 |
Table of Contents |
 |
Inclusive Business at the Base of the Pyramid
Updated: 19 April 2012
Inclusive growth in Asia and the Pacific
Over the past two decades, the Asia and the Pacific region has sharply reduced the share of its population living in poverty to 21% ($1.25 per capita income/expenditure at purchasing power parity of 2005) and 47% ($2), as of 2008. Many countries in the region have broadened their approach toward economic development – promoting inclusive growth strategies that can sustainably benefit the poor and vulnerable. While the private sector has been a key contributor to the economic boom in Asia, it has yet to fully realize its potential in creating shared value, which is to promote business models that integrate the low-income segment in unique and innovative ways that generate company growth while creating value for the low-income segment and directly contributing to poverty reduction. As such, there is an increasing agreement that the private sector growth can be a powerful tool in the global fight against poverty, if its business is more specifically targeted towards creating impact at the lower income groups.
Role of private sector in poverty reduction
Asia's private sector is increasingly realizing that the base of the income pyramid (BoP), i.e. those living below the $3-$4 poverty line, represents an interesting business opportunity as a substantial new market for goods and services that can improve the livelihoods of the poor and vulnerable, and as a significant pool of entrepreneurship, assets, talent and productivity that can be leveraged for the supply of critical inputs, innovative distribution systems, and skilled labor. Inclusive businesses are private sector investments specifically targeting this low income market with the double purpose of making reasonable profit (i.e. an internal rate of return of 8-20%) and creating tangible development impact through the provision of sustainable decent jobs and better income opportunities, as well as services that matter for the poor's life.
Inclusive business differs from social enterprises and corporate social responsibility activities in its realized profit making motive, as well as its social impact in scale and systemic contribution to poverty reduction, and consequently also the larger size of investment needs. It also differs from the original base of the pyramid approach that sees the poor mainly as market for private ventures and assumes automatic benefit for the poor through the provision of any consumption good. Expanding private sector growth through inclusive business ventures on the other side would provide the poor with new jobs and access to quality and affordable goods and services, helping them improve their lives and reducing poverty. However, the private sector has barely explored its potential at the BoP.
View the differences between social enterprises and inclusive business as relevant for developing ADB's IB Funds.
Furthermore, ADB is currently developing case studies on successful inclusive businesses in Asia; in addition, another ADB study will show investment opportunities for IB in the Mekong region relevant for ADB's IB Mekong Fund.
ADB's inclusive business initiative
First approved in 2008, and refined in 2010, ADB engaged in an initiative to stimulate inclusive business in Asia and Pacific. An initial technical assistance (TA) project aimed to develop inclusive business ventures in six (later broadened to 10) target Asian countries (Bangladesh, India, Indonesia, Pakistan, the Philippines and Viet Nam; as well as Cambodia, Lao PDR, Sri Lanka, and Thailand) and prepare them for project financing through the development of national/sub-regional private equity funds. The project is co-implemented, and leveraged where appropriate, with the Netherlands' Development Organization SNV* and the networks and assets of the World Business Council for Sustainable Development* (WBCSD). The Ford Foundation* is supporting the work in Indonesia.
This website provides information on
Projects 
Top of page
RSS Feeds
