uses as reinvested capital for expansion of the business or for creating new products and services. In this way, the business contributes to the disadvantaged community (Yunus, 2007).

http://en.wikipedia.org/wiki/Socio-economic_group

http://en.wikipedia.org/wiki/Socio-economic_group


Background

On 29 July, 2014, Katalyst organized a roundtable discussion on “Inclusive Business in the Context of Bangladesh: Prospect and Challenges” with the aim to work with relevant public and private stakeholders to create an enabling environment for promoting inclusive business practices. The first event put focus on the following issues: a) understanding inclusive business in the context of Bangladesh; b) current status of inclusive business in Bangladesh mainly in agri-businesses; c) prospects and challenges of development of inclusive business in Bangladesh; and d) role of stakeholders in promoting inclusive business in Bangladesh.

The Chief Guest for the round table discussion was Mr. Mahbub Ahmed, Hon’ble Senior Secretary of Ministry of Commerce. The event was attended by Mr. Markus Ehmann, General Manager, Katalyst

and was closed by Mr. Samuel Bon, CEO, Swisscontact.

The session was attended by entrepreneurs and senior officials of different national and international private business groups, academia and researchers from research organizations (Annex 1). This includes Dr. Asaduzzaman, Professorial Fellow, Bangladesh Institute of Development Studies (BIDS); Naquib Khan, Director, Corporate Affairs, Nestlé Bangladesh; Ashraful Alam, Deputy General Manager, Bangladesh Bank (SME wing); Sheikh Morshed Jahan, Mission Leader, Center for Development and Competitive Strategies (CDCS) Tabith Mohammed Awal , Deputy Chief Executive Officer, Multimode Group (Lal Teer Seeds Ltd.); Ashraf Uddin Ahmed, Manager, Business Development, M.M. Ispahani Limited; Partha Sharathi Roy, General Manager-Marketing, Petrochem (Bangladesh) Limited and Anam Mahmud, Managing Director, Nielsen Bangladesh.

The Chief Guest for the event Mr. Mahbub Ahmed, Senior Secretary, Ministry of Commerce along with the special guest Mr. Samuel Bonn, CEO Swisscontact and Mr. Markus Ehmann, General Manager Katalyst.


Highlights of the Keynote Presentation

Dr. K G Moazzem presented his paper on “Promoting Inclusive Business in Bangladesh: Prospects and Challenges in Agribusiness” which is co-authored by Ms. Kashfi Rayan.

Initiating the discussion on the conceptual issues, Dr. Moazzem mentioned that poor people in the developing countries not necessarily live only in the bottom of the pyramid but rather in both sides of the poverty line. The characteristic features of these people are not same particularly in terms of income, consumption pattern, nature of engagement in economic activities and skill composition.

With the changes in the structure and composition of the poor people, scopes for integrating the poor with the market have significantly increased. In a market-based approach, poor people usually link with the production network and supply chain through different roles.

There are a number of ‘top-down’ and ‘bottom-up’ approaches applied for poverty reduction. Inclusive business is likely to link those two approaches where organizational and operational modalities are likely to be beyond ‘business as usual’ approaches. To accommodate the new approach, traditional ‘business as usual’ production and marketing processes need to be upgraded and if required to be transformed by undertaking proper initiatives which ensure better integrate the poor in the market by adding distinctive and qualitative values in the business process (Annex Table 1).

Since the corporate sector possesses knowledge about market such as market players, consumers’ demand, price and risks, they could take the lead role in the process which could facilitate both the need of the corporate sector as well as the need of the poor (Annex Table 2).

The Keynote Presentation discussed five key issues:

• Conceptual issues related to inclusive business

• Differences between inclusive business and other kinds of businesses

• Inclusive business in the context of agriculture

• Benefits of inclusive business

• Challenges for initiating and operationalizing inclusive business in Bangladesh


According to Dr. Moazzem, an operational definition of poor should include both extreme poor (those who earn less than US$1.25) and poor people having an income just above the poverty line (poor people who earn between US$1.25-US$5). Besides it is also important to make a distinction between the different concepts of poverty-based approaches. Dr. Moazzem briefly discussed the conceptual differences between the socially-embedded business related activities such as social business, bottom of the pyramid (BoP) and corporate social responsibility (CSR) (Annex Table 3). Various analyses reveal that the inclusive business models lie in between mainstream business and social business.

Dr. Moazzem has identified several activities undertaken by local and multinational companies on inclusive business in Bangladesh. These include Rahimafrooz’s renewable energy project, BRAC Bank’s BKash banking services for the poor, Nestle Bangladesh Limited’s popularity positioned products (PPP) and Katalyst’s pro-poor market development projects under making markets work for the poor (M4P).

In the final part of his presentation, Dr. Moazzem mentioned about policy environment in relation to inclusive business practices in Bangladesh. Major development policies of Bangladesh are by and large ‘inclusive’ in nature as those policies promote SMEs, employment generation, women entrepreneurs and industrial development in the backward areas. These policies include Industrial Policy 2010, SME Policy Strategies 2005 and National Social Protection Strategy (NSPS) 2014. A number of fiscal and financial provisions for promotion of businesses are related with industrial development in the domestic market, import-substituting industrialisation and SME development. Given the criteria set forth to be the inclusive business national policies have limited scope to fulfill those criteria. Only a limited number of provisions in different policies are found to be closely linked with inclusive business. For example, Industrial Policy 2010 has mentioned about a number of initiatives such as special emphasis for

Dr. K G Moazzem presenting his key note paper


stimulating import-substituting, food and agro-processing industries, conducting survey to review the inclusive business practices of privatized enterprises, encouraging entrepreneurs to set up industries in the backward regions, reduction of import duty and VAT for domestic industries such as agro-processing, dairy, livestock sectors and promoting sub-contracting facilities for small entrepreneurs. The National Social Protection Strategy (NSPS) 2014 has also delineated the initiative undertaken by the Katalyst for creating market access to the poor.

Given the targeted nature of activities under the inclusive business, more specific and focused provisions are needed to make the policies more relevant for the application of this business model. For example, the provision for promotion of industrialisation in the backward areas could be made ‘inclusive’ by adding provisions of special support for establishing industries in ‘poverty pockets’ of the country.

Special incentives could be considered for promoting business network with backward areas/poverty ridden areas. Incentives can be offered for sub-contracting activities in backward areas/poverty-ridden areas and linking the activities with the corporate sector promoting inclusive business. Similarly, special support for promoting products and services particularly targeted to the poor with special offer in terms of

Given the targeted

nature of inclusive

business, more specified

and focused

provisions are

needed to make the

policies more

relevant.


price, quality and quantity can be promoted.

Highlights of the Open Floor Discussion As the moderator of the open floor discussion, Dr. Moazzem requested the participants to discuss key issues highlighted in the keynote paper. Three sets of issues have come out from the keynote paper where further clarity and in-depth discussions were required which include: a) definition and framework of inclusive business; b) relationship of inclusive business with private sector; and c) policy recommendations to improve inclusive business activities.

Definition and Framework of Inclusive Business

The panel members emphasized that “inclusiveness” needs to be determined in terms of where and how it is occurring within the business structure. Different panel members explained “inclusiveness”

differently. According to Dr. Asaduzzaman of BIDS inclusive business may occur in two ways in the production network – a) at ‘process’ and b) at ‘outcome’. In the agriculture sector inclusiveness is more important in the ‘process’ as it could ensure inclusiveness in the output as well. Inclusiveness in the agriculture sector should be ‘socially’ sustainable. But that does not necessarily accept application of labor-intensive production processes without sufficient level of labor productivity.

In fact, inclusive business in the agriculture sector should promote improvement of labor productivity through application of modern state of art technologies which will lead to further demand for workers in the production process.

Mr. Sheikh Morshed Jahan, Mission Leader, CDCS, speaking at the event


Mr. Sheikh Morshed Jahan from CDCS elaborated different kinds of ‘inclusiveness’– inclusiveness in gender related issues, social issues and physical issues. He explained that inclusiveness occurs at three stages: in the process through choice of infrastructure, in the production process in case of sharing of generated profit, and in bargaining with the public sector agencies for ensuring facilities for the agriculture sector. Further inclusiveness may be of two types – a) supply-side inclusiveness and b) demand-side Inclusiveness. While supply-side inclusiveness deals with production of different inputs for agricultural production, its distribution and selling, demand side inclusiveness is related with food security and consumer choices.

Mr. Naquib Khan from Nestlé Bangladesh added another area of inclusiveness. Agribusiness inputs required for production and their efficient distribution at the farm level could be made inclusive by integrating poor farmers in the process of production and distribution of inputs.

Mr. Tabith Mohammed Awal from Multimode group mentioned that technology needs to be expanded to poor people through inclusive business initiatives. Without the development of technologies, business models could not be ‘participatory’ in nature. Mr. Partha Sharathi Roy of Petrochem and Mr. Naquib Khan of Nestle echoed with the concept of sharing new technologies with the poor under this new business model. Mr. Naquib

“Technology needs to be expanded to poor people

through inclusive business initiatives”

-Mr. Tabith Awal

Deputy Chief Executive

Officer

Multimode Group (Lal

Teer Seed Ltd.)


Khan added that businesses have the incentive to implement inclusive business models with a view to make the current production structure more ‘efficient’; use of imported input and packaging materials would raise input cost and packaging costs of business.

According to Dr. Asaduzzaman, defining the ‘poor’ for inclusive business model is not so easy since there are different strata among the poor – upper and lower strata. The ‘BRAC model’ for reaching out the poor is working on concerns for poverty. It is also important to ensure the interest of the two groups in the market. In general, bringing as many poor people as possible into the market mechanism is more important. Widening disparity among the poor as well as rising regional disparity in the country needs to be addressed in the inclusive business models.

Relationship of Inclusive Business with Private Sector

Entrepreneurs and senior officials of different corporate houses have shared their experiences of inclusive business in Bangladesh. Mr. Naquib Khan mentioned that poor people in developing countries living in the bottom of the pyramid (BoP) need to be included in the mainstream business in order to sustain the economic growth.

Widening disparity

among the poor as well

as rising regional

disparity in the country

needs to be addressed in

the inclusive

business models”

-Dr. Asaduzzaman,

Professorial Fellow,

Bangladesh Institute of

Development Studies

(BIDS)


Nestlé, as an initiative to incorporate BoP, is trying to use local inputs (such as rice) that match their specific requirements in manufacturing products. It also provides training to develop skills to rice growers in that locality. Speaking more on product development for the people living in poverty Naquib Khan mentioned that knowledge-gap on poor consumers’ demand makes it difficult to sell and distribute products to the people living in the BoP. To solve this, Nestlé has worked with Katalyst in developing some of the products for the BoP, like developing nutritious products at low cost for meeting the needs of mothers and children living in rural and remote areas.

They also worked together in developing mini packets of 10 gm seeds of vegetables. This product has included whole new segments of BoP in the agriculture market. This product benefits the housewives of the farmers for home gardening and encourages multi cropping in small piece of farm land. Moreover, Nestlé has included

people in the BoP as distributors by creating mobile seed vendors who can reach poor people in remote areas (by rickshaws and vans) with their products that were inaccessible before. Also, Nestlé trains them with agricultural information and skills that benefit the unreached segment of people. Similar kinds of steps are being taken by Petrochem (Bangladesh) Ltd. where they have provided training to farmers in making micro-nutrient fertilizer and use of quality seeds and pesticides in the agricultural lands.

Lal Teer seeds Ltd. (a sister concern of Multimode Group) has been working with about 20,000 farmers. As part of inclusive business initiative, it has trained the farmers in producing good quality seeds and in using improved technologies. A major challenge for working with farmers, according to Mr. Tabith of Lal Teer Seeds Ltd., is lack of proper document related to property rights on land which could be used for signing temporary contracts with small farmers. The company has been working as


an arbitrator by making arrangements in order to sign contracts with the farmers maintaining the property rights of the farmers. In the inclusive business models, appropriate mechanism should be developed to ensure property rights of the farmers which facilitate the corporate sector to be involved in the contractual arrangement with the farmers. Given the price competition in the market, the products and services to be procured from the poor living in the rural areas should be determined by quality and quantity of products; a ‘merit based pricing’ mechanism should be followed in this regard. In this connection, Mr. Naquib mentioned that both farmers and companies should share their responsibilities.

Mr. Naquib Khan pointed out problems in the existing conditions for private businesses to work and incorporate the rural farmers in the business venture. In the absence of proper functioning of law enforcing agencies goods are transported from the rural areas to cities by paying bribes to the people of law enforcing agencies and rent to local goons in order to ensure uninterrupted delivery of products. All these activities cause raise the marketing cost of businesses. Sometimes it is difficult to establish businesses in rural areas because of prohibition of use of farmland for establishing industrial estates. According to Dr. Asaduzzaman, a number of emerging challenges are currently confronting the agriculture sector in Bangladesh. Climate

change and chronic natural disaster cause high risk in agricultural production and ultimately cause large variability in output. Hence, it is important to assess the risks in agriculture production and find out the mechanism to share responsibility for uncertain occurrences by both the businesses and local farmers.

Mr. Ashraf Uddin Ahmed from M.M Ispahani ltd. has elaborated various initiatives undertaken by his company in case of inclusive business. Development of environment-friendly agricultural inputs like bio-pesticides by Ispahani for controlling the pest in fields particularly aiming small and poor farmers is a major contribution. Similarly, it processes rice after collecting it from farmers and sell the processed rice to the consumers. In this process, poor semi-skilled farmers are involved in processing, packaging and marketing works in processed agricultural products.

Given the mechanization of agriculture, large number of people who were earlier dependent on agriculture has been shifted to non-agricultural activities. The question as raised by Mr. Ashraf Uddin Ahmed is that if the corporate sector employs these displaced workers in manufacturing and service sectors will those activities be considered as ‘inclusive business’ practices.

According to Mr. Anam Mahmud from Nielsen Bangladesh such queries be better answered through exploratory research and primary surveys by understanding the changing dynamics of the BoP in


Bangladesh. Future research should also focus on how businesses can approach to the BoP more effectively and how to include BoP more in the distribution system. The finding of the research should help to know how knowledge transfer, technology transfer and intervention process between corporate sector and the poor at the BOP is currently taking place.

Policy Recommendations to Improve Inclusive Business

Discussing the issues of existing policies in Bangladesh, Dr. Asaduzzaman mentioned that policies in Bangladesh regarding facilitation of inclusive business are not implementable as there is no action plan related with those policies. Issues related to inclusive businesses have been directly and indirectly mentioned in major

development policies (i.e. Industrial Policy 2014, SME Policy 2005, and Equity and Entrepreneurship Fund and National Social Protection Strategy (NSPS) for Bangladesh 2014).

However, public sector organizations responsible for implementing related policies are not ready to facilitate that process. Mr. Jahan from CDCS mentioned that policies in Bangladesh which could facilitate inclusive business more such as Industrial Policy and SME policy have limited focus towards that direction. He added that SME policy somehow narrowly focused - seven of 11 provisions which could be linked with inclusive businesses is focused mainly on the ICT sector. Besides, most of the related policies including SME Policy 2005 do not have any action plan in order to implement hose policies.


Favorable business environment is one of the preconditions to enhance private investment in inclusive business practices. According to Mr. Naquib Khan, high corporate tax is one of the obstacles towards taking such innovative business models given the high risk associated with doing businesses with the BoP. A number of institutional weaknesses have been discussed

Mr. Naquib Khan sought the support of the government in developing the infrastructure facilities and capacity building to facilitate inclusive business by working with the private sector. He also added that the government needs to expand the support ensuring the supply of agricultural inputs like timely availability of fertilizer and subsidy in fuel etc. that will help small farmers in producing good quality agricultural output.

It was clear from the discussion that more specific and focused approach is needed to make the policies close to inclusive business. Hence, Dr. Moazzem recommended the following specific steps in his paper in order to meet the targeted goal:

Specific policy provisions as part of promoting industrialisation in the backward linkage industries by encouraging setting up industries in ‘poverty-ridden’ upazillas.

“Government needs to

expand the support

ensuring the supply of

agricultural inputs like

timely availability of

fertilizer and subsidy in

fuel etc. that will help

small farmers in

producing good quality

agricultural output”

-Mr. Naquib Khan,

Director, Corporate

Affairs, Nestlé

Bangladesh


New provisions for promoting business network in the backward/poverty ridden areas.

Incentives for sub-contracting activities in backward areas/poverty-ridden areas connected with the corporate sector in the manufacturing process.

Special support for promoting products and services particularly targeted to the poor with special offer in terms of price, quality and quantity.

Furthermore Dr. Moazzem mentioned three remarks for developing inclusive business in Bangladesh. They are: Promoting the concept of ‘Inclusive

Business’ by taking into account its multifaceted positive impact and implications for the development of the poor. The market leaders in inclusive

business in Bangladesh can be integrated in disseminating this concept by sharing their successful examples.

Campaign for inclusive business should be carried out through a well thought out plan of action. It will also help the private sector identify their business activities that would fall under inclusive business categories.

Identification of areas for inclusive business practices in the production network in Bangladesh. This would also require understanding the extent of backwardness which necessitates intervention of inclusive business models. A possible set of indicators for such understanding is nature of production, production network, production process, consumer demand, nature and extent of poverty and unemployment, underemployment and geographical issues.


Key Issues Discussed in the Open Floor Discussion

Participants have raised a number of questions on the three core issues discussed in the open floor discussion.

Issues on Definition and Framework of Inclusive Business

Occurrence of inclusiveness in the business operation and identification inclusiveness from the different attributes of businesses such as business process, distribution of input, output, and sharing profit.

Reinvestment of profit into the inclusive business models

Absence of specific policy for inclusive business in Bangladesh

Lack of institutional structure to facilitate inclusive business in Bangladesh

Issues on Relationship of Inclusive Business with Private Sector

Mechanism of sharing risks between the business and the local farmers given the variability in production due to climate change and other natural calamities.

Technical support needed to the BoP and mechanism to transfer technical support to be poor

Development of formal business processes for signing contracts with the poor

Ensuring the required quality and specificity of goods and services to be supplied by the poor

Fixing the price of goods and services to be used from the poor

Training for low skilled farmers about mechanized agricultural practices

Lack of law and order in case of transporting the goods from the rural areas

Reduction of the gap on selling and distributing products for the people living in the BoP

Government needs to expand support in providing agricultural inputs in time and also in developing infrastructural facilities and improving skills

Current investment barriers in establishing business in rural areas

Need of exploratory research and primary surveys in order to design appropriate inclusive business models.


Remarks by the Special Guest

In his remarks as special guest, Mr. Samuel Bon, CEO of Swisscontact, mentioned that inclusive business models considers a holistic view regarding development of the poor where employment and income are two key issues. Katalyst has been engaged in developing the conditions of the poor through various kinds of inclusive business practices- so far it has trained 54,000 farmers regarding good practices, provided vocational training and also provided jobs to 16,000 rural people. Mr. Bon emphasized that the economy of Bangladesh is changing and thus inclusive business will be a driver for achieving a positive change in growth through innovation and inclusion of the poor in mainstream business.

He also mentioned that the inclusive business practices should not be limited to include the BoP just as ‘consumers’ rather its scope should be widened by including the BoP as producers, suppliers and workers in different stages of the value chain. Thus, it is possible to have inclusive growth by the collective effort of different stakeholders.

Special guest, Mr. Samuel Bonn at the event


Remarks by the Chief Guest

The chief guest of the roundtable discussion Mr. Mahbub Ahmed, Senior Secretary of Ministry of Commerce, Government of Bangladesh shared his views on the inclusive business and further explained the role and existing policies taken by the government. Mr. Ahmed said that inclusive business is an initiative for earning profit and contributing to poverty reduction by including low income communities as producers, consumers and suppliers. He also raised the point that, government intervention in inclusive business practices need to be ‘minimum’ since corporate sector could take the lead role where government’s role is expected to be as a facilitator by taking proper policies. He also mentioned that it should be identified who would be the main architects of this business model and how overall and regional disparities of poor will be handled through inclusive business practices in the agriculture sector. He thinks that the main challenge of inclusive business in agriculture will be its proper implementation maintaining the dual challenge - ensure profitability of corporate sector and ensure added benefit for the poor in the BoP.

Discussing about the policies taken by the government, the chief guest mentioned that at present there is no specific policy targeting the inclusive business. However, few policies have by default concepts of inclusive business. Promoting inclusive

business will help government to achieve its desired objectives along with achieving expected level of GDP growth. Government can help the private sector with information, create scopes for skill development for the poor and develop policies that will facilitate development of the inclusive business in Bangladesh. Government policies have intrinsic support for inclusive business as reduction in income tax to create incentives among businesses to start inclusive business related projects have been mentioned in the national budget.

Also, the government has already taken some steps regarding the development of physical and social compliances in the RMG sector including ‘Sustainable Compact’, Bangladesh Action Plan with US, ‘Business Promotion Council’ by ministry of commerce, Skill development programs and collaborate with Swisscontact through Katalyst for working with the poor, establishing women chamber of commerce and encouraging women entrepreneurship in rural areas to support the inclusive business initiatives. After hearing the panel members the Hon’ble Secretary commented that he would suggest the government to give special incentives for entrepreneurs to do inclusive businesses in rural areas.


Conclusion The round-table discussion has widely covered the issues on inclusive business in the context of Bangladesh particularly on the three critical issues mentioned in the keynote paper. The discussion has provided a conceptual clarity about definition of inclusive business, its scope and limitations. Representatives of the private sector have shared their experiences about inclusive business practices in their respective businesses and challenges for development of those businesses in the absence of proper institutional set up. The discussion revealed that although development policies are pro-poor, it is important to promote specific provisions in different policies to promote inclusive business in Bangladesh. The learning from this roundtable discussion is that the private sector needs clarification on different processes of inclusiveness and policy intervention towards addressing barriers in investment in rural areas. Moreover collaboration of government with the private sector in developing the necessary infrastructure and building skills among the poor people is a necessity. However, how the existing institutions will incorporate with those needs and how the strategic planning will be developed are questions that need further discussions.

Acknowledgements

The author(s) would like to register their deep appreciation to Katalyst for undertaking the initiative for broader dissemination of ’inclusive business’ among the key stakeholder(s) of the country.

The author(s) would like to express their heartfelt thanks to Mr. Samuel Bon, the CEO of Swisscontact and Mr. Markus Ehmann General Manager, Katalyst for identifying inclusive business as an alternative strategy for poverty reduction in Bangladesh. Special thanks to Md. Emdadul Haque, Head of Government Relations, Mr. Nasir Uddin Ahmed, Head of Capitalisation, Communications and External Relations and Mr. Tahsin Akbar, Principal Business Consultant, Capitalisation, Katalyst, for successfully planning and organising the session.

In this connection, author(s) would like to express their gratitude to the participants of the workshop for providing valuable comments and suggestions on conceptual and operational issues. Author(s) express their gratitude to Professor Mustafizur Rahman, Executive Director of Centre for Policy Dialogue (CPD) for his encouragement and support in the process of undertaking this project. The staffs of Katalyst who were involved in organising the roundtable discussion and made it successful are also appreciated.

Annexure: Panel Members 1. Chief Guest

Mr. Mahbub Ahmed, Senior Secretary

Ministry of Commerce, Government of Bangladesh

The Ministry of Commerce, Government of the People’s Republic of Bangladesh is responsible for overall trade and commerce related activities of Bangladesh.

2. Special Guest

Mr. Samuel Bon

CEO, Swisscontact

Swisscontact is a business-oriented independent foundation for international development cooperation. Represented in 27 countries with over 800 employees, it promotes - since 1959 - economic, social and environmental development.

