⑦Dalberg_130221 ADB IB Workshop - EA LatAm profile and case studies vF

7/29/2019 Dalberg_130221 ADB IB Workshop - EA LatAm profile and case studies vF

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IB Examples from Asia and Latin America

ADB-IDB Inclusive Business Workshop

1:45 p.m. 3:45 p.m., Tokyo, Feb-Mar 2013


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In this session we will be focusing on IB opportunities in specific countries in

Asia and Latin America

Source: Dalberg research [TBD]

ASIA LATIN AMERICA

PHILIPPINES

INDONESIA

VIETNAM

INDIA

PAKISTAN

THE MEKONG

SRI LANKA

BANGLADESH

TBD


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Philippines

1


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Market overview: Philippines

BOP OVERVIEW

INCLUSIVE

BUSINESSPROFILE

IMPORTANT

MACROECONOMIC

TRENDS

CHALLENGES

49%

14%

26%

11%Others

Manufacturing

Financial services

Agriculture

36%

43%

10%

11%

Consumer

Employee

Distributor

Supplier

Current IB engagement (n=70) Engagement model (n=70)

Poor business climate

Corruption and red-tape leading to severe regulatory bottlenecks

Inflexible and outdated labor code that serves to limit labor productivity

Lack of government initiatives

Poor infrastructure, leading to high costs (logistics, transportation, etc.)

Consumption-driven economy with household consumption contributing 24% to

GDP and consumer confidence is rising

Large pool of young labor that is literate, the majority of whom speak English

The majority of the poor work in the agriculture and informal industries sectors

Large network of 700K SMEs and NGOs and 20K SEs; this existing platform can be

leveraged/extended into IB models

PHILIPPINES VITAL STATISTICS1

GDP per capita

(PPP)

USD 4,300 (2012 est.)

GDP composition Agriculture 12.4%Industry 31.3%%

Services 56.4%

Labor

composition

Agriculture 33%

Industry 15%

Services 52%

25%

62%

75%

38%

Non-BoP BoP

Spending $180.0B2

Population 96.5m

1.CIA World Fact book

2.Uses BoP/Non-BoP per capita spending ratios averaged for East Asia and Pacific region for Thailand, Cambodia, Indonesia

Source: ADB Market scoping studies; Dalberg research


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Deep dive into selected important IB sectors in the Philippines

IMPORTANTSECTORS MODEOFENGAGEMENT RATIONALE

Agriculture/Agribusiness Supplier High inclusive growth potential - source of livelihood and employment

for 12 million rural workers Supply of raw materials, particularly coconut, fish, rice and seaweed

Represents the largest share of current IBs in the Philippines

Design-based

manufacturing

Employee The manufacturing sector has been able to ward off competition from

China since Filipinos have customized western products integrating

oriental elements to suit the local consumer base

Business Process

Outsourcing

Employee Existing employment in this sector is more than 1 million

Largely English-speaking labor pool

Well educated/qualified professionals in medicine, animation,

programming and engineering

NOTEXHAUSTIVE

Source: ADB market scoping study; Dalberg research and analysis

Tourism Employee Sector is currently underdeveloped, but represents scope to grow

(neighboring countries like Vietnam are more advanced)

Very high potential for employment generation of BoP populations

Scope for significant positive spillover effects in linked sectors such as

agribusiness


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WHATWASTHEPROBLEM?

Provision of ATM services to rural populations in Philippines was deemed unviable and

expensive by commercial banks As a result, rural populations faced severe challenges to get access to cash

HOWWASITSOLVED?

Using partnerships with rural banks, cooperatives and MFIs and by innovatively using

technology, ENCASH installs ATMs in remote, rural areas

To keep costs down, ENCASH also outsources ATM processes

WHATWERETHEOUTCOMES?

With 337 ATMs installed and more than 140 partnerships as of 2012, ENCASH has the largest

rural and cooperative banking network in Philippines

Availability of cash in the villages has led to the emergence of micro-enterprises near the ATM

as people spend the money in their own village

WHATWASLEARNT?

Inclusive businesses can expedite and create greater impact by incorporating technology in

business models

Rural populations are fast at adopting new technologies that offer a strong value proposition

ENCASH uses TECHNOLOGYand PARTNERSHIPS with rural banks to provide

ATM services to rural CONSUMERS

Source: ADB market scoping studies; Dalberg Research

Photo courtesy www.images.google.com


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WHATWASTHEPROBLEM?

The low income Filipino population had little access to cellular phone services and could notafford wireless products and services

Credit worthiness was also an issue since applicants for the service had to provide extensive

documentation to establish their financial status

HOWWASITSOLVED?

Smart introduced the Smart BillCrusher where no documentation such as credit cards, proof of

employment, etc. was necessary

The company introduced low-denomination top up pre-paid cards sold by micro-entrepreneurs

Capitalizing on the unique Filipino culture of sharing, Smart introduced a sharing service that

allowed customers to share airtime with family and friends


Smart Communications grew from ~190,000 subscribers in 1999 to 24m in 2006

Consumers benefited from several services such as: mobile banking, wallet to wallet transfers,

low cost remittances, ATM withdrawals, etc.

WHATWASLEARNT?

Local relevance & social dynamics can be crucial to designing products that can be easily

adopted

Smaller unit sizes tailored to suit low income cash flows, can help mitigate issues around

extensive proof of credit worthiness

Smart communications used innovative products to make wireless

services affordable for low income CONSUMERS

Source: Growing Inclusive markets UNDP case studies; ADB Market Scoping studies; Dalberg Research



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Overview of additional inclusive businesses in the Philippines

Source: ADB Market Scoping studies; Dalberg research

SECTOR COMPANY ENGAGEMENTMODEL OVERVIEW

Agriculture

/Food

Dizon Farms Supplier Fruit and vegetable wholesale chain that procures from 1,000 small farmers at fair prices and

extends training in farming and processing

Coffee for Peace Supplier Sources coffee beans at fair prices from tribal areas in Philippines, removing middlemen and

improving incomes

Jollibee Food

Corporation

Supplier Fast food retail company that sources inputs from small scale farmers, through long term

contracts and technical assistance for farmers

Nestle Supplier Purchases coffee from low income farmers, assisting them in increasing yield and quality,

while also working with the Govt

Financial

services

World Partners Bank Consumers Targets tricycle drivers and market vendors as customers for its micro-savings program, while

educating people of benefits

Western Union

Reduce costs of remittances for the BoP and offer additional services

Manufacturing All Home Design Suppliers Incorporates sourcing from basket weavers and small scale consolidators

Work Asia Employees Labour cooperative that provides outsourced manpower services for labour intensive services,

ensuring that labourers are paid minimum wages and get adequate social benefits

Energy Power Source group Consumers Combine renewable and conventional generation to provide electricity to off-grid households

through mini-grids. Power source also supports entrepreneurs in setting up small businesses

Health Generika Inc. Consumers Has franchisees all over Philippines and conducts educational and marketing campaigns , by

encouraging a shift to use of generics in order to reduce costs of health for the BoP

IT Smart Communications Consumers Offer mobile communication to the BoP, with customized facilities such as prepaid loading,and other services such as microfinance banking facilities

Globe Consumers Offer mobile communication to the BoP, with customized facilities such as prepaid loading.

BPI Globe BangKo is the first mobile phone-based microfinance savings bank

Encash Consumers Deploys ATMs in rural areas not deemed viable by commercial banks, charging a withdrawal

fee between $0.5 2, reducing travel to far off towns


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Indonesia

2


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Market overview: Indonesia



BOP OVERVIEW

INCLUSIVE

BUSINESSPROFILE

CHALLENGES


The rule of law is weak; corruption is high particularly in the infrastructure and

natural resources sector

Pace of private sector reforms remains low, restricted by a change-averse and

bureaucratic legislative branch

Insufficient infrastructure including inadequate roads and transportation, poor

electricity access, etc. all constrain productivity

Education levels and labor productivity remains low relative to regional estimates

Recent economic growth (6.5% real GDP growth in 2011) is among the fastest in

the developing world, and is driven significantly by rising consumer demand (63%

of GDP in 2011)

A young and large population with significant scope for inclusion as employees,

given some of the lowest real wage rates in the region

Huge natural resource reserves that can be leveraged for supplier IB models

Almost 60% of the labor is employed in two sectors Agriculture/Fisheries (40%)

and Tourism (20%)

INDONESIA VITAL STATISTICS1

GDP per capita

(PPP)

USD 5,000 (2012 est.)

GDP composition Agriculture 14.3%Industry 46.9%

Services 38.8%

Labor

composition

Agriculture 38.3%

Industry 12.8%

Services 48.9%

50%14%

22%

13%Others

Manufacturing

Consumer goods/retail

Agriculture

37%

24%

26%

13%Employee

Distributor

Supplier

Consumer

IMPORTANT

MACROECONOMIC

TRENDS

11%

73%

89%

27%

Non-BoP BoP

Spending $551.6B

Population 244.8m


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Deep dive into selected IB opportunities in Indonesia

KEYSECTORS MODEOFENGAGEMENT RATIONALE

NOTEXHAUSTIVE


Energy Consumer Large demand and need (both for grid electricity and for

decentralized appliances) as electrification rates remain low, and a

third of the population remains without access Potential for investment in infrastructure is high given ageing power

plants that need to be replaced in the short term and government

incentive sin the sector

Agriculture/Forestry/Fishery

Supplier

Largest employer, particularly of BoP populations, accounting for40% of the labor force

Track record of engagement with inclusive business models in which

MNCs incorporate smallholder farmers as suppliers (e.g. Nestle,

Unilever)

Tourism Employee More than 20% of Indonesias labor force is employed in the tourism

industry, most of them informally

Sector recorded 11% growth in 2012 (Q1), year-on-year


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WHATWASTHEPROBLEM?

Coffee trees are grown in mountainous regions, where transport is difficult

Coffee farmers are not aware of latest information on production methods and quality control

mechanisms

HOWWASITSOLVED?

Toarco established purchasing stations close to farmers and offered premium prices for quality

coffee

Toarco engaged local collectors to play multiple roles including providing credit to farmers,

buying coffee beans, transporting them to Toarco, and ensuring quality control for coffee

Toarco also organized seminars for training farmers in cultivation and post harvest processing


P.T. Toarco Jaya now exports 200-500 tons of coffee beans per year

It procures from 7,000 small-scale farmers , providing 53 full time and 900 temporary jobs at its

Rainforest Alliance certified plantation

WHATWASLEARNT? Incentives for quality produce can help increase adoption of training techniques provided to

improved productivity

Leveraging local capability to navigate difficult terrain can ensure greater reach and bring

down transport costs

P.T. Toarco Jaya is a subsidiary of a large Japanese coffee company and

sells a brand of speciality coffee while engaging the BoP as SUPPLIERS

Source: Growing Inclusive Markets country case studies; Dalberg Research



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WHATWASTHEPROBLEM?

The BoP population in Indonesia had very limited access to markets for consumer goods and

services such as mobile phone minutes Companies that wish to serve low-income segments find it very difficult to obtain any robust

consumer information

HOWWASITSOLVED?

RUMA uses a network of micro-entrepreneurs to sell products such as prepaid mobile minutes,

and prepaid vouchers for utility bills using mobile technology

RUMA provides market intelligence to consumer goods companies like Nestle and Danone

through their mobile phone product survey


RUMA has trained and incorporated over 10,000 agents, expanding their customer base to over

2 million consumers

Significant job creation in the region for women (85% of Ruma entrepreneurs are women) and

BoP populations

WHATWASLEARNT?

Matching payment methods to the requirements of poor people will increase collections BoP

customers prefer prepaid or pay-per-use models that allow them to pay in smaller increments

Collecting and providing market information on the BoP to companies is often as valuable and

impactful as directly providing products and services

RUMA is an IT and services firm that connects large companies to low

income CONSUMERS though a network of BoP DISTRIBUTORS




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Overview of additional inclusive businesses in Indonesia



Agriculture /Food Green Gold Global Supplier Source export grade seaweed from BoP farmers, while hleping them design and

build farming apparatus, providing inputs and implementing international

management and quality control standardsBali Seafood Supplier Link international markets for sustainable seafood with small fishermen in

Indonesia and invest in fisheries conservation while working with Govt and non-

profit organizations

UKM Indonesia Supplier Source agri-products produced by SMEs and BoP communities at contracted

prices and sell using a multilevel marketing strategy and market based approach

Paskomnas Consumer Manage wet market operations, provide farmers with information from a

network of markets and retail outlets, in order to optimtize prices and improve

bargaining leverage

Financial services Bank Andara Consumer Wholesale banking institution that partners with over 700 MFIs, providing loans

and services

Retail PT Sarinah Supplier Main retail/export outlet (state owned) for ~600 SME producers in Indonesia,

which provides capacity building and training assistance as well as loan/credit

with 6% interest

Energy RiverGen Employee/

Consumer

Provide power using micro-hydro technology to rural and remote communities

that are not currently reached by the existing power grid. 90% of the workforce is

also sourced from local communities

Terrasys Energy Consumer Provide affordable solutions for alternative power generation and access to rural

communities through a mix of renewable sources and technologies while

engaging the BoP in planning, construction and operation

IT PT. Rekan Usaha Mikro Anda (RUMA) Distributor/

Consumer

Provides products such as mobile minutes, vouchers for payment of utility bills,

etc through a network of small shops using mobile technology; also works to

provide market intelligence and employment information to the BoP

Education biMBA AIUEO Distributor/

Consumer

Uses a franchisee model to provide education to rural/urban BoP at affordable

prices, by using a low cost, child safe and environmental friendly materials


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Vietnam

3


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Market overview: Vietnam

BOP OVERVIEW

INCLUSIVE

BUSINESSPROFILE

CHALLENGES


Vietnams Doing Business rankings reflect continuing challenges in starting abusiness, registering property, getting credit and paying taxes

In spite of proactive Govt efforts, there is lack of infrastructure, specially

electricity and a reliable road system

Inadequate legal and regulatory systems are further bottlenecks to businesses

One of the fastest growing economies in the world in the last decade averaging

6.8% annual growth

Recent improvements in business and investment climate as indicated by

significant growth in FDI

Vietnamese export sector has exhibited 20% average annual growth over the last

15 years

VIETNAM VITAL STATISTICS1

GDP per capita

(PPP)

USD 3,500 (2012 est.)

GDP composition Agriculture 21.5%Industry 40.7%

Services 37.7%

Labor

composition

Agriculture 48%

Industry 22.4%

Services 29.6%

37%

18%

30%

14%Others

Financial services & insurance

Agricuture, forestry & fishing

Manufacturing

42%

16%

31%

12%Employees

Distributors

Suppliers

Consumers

IMPORTANT

MACROECONOMIC

TRENDS

17%

50%

83%

50%

Non-BoP BoP

Spending $83.6B2

Population 89.7m


2.Uses BoP/Non-BoP per capita spending ratios averaged for East Asia and Pacific region including Thailand, Cambodia, Indonesia


NOT EXHAUSTIVE


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Deep dive into selected IB opportunities in Vietnam



Agriculture/Agribusiness/Agri-inputs

Supplier

Leading exporter of natural resources commodities in cropssuch as coffee, rubber, tea and cashew

Large number of food processing exporters suggests potential

to involve farmers as suppliers to these exporters

Employs largest number of people in Vietnam

Light manufacturing Supplier

Employee

Significant anticipated short-term growth in manufacturing

across sectors

Opportunity to integrate millions of low-income people into

the work force Existing capabilities due to diverse manufacturing base

garments, textiles, shoes, electronics

Scope for sourcing raw materials from low-income producers

NOTEXHAUSTIVE

Healthcare Consumer Significant existing demand for healthcare Vietnam is the

second-highest self-medicating country in the world

Large opportunity for decentralized and technology-driven

care models (such as telemedicine, remote diagnostics) that

provide access to health products and services in rural areas


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WHATWASTHEPROBLEM?

Low income households use inefficient fuel-based lighting which has negative health andenvironmental implications

HOWWASITSOLVED?

Philips sells energy saving light bulbs with 2 -3X the longevity of regular bulbs

Philips increased product awareness and knowledge of long term benefits of low energy

lighting though conventions and seminars for current distributors

Philips also partnered with State Vietnam electricity to help distribute light bulbs at a subsidy

to the poor


Increased revenues for Philips in Vietnam

Increased awareness of negative effects of fuel-based lighting and increased access to clean

lighting technologies among the BoP in Vietnam

WHATWASLEARNT?

Spreading awareness amongst distributors helps indirectly influence consumer decisions, as

local distributor/retailers are closer and more credible to consumers

Partnering with public organisations can help leverage Govt initiatives to make products

affordable/accessible for the low income group

Philips Electronics works with DISTRIBUTORSTOSPREADAWARENESSabout low

energy lighting and sell technology to low income CONSUMERS




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WHATWASTHEPROBLEM?

Rural population was hard to reach and penetration numbers for these regions was low

HOWWASITSOLVED?

Coca Cola provided opportunities for sellers in rural markets to become distributorsThe route

to market model provided an opportunity for rural sellers to become distributors

Hundreds of mini-distributors were engaged trained to set up independent businesses

Coca Cola also uses this network to collect market information on key local needs and

requirements


Over 50 million sales revenue from Vietnam in 2009, with 30% growth in 2010

Distribution networks in all small cities and towns in 64 province of Vietnam by 2014

WHATWASLEARNT? Engaging and organizing existing informal rural retailers into a formal and proprietary

distribution network offered Coca Cola substantial competitive advantages in sales

Investing in building the incomes and capacity of the local community will build the companys

reputation in the community and build loyalty among consumers as well as employees

Coca-Cola uses an innovative grassroots approach engaging the BoP as

DISTRIBUTORS in order to reach rural CONSUMERS




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Overview of additional inclusive businesses in Vietnam



Agriculture /Food Duc Viet Joint Venture Company Supplier/Consumer The company invests in breeds, and provides high quality piglets as well as

training to ~100 farmers who supply reared pig; DVJV also provides small

distributors with coolers for processed meat and cater to BoP consumers through

wet markets

Nestle Supplier 25% of the companys global comes from coffee exports from Vietnam

Nestle works through public private partnerships to deliver techinical

assistance/training to farmers

Gentraco Join Stock Company Supplier Gentraco provides seeds and materials for contracted farmers, invites experts for

training, buys high quality rice (which creates 2 -3 time more profit) from farmers

at a price 5% higher than market price

Coca Cola Beverages Vietnam

Ltd.Distributor Through a route-to-market approach, Coca-Cola partners with mini distributors

and bodies such as the National Womens Union to train women, in order to

increase product penetration

An Giang Fruit, Vegetable and

Foodstuff JSC (AN-TESCO) Supplier TESCO provides seeds, materials, technology & periodic monitoring to the

farmers & collects raw materials from low income farmers at competitive prices

(0.05% higher than market rates) for export of canned food

Manufacturing Kim Jang Aluminium Plastic JSC Consumer/Distributor Sells affordable aluminium/steel products to the BoP through distributors 10

15% of whom are BoP sellers and are provided with credit/funds

Energy Philips Electronics Vietnam Ltd. Consumer Philips sells long lasting energy saving l ight bulbs to low/middle income families,

while creating product awareness and knowledge amongst distributors to

indirectly influence customers

IT /Technology Dong A Joint Stock Company(JSC) Consumer JSC produces low cost TVs for the low income market, by reducing costs through

eliminating distribution costs, importing affrodable equipment bulk and using the

latest productivity

TMA Solutions Consumer TMA plans to team up with the Govt and mobile service providers to create

mobile banking services for the low income group & provide health, education

and market related information through mobile technology

Other services Linfox Logistics Employees Linfox hires and trains BoP employees for specific tasks such as bundling, loading

and other supply chain management services

The Linfox College helps employees with a learning/development program


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India

4


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Market overview: India



BOP OVERVIEW

INCLUSIVE

BUSINESSPROFILE

CHALLENGES

Engagement model (n=67)

Poor law enforcement, complexities in the regulatory environment, includinginefficient subsidies and bureaucratic procedures (related to opening a business

for e.g.)

Low productivity of labor in general and shortage of technical and managerial

talent in particular

Policy paralyses, lack of reforms & administrative obstacles with instances of large

scale corruption raise concerns about Indias ability to sustain a high growth rate

A booming services sector has driven Indias GDP growth story over the last

decade and constitutes 65% of the GDP;

Agriculture employs more than half of the population offering largest scope for

inclusion (as employees and suppliers)

More than half of the population is under the age of 25, and India possesses 25%

of the worlds workforce; demographics are especially favorable in low-income

states

INDIA VITAL STATISTICS1

GDP per capita

(PPP)

USD 3,900(2012 est.)

GDP composition Agriculture 17%

Industry 18%

Services 65%

Labor

composition

Agriculture 53%

Industry 19%

Services 28%

24%

63%

10%3%

Employee

Distributor

Supplier

Consumer

Current IB engagement (n=120)

51%

13%

25%

11%

Healthcare

Others

Energy

Agriculture

IMPORTANT

MACROECONOMIC

TRENDS

94%

51%49%Spending $1,206.1B

Non-BoP BoP

Population 1,258.3m6%

NOTEXHAUSTIVE


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Deep dive into selected IB opportunities in India


Agriculture/Agribusiness Supplier

Employee

More than half of Indias population is dependent on agriculture for

their livelihood Significant investment required in agricultural supply chains, including

storage and cold chain infrastructure

Government incentives for this sector, including encouraging private

sector investment

Energy Consumer Millions at the BoP seeking off-grid solutions for access to energy

Significant renewable energy potential, particularly solar

Huge consumer opportunity

USD 2.04B/year in decentralized

renewable energy services

Tourism Employee India has the 2nd fastest growing tourism market in the world

One of the largest service industry employment sectors provides 9%

of employment in India

Sector employs people all over India, including a large percentage of

women


Sanitation Consumer Huge need, as 65% of rural households and 11% of urban households

do not have any latrine facility at home (2010)

Government support and carrots for private sector investment in this

sector in order to meet targets

Greenlight Planet offers affordable lighting to rural low income


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WHATWASTHEPROBLEM?

BoP households in India, especially in rural areas, do not have reliable access to electricity andinstead must rely on kerosene lamps which can be costly, unsafe, and provide poor quality light

HOWWASITSOLVED?

Solar-powered, portable, LED household lighting products, some of which can double as cell-

phone chargers

Innovative marketing and distribution channels such as the Saathi model that engages rural

retailers and prominent community members such as teachers, village leaders, etc. as

distributors


Greenlight reaches 1 million consumers and engages 1,000 distributors while employing 230

people

Greenlight plans to reach 10 million customers through 10,000 distributors by 2015

WHATWASLEARNT? Multiple distribution channels (e.g. shelf space in stores, door-to-door distribution agents)

need to be utilized to reach BoP markets

Marketing strategies requiring physical presence (e.g. rural village road shows, meetings with

local dealers) are important in BoP markets where personal relationships are important

Greenlight Planet offers affordable lighting to rural low income

CONSUMERS while also engaging the BoP as DISTRIBUTORSandEMPLOYEES

Source: Rug making Shaping lives on the road to export markets, CARE; Dalberg Research


Aravind eye care used an innovative deskilling technique for less skilled


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WHATWASTHEPROBLEM?

Lack of high skilled resources, such as doctors, made eye screening and surgery expensive

HOWWASITSOLVED?

End-to-end business model that divided operations into simple, discrete, assembly-line like

tasks using less-skilled professionals

Division of labor allowed for greater utilization of doctors, while still providing low-cost, high-

quality, high patient throughput


LifeSpring averages five times the number of deliveries compared to private clinics and the cost

Aravind grew from one hospital with 11 beds in1976 to seven hospitals with 3,590 beds

$2.5 million patients screened per year

Profitable, even though two thirds of surgeries are to the BoP

WHATWASLEARNT?

Division of operations into simple, discrete tasks can optimize scarce resources and allow for

high-quality, high-volume services

Longer investment horizons may be required to achieve scale; Aravind took a decade to perfect

operating model

Aravind eye care used an innovative deskilling technique for less skilled

EMPLOYEES to in order to effectively cater to low income CONSUMERS

Source: IDB Inclusive Forum 2010; Dalberg Research



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Overview of additional inclusive business models in India



Agriculture /Food Star Agri Supplier/Consumer Star Agri procured farm produce from rural farmers to fulfil orders from indian

corporates, using a quality based procurement

StarAgri provides services such as warehousing, quality testing and collateral

management services to BoP farmers

Global Easy Water Products Consumer GEWP sells affordable drip irrigation technology to small scale farmers across India

Financial services Vortex Engineering Consumer Sells rugged ATMs that consumer low power for rural areas with intermittent

power supply to both private and public banks

Textiles Industree Crafts Pvt. Ltd. Suppliers Industree works with rural artisans and SHGs to produce textiles garments and

other handicrafts, which retail under a unique brand name

Industree provides collateral for SHGs & acts as a guarantor for bank loans

Jaipur rugs Supplier/Employee Jaipur rugs employs 40,000 rural artisan weavers to make hand woven carpets for

export and 200 full time employees who are provided techinical training and

encouraged to develop professional skills

Energy Greenlight Planet Consumer/Employee/Dist

ributor

Greenlight Planet sells affrodable solar lighting products to the BoP in India

through a decentralised distribution model involving village level entrepreneurs &local staff as employees to oversee operations

Health Apollo REACH Consumer Apollo REACH hospitals provide super speciality medical care at affrodable rates

(20 - 30% less than major hospitals) and uses a hub and spoke model to effectively

provide talent to these hospitals

IT DesiCrew Solutions Employee As a rural business process outsourcing company DesiCrew engages the rural BoP

as employees, after training educated youth, who would otherwise migrate to

cities in search of jobs

Education AISECT Consumer AISECT uses a franchisee model while partnering with Govt organizations to

provide IT and vocational skills training uses a flexible fee structure that takes

agricultural cycles into account

Water Water Health Consumer Combines the use of decentralized purification centres in partnership with local

bodies to provide clean drinking water (20 litres/person/day)

Village level entrepreneurs operate units and BoP individuals also work as

construction workers

Housing Aarusha Homes Consumer Aarusha provides low cost housing for migrants and low income individuals in big

cities in India and also engages the BoP as workers in the facilitates


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Pakistan

5


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Market overview: Pakistan



BOP OVERVIEW

INCLUSIVE

BUSINESSPROFILE

CHALLENGES

Distribution & logistics are most notable obstacles for businesses engaging withthe BoP

Govt public policies and regulations are considered a major non -financial risk

Internal conflict, rule of law, stability, resource security and infrastructure

readiness are causes of concern

Pakistans energy deficit and institutional fragmentation of the sector is a major

contributor to reduction of industrial productivity

The financial services and manufacturing sectors have grown at twice the rate of

the agriculture sector

There is a huge demand for micro-insurance products in agriculture and health

Pakistans labour force is growing at ~4% a year

Exports were worth $20 bn in 2011 with textiles and food making for majority

share

BANGLADESH VITAL STATISTICS1

GDP per capita

(PPP)

USD 2,900 (2012 est.)

GDP composition Agriculture 20.1%

Industry 25.5%

Services 54.4%

Labor

composition

Agriculture 45.1%

Industry 20.7%

Services 34.2%

IMPORTANT

MACROECONOMIC

TRENDS

Current IB engagement (n=70)

39%

23%

23%

16%Others

Consumer goods

Food

Financial services

11%

93%

89%

7%

Non-BoP BoP

Spending 197.8B

Population 180.0m

NOTEXHAUSTIVE


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Deep dive into selected IB opportunities in Pakistan


Agribusiness

Supplier Consumer

Animal feed for emerging beef export markets, seeds to

assure increased productivity and agricultural infrastructureare import sectors where inclusive businesses can plug in

Innovative financial and micro and crop insurance products

and services can help mitigate risks in agribusiness

Energy Consumer Pakistan has a huge demand supply gap in energy

River based hydro-energy initiatives and biomass/biogas/solar

power for off-grid population can be systematic solutions

Energy efficient services through technology innovation,infrastructure replacement/retrofitting are also potential

areas that can be tapped into

Health Consumer Pakistans health facilities are highly polarized with few low

cost services for the BoP

There is a huge demand for diagnostic centers in smaller

towns

Health centered micro-insurance products are an urgent need

to provide affrodable care to millions of Pakistanis

Source: ADB market scoping study; www.ibfb.org; Dalberg research and analysis

Nestle incorporates small dairy farmers in its value chain as SUPPLIERS


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WHATWASTHEPROBLEM?

