Markus Dietrich - Inclusive Business

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Unlocking the massive potential impact of Inclusive Business in Agriculture in the Philippines
Presentation at Social Business Summit on 2 October 2013
For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph
Social Business Summit 2013
GK Enchanted Farm - Bulacan, Philippines
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There is high growth in the Philippines but it is not inclusive:

High level of poverty in the ASEAN context
Philippines Vietnam Indonesia Thailand Malaysia Singapore 0.00% 5.00% Poverty Incidence (2009) 10.00% 15.00% 20.00% 25.00% 30.00%
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High growth but no poverty reduction
8.0% 60.0% 7.0% 50.0% 6.0% 40.0% 5.0% GDP growth (annual %)* 30.0% Poverty Incidence Among Families, NSO (%) Self rated poverty SWS
4.0%
3.0% 20.0% 2.0% 10.0% 1.0%
0.0% 2009 2010 2011 2012 2013Q2
0.0%
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High and rising inequality
Philippines Thailand Singapore Indonesia Malaysia Vietnam 0.34 0.36 0.38 0.4 0.42 0.44 0.46
Gini Coefficient (2009)
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Persistent and high un- and underemployment
8.0% 25.0% 7.0% 20.0% 6.0% Unemployment rate
GDP growth (annual %)*
5.0%
15.0%
4.0% 10.0%
Underemployment rate
3.0%
2.0% 5.0% 1.0%
0.0% 2009 2010 2011 2012 2013Q2
0.0%
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The private sector can make growth more inclusive

Decent jobs and income Goods and services relevant, affordable and accessible for the poor Strong Social Consciousness 300,000 NGOs 20,000 Social Enterprises 70% of companies have CSR programs 50% of companies have corporate foundations Weak Engagement as Business 70 companies in ADB study with inclusive business models
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Private sector engagement in IB

Benefits
Reasons to engage the BoP 1. Increase growth and profitability 2. Localize supply chain 3. Strengthen reputation and brand
Obstacles
1. Poor regulatory environment for IB and lack of targets 2. Problems to access capital 3. Lack of government incentives 4. Lack of social appreciation on the role of IB in inclusive growth (media, government, civil society)
Benefits to the company 1. Create shared value 2. Improved sales 3. Improved reputation
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Inclusive Business
Inclusive business - core business activity that integrates the low-income segment within its value chain as suppliers, consumers, distributors and/or employees in such a way that it creates shared value, addresses pressing social (and environmental) issues and contributes systemically to poverty reduction.
High Finacial returns
Mainstream Business Inclusive business
Social enterprise
Low Low
Social Impact
High
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Social Impact
- Reach
- How many people in the low income segment does it reach
- Depending on sector and mode of engagement
- Depth
- How intensive is the project impact on the poverty situation - Job generation: Stability, Sustainability, Quality - Access to products/services: Relevance of products/services
- Relevance and Systemic Contribution

- How relevant is it to the countrys poverty situation - How systemic is does the model contribute to poverty reduction
- Scale - Replicability
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Social Impact
- Innovation
- How innovative is the model
- What other benefits brings the model to the low income population
- Participation - Gender empowerment
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What is the Base of the Pyramid (BoP) in the Philippines?

62% of the Philippine Population (57 million) with family income below PHP 18,000
62.5% of population = 57.4 million people with income/expenditure of less than US$3 per day/capita (ca 18,000 PhP per family per month) in international Purchasing Power Parity 41.7% = 38.1 million US$2 per day/capita (self rated poverty (SWS) / minimum wage; ca PhP 12,000 per family per month) 18.4% = 16.9 million US$ 1.25 per day/capita (Philippines poverty line)
Source: PovcalNet / 2005 PPP USD, 2009 data
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Base of the Pyramid (BoP) Market

BoP consumes US$ 33.4bn (48% of total PH expenditure)
Education Household Operations Gift and Contributions Medical Care Clothing, Footware and Other Personal Care and Effects Transportation and Communication Fuel, Light and Water Rent/Rental Value of Dwelling Unit Food 0
435 490 506 507 677 1,437 1,935 3,077 5,830 16,292 5,000 10,000 US$ Million 15,000 20,000
Source: FIES, 2009 data, Top 10 expenditure items
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Findings of ADBs IB Country Study

IB in the Philippines is in a nascent state
Low awareness of IB among business community
Many IB models are early stage IB eco-system does not exist 70 IB companies of which only 30 are investable at the moment
Low awareness in finance community

Only 3 deals with total of US$ 5 million in last 3 years
Low awareness among government and donor community
BUT, there are good examples demonstrating potential of IB
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IB Potential in Agriculture - Job generation
Agriculture and Agribