Inclusive Business Model: For whom?
Mohammad Ali Ashraf, PhD
An author of 18 books and more than 100 research publications
Former Head, Department of Economics
United International University
Recently, a new concept of business has been introduced in the developing world called inclusive business. According to its originator, an inclusive business model is a commercially viable model that benefits low-income communities by including them in a company’s value chain on the demand side as clients and consumers and on the supply side as producers, entrepreneurs or employees in a sustainable way.
The term ‘inclusive business’ was first coined by World Business Council for Sustainable Development (WBCSD), which is a CEO-led organization of forward-thinking companies that galvanizes the global business community to create a sustainable future for business. However, the conceptual idea was first originated in an early United Nations report entitled, “Creating Value for All: Strategies for Doing Business with the Poor” published in 2008 by the Growing Inclusive Markets Initiative and guided by an Advisory Board consisting of leaders in the field such as the International Business Leaders Forum, the International Finance Corporation, key bilateral donors (USAID and AFD), the World Business Council for Sustainable Development, University of Michigan and Harvard Business School.
Though inclusive business models build bridges between business and the poor for mutual benefit, the benefits for business go beyond immediate profits and higher incomes. For business they include driving innovations, building markets and strengthening supply chains. And for the poor they include access to essential goods and services, higher productivity, sustainable earnings and greater empowerment.
According to the CEO-led businesses, this creates and uses the innovative models ranged from multinational corporations to large domestic companies, co-operatives, small and medium-sized enterprises, or even not-for-profit organizations that use business principles—or social business approaches—to achieve their mission. The question is: who are these entities aimed for to be benefited?
Conceptually, inclusive business is not corporate philanthropy or corporate social responsibility, which has inherent limitations of scope, impact and budget. Rather, it is the search for sustainable business models that "do well by doing good" and are part of the companies’ core business activities - the key to business having development impact at scale.
Based on the view espoused by the UNDP, the concept is adopted by development communities as ‘business fighting poverty’, but how? Or, is this model formulated for alleviating poverty in the developing nations? Or, is it dedicated for improving the socio-economic conditions of the poor? In reality, there is no clear indication by which we can confirm that the model is conducive to mitigate global poverty and environmental or climate problem.
According to a study, the approach is based onprofitability and it is planned for a long term process. In addition, businesses have the potential to reach a scale that is unattainable by most direct development interventions. For instance, Vodafone’s MPESA service in East Africa has reached more than 18.5 million individuals.
As to the matter of facts, this is a model which seeks to work for the welfare of the poor in developing countries by benefiting them through core operations on commercial terms of maximizing profits. Experts opine that there is a large market for opportunities for the large population of people of low incomes under the bottom of the pyramid (BoP) concept.
The critics argue that this approach has focused on the poor as consumers only. The stake holders of this type of business are the large private international corporations whose market shares in the developed nations had already been squeezed. For this reason, developing nations’ vast market is the target of the mega business vultures nestled in the western nations especially in the land of Uncle Sam.
Last but not least, the ultimate question remains as mentioned some earlier: For whomis this business conceptualized or who are the core beneficiaries of the inclusive business model -the mega international corporations or the poor of the developed and developing nations?