Nestle needed a reliable supply of milk, but large dairy farmers were expensive due to theirsignificant bargaining power

HOWWASITSOLVED?

Nestle set up its own supply chain by setting up Village Chilling centres where local individual

farmers could deposit milk

Nestle hires a Village Milk Collection Agent who is responsible for overseeing milk collection,

quality assurance, cash payment to farmers, and organizes extension services (e.g. veterinary)


Nestle collects milk directly from 160,000 farmers, taking in 50 million liters per year and

earning a profit of $20.7 million on revenues of $456 million

WHATWASLEARNT? Organizing BoP suppliers can be an effective way of building a low cost and reliable supply

chain, but initial set-up of infrastructure is time and cost-intensive

Finding high quality staff who can interact effectively with individual BoP suppliers (e.g. VMC

agent) is critical to the success of supply chains incorporating the BoP

Nestle incorporates small dairy farmers in its value chain as SUPPLIERS

ensuring a reliable supply of milk

Source: ADB market scoping studies; IDB inclusive business forum 2010; Dalberg research


Engro helps small scale farmers pursue profitable commercial business as


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WHATWASTHEPROBLEM?

Small dairy farmers are geographically dispersed over large distances, and lack techinical skills Dairy farmers refrain from commercial business since they are subject to unjust price,

exploitation by middlemen and payment delays

HOWWASITSOLVED?

Engro established milk procurement infrastructure deep in rural Pakistan using GPRS powered

devices to manage procurement through information systems

The MIS systems enable prompt and accurate payments on a weekly basis for farmers enabling

frequency of payments to match supplier needs


Sales have grown 20 times since 2006, with milk procurement tripling between 2006 2011

There are 1000 purchase locations and a field force of 1500 people to help farmers develop

their production

WHATWASLEARNT? Investing in building procurement channels close to supplier base, even though cost intensive

can reap several long term benefits

Tailoring payment systems to supplier needs can help maintain a steady supply of inputs as

suppliers do not have to deal with cash flow problems

g p p p

SUPPLIERSthrough effective procurement management systems

Source: G20 Challenge 2012; Dalberg research


O i f i l i b i d l P ki t


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Overview of inclusive business models: Pakistan



Agriculture /Food Agro Pvt. Ltd. Consumer Agro provides low cost inputs and services to the BoP

Vita Pakistan Consumer Vita provides low cost fortified milk for the BoP

Shakarganj Foods and Products Ltd. Supplier

Shakarganj integrates dairy suppliers in its value chainDalda Foods Pvt. Ltd. Supplier/Consumer Dalda Foods interates BoP suppliers in its cooking oil value chain and allows

consumers access to healthy oil

Unilever Pakistan Ltd. Distributor/Consumer Unilever integrates the BoP into its supply and sales chain primarily through the

Shakti Amma Program and a complementary farmer programs to improve quality

of raw material s

Nestle Pakistan Supplier Nestle integrates BoP farmers in its dairy value chain

Al Hamd Food Ltd. Supplier Al Hamd integrates women into their frozen foods value chain

Financial Services Capital Marketing Services Distributor Capital marketing will include BoP drivers in its cold supply chain

Tameer Microfinance Bank Ltd. Consumer Tameer will market health insurance products through its mobile phone banking

distribution network

Automobiles and

parts

Plum Qingqi Motors Ltd. Consumer Qingqi is keen to develop, manufacture and market low cost combine harvesters

for low income farmers

Pharmaceuticals Ferozsons Laboratories Ltd. Consumer Ferozsons provides low cost medicines for the BoP

Chemicals RL Enterprises Employee/Consumer RL enterprises will locally manufacture Zinc Sulphate for BoP farmers, generating

employment and health benefits


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Sri Lanka

6

CIC Agri is a large conglomerate that engages BoP across the value chain


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WHATWASTHEPROBLEM?

Lack of quality agricultural inputs for farmers, and inadequate information on effectiveproduction mechanisms

HOWWASITSOLVED?

CIC Agri provides small holder farmers with seeds and fertilizer and buys the harvested product

back at fair prices

It directly employs 2,500 BoP individuals in its factories, processing units and farms

CIC Agri offers consultancy services for farmers on optimizing yields


CIC Agri directly impacts the lives of over 20,000 farmers

CIC currently contributes to 6% of Sri Lankas total agricultural production and plans to grow

20% every year

WHATWASLEARNT?

Offering integrated solutions across the value chain can help tap synergies in producing impact

Working with a large number of small suppliers with effective techinical support can ensure

scalability of model

as SUPPLIERS, EMPLOYEESandCONSUMERS

Source: ADB market scoping studies; Dalberg research

Photo courtesy www.cicagri. com

MAS Intimates is a manufacturer of intimate apparel and sportswear that


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WHATWASTHEPROBLEM?