3. Mr. Markus Ehmann

General Manager, Katalyst

Katalyst is a market development project that aims to contribute to increasing the income of poor men and women in rural areas. It does this by facilitating changes in services, inputs and product markets, which in turn increases the competitiveness of farmers and small enterprises

4. Dr. Asaduzzaman

Professorial Fellow

Bangladesh Institute of Development Studies (BIDS)

BIDS is an autonomous public multi-disciplinary organization which conducts policy oriented research on development issues facing Bangladesh and other developing countries. The mission is to facilitate learning in development solutions by conducting credible research, fostering policy dialogue, disseminating policy options, and developing coalitions to promote informed policy making.

5. Mr. Naquib Khan

Director, Corporate Affairs

Nestlé Bangladesh

Nestlé Bangladesh Limited started its first commercial production in Bangladesh in 1994. It produces and supplies instant noodles, cereals, repacks milks, soups, beverages and infant nutrition products. The aim

of Nestlé is to provide the best quality food for the people of Bangladesh.

6. Mr. Ashraful Alam

Deputy General Manager Bangladesh Bank (SME Wing)

Bangladesh Bank is the Central Bank of Bangladesh. The primary responsibility of Bangladesh Bank is conducting monetary management and financial sector supervision, supporting rapid broad based inclusive economic growth, employment generation and poverty eradication in Bangladesh. SME & Special Programme Department is a newly created wing of the central bank to cater the need of cottage, micro, small & medium entrepreneurs for achieving enhanced economic activity for rapid and inclusive economic growth. The department is also an arm for broadening financial inclusion for the unserved and under-served entrepreneurial community.

7. Mr. Sheikh Morshed Jahan

Mission Leader

Center for Development and Competitive Strategies (CDCS)

CDCS is a private sector think-tank renowned for its work and voice on enterprise competitiveness and BoP-inclusive growth. The organization has special focus on agriculture and agribusiness and is successful in bridging gaps among private sector, academia and government agencies. Strengthened by CDCS Knowledge Institute and Sustainable Market Foundation, two key SBUs, it pursues action research, crafts and implements interventions and builds human and organizational capacity.

8. Mr. Tabith Mohammed Awal Deputy Chief Executive Officer

Multimode Group (Lal Teer Seeds Ltd.)

Lal Teer Seed Limited is the first research-based and one of the largest seed companies in Bangladesh. It is engaged in developing, producing, processing and marketing high yielding seeds of good quality to develop a sustainable foundation for agriculture and food security.

9. Mr. Ashraf Uddin Ahmed

Manager, Business Development M.M. Ispahani Limited

M. M. Ispahani Limited is a prominent industrial and consumer food conglomerate. The group owns Bangladesh’s leading Tea Company, as well as other major consumer food brands in the country. It also has interests in agriculture, shipping, real estate, textiles, jute and hotels.

10. Mr. Partha Sharathi Roy

General Manager-Marketing

Petrochem (Bangladesh) Limited

Petrochem (Bangladesh) Limited was formed in 1990. Petrochem (Bangladesh) Limited seeks to provide better seeds, fertilizer as well as pest management in increasing crop yield and quality, with preservation and improvement of environment.

11. Mr. Anam Mahmud

Managing Director

Nielsen Bangladesh

Nielsen Bangladesh is one of the leading marketing research firms in Bangladesh with experience of conducting large number of both qualitative and quantitative researches

Annex Table 1: Benefits of Inclusive Business

For the Company For the Low Income Community

With Partners, Suppliers & Distributors

Secure supply of raw materials Fair prices and conditions

Traceability and quality control of raw materials Assured sales

Lower transaction costs Employment creation and expansion

Shared risks Training and technical assistance

Access to knowledge and local networks Technology and knowledge transfer

Better relations with government Access to financing

Strategic positioning in new fair trade markets Participation in a business and investment environment

With Consumers

Access to new markets Greater access to quality products and services

Increased income Lower and more affordable prices

Transfer of product innovations to existing markets Better quality of life

Increased brand value and positioning in Order to capture new markets.

Increased productivity

Source: SNV and WBCSD 2008, p.13 (cited in Golja & Požega 2012, p.25)

Annex Table 2: Benefits of Inclusive Business and Requirements for Companies for Implementation

Benefits for companies

Benefits for communities

Benefits for governments

Requirements for

companies

Higher profitability Jobs and income Increased tax revenues (SMEs)

Changed mindset: Open to

collaborate with new markets

Wider market share Increased market

access

Improved

social services

High understanding and

knowledge of local / informal

markets

Lower operating costs Enhanced human

dignity Increased GDP

Market research, resources /

investment

New consumers Access, innovation

and technology

Greater infrastructural

support

Innovation and ‘thinking out

of the box’

Better branding of products

Easier access to

credit

Improved business

climate

Proper calculation of return on

investment (ROI )

Ease of doing business due to better relations

with government

and communities

Better living conditions

as a result of

the above points

Patience

Source: (GIZ, 2013, p. 17)

Annex Table 3: Differences between CSR, Social Enterprise, Inclusive Business and Mainstream Business

CSR Social Enterprise Inclusive Business Mainstream

Business

Definition

The social responsibility of business encompasses

the economic, legal, ethical, and discretionary

A commercial enterprise which mainly focuses on

innovative solutions

A profitable commercial

enterprise where the business model

A company which primary goal is profit

making

[later referred to as philanthropic]

expectations that society has of organizations at a

given point in time

for the poor balances profit making with scaled

social impact

Financial Viability Not viable Commercially viable Fully commercially viable (profitable)

Profitable or highly profitable

Rate of return (percent net per

year) 0 0-10 10-25 10-50

Growth potential (average percent per year over 5

years)

< 2% 5%-10% 10%-25% >15%

Main purpose of the business is social impact

Yes Yes Mixed (business+

social) no

Social Impact Area Community/local Local Sector/country/

Systemic -

Source: Asian Development Bank 2014; Carroll 1979

Annex Table 4: Inclusive Business Strategy Matrix

Strategies Constraints

Adapt products and Processes Market Information

Invest in removing market constraints Regulatory environment

Leverage the strengths of poor Physical Infrastructure

Combine resources and capabilities with others Knowledge and Skills

Engage in policy dialog with the government Access to financial services

Source: (Gradl & Knobloch, Inclusive Business Guide, 2010, p. 40)

Annex Table 5: Types of Socially-Embedded Businesses in Agriculture Value Chain

Type Definition

Contract Farming

Pre-agreed supply agreements between farmers and buyers. Generally an agro-processing company commits to supply upfront inputs (credit, seed, fertilizer, pesticides etc.) which may be charged against the final purchase

price.

Management Contracts

Refer to the variety of arrangements under which a framer or farm management company work agricultural land belonging to someone else. It

may take the form of a lease or tenancy and often entails some form of profit sharing rather than a fixed fee.

Tenant Farming & Sharecropping

Is a type of management contracting in which individual farmers, for example smallholders, work in the land of larger scale agribusinesses or other farmers.

In tenant farming the usual arrangement is a fixed rental fee while in sharecropping the landowner and sharecropper split the crop (or its proceeds)

along a pre-agreed percentage

Joint ventures

Entail co-ownership of a business venture by two independent market actors, such as an agribusiness and a farmers’ organisation. A joint venture involves sharing of financial risks and benefits and, in most but not all cases, decision-

making authority in proportion to the equity share.

Farmer-owned business

Are formally incorporated business structures for farmers to pool their assets to enter into particular types of business (e.g. processing or marketing), gain access to finance, or limit the liability of individual members. Such businesses are often owned by cooperatives in order to facilitate business transactions.

Upstream/downstream business links

It is an umbrella expression for the set of business opportunities beyond direct agricultural production that exist for both agribusinesses and smallholders and

small local enterprises. As convenient shorthand, the report uses the term agribusiness to refer to companies working in the agricultural value chain that

are not owned by smallholders or local community members. This includes companies involved in agricultural production, and businesses operating

upstream or downstream in the value chain.

Source: (Vermeulen & Cotula, 2010, pp. 29-30)

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