Majority of the BoP labour force has minimal work experience and does not possess specialized

skill sets

High attrition rates are a major challenge for the textile sector

HOWWASITSOLVED?

MAS absorbs workers at entry level positions, and trains them in requisite skills

A lot of emphasis is placed on career paths, employee interests and professional development

In order to promote ownership, small teams have weekly meetings with employees to discuss

challenges faced along production lines


MAS currently employs 50,000 individuals from BoP backgrounds, 80% of whom are women

MASs strong reputation as a preferred employer has led to low attrition

MAS has grown to 34 facilities in Sri Lanka and has now launched its own brand of clothing

WHATWASLEARNT?

Providing employee benefits such as those provided by traditional office jobs, and

promoting greater ownership of work can help ensure longevity of employee engagement

engages the BoP as EMPLOYEES




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Bangladesh

7

Kik is a German retailer for textiles that incorporates BoP artisans into


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WHATWASTHEPROBLEM?

The textile sector had been experiencing a 20% growth in Bangladesh, however a large pool ofartisans were completely disconnected from this export-driven growth story

HOWWASITSOLVED?

Kik worked with local partners: Systain Consulting Ltd. & CARE to involve rural women in their

supply chain

Funding was provided to local entrepreneurs to set up venues for work and training

Systain Consulting offered quality and monitoring control, while CARE was responsible for

mobilizing rural women


Kik fulfills demand for 5 out of its 600 centers from Bangladesh and plans to scale up the model

The enterprise has seen an average annual growth of 15% in production

WHATWASLEARNT? Partnering with local organizations can help international companies keep track of sector

specific needs and provide operational support

Investing in training facilities while mobilizing local work force can help ensure supply of

skilled labour to drive scale

the international value chain as SUPPLIERS

Source: Rug making Shaping lives on the road to export markets, CARE; Dalberg Research


BATA partners with CARE to train and engage rural women as door to


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WHATWASTHEPROBLEM?

Rural Bangladeshis have limited access to consumer products, and have to travel largepopulation centers investing time and money

HOWWASITSOLVED?

BATA works with a CARE initiative that selects women as sales representatives to sell multiple

products

BATA provides necessary trade credit, training support and delivery of products, while CARE

provides credit guarantee, training and support services to the self-help groups


Within 9 months of engaging with the model the program generated USD 300,000 in revenue

Success of the program resulted in a 20-fold increase in women sales agents

WHATWASLEARNT?

Existing programs can mitigate risks that working with low income consumer can bring in, while

offering operational on-ground support

Investing in training facilities while mobilizing local work force can help ensure supply of

skilled labour to drive scale

door DISTRIBUTORS of company products

Source: Bangladesh Social Enterprise Report 2010, FDC, LIBRA Advisory Group; Dalberg Research



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Mekong Region

8

Urmatt sources organic rice and by-products from 7000 low income

i Th il d


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WHATWASTHEPROBLEM?

Declining demand, increasing production costs and low profitability had forced many smallscale rice farmers into indebtedness and out of their farms

HOWWASITSOLVED?

Urmatt utilizes a fair trade contract farming model with more than 7000 farmers to purchase

organic rice and exports rice and rice by-products

Urmatt through monetizing by-products and cross subsidizing its business model hopes to

bring down costs of organic rice


Organic rice requires only one-third of the cash capital needed for conventional rice production

and is four times more energy efficient

The companys growth rate is supposed to double in the next 2 years and include another

~1400 farmers as rice exports from Thailand increase at 15% a year

WHATWASLEARNT? Tapping growing demand for adjacent products that are cost efficient can help increase

margins and profitability for both suppliers and the company

Cross subsidizing multiple products and bringing down product prices and enhance demand

for cost efficient products

SUPPLIERSin Thailand



Hydrologic Social Enterprise partners with microfinance institutions to

ll l filt ti t h l t l i


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WHATWASTHEPROBLEM?

Less than 5% of the population has access to piped water in rural Cambodia, and most peopleboil water using wood/charcoal which has negative health and environmental effects

HOWWASITSOLVED?

HSE developed a ten liter ceramic water filter that is equipped to kill disease causing bacteria

HSE partners with VisonFund, an MFI to provide 6-month loans to villagers to help families

purchase filters


By February 2012 226,000 filters were sold allowing 420,000 people access to clean water,

while also reducing wood usage and cutting emissions by 41,000 tons a year

HSE plans to sell other water, sanitation and hygiene products through the same channels in

future

WHATWASLEARNT?

Tailored purchase finance is difficult to design effectively, but can help increase adoption of

appropriate technology

Models which promote technology that have multiple health and environmental benefits can

tap additional sources of funding/revenue such as carbon finance

sell clean filtration technology to low income CONSUMERS




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End of Session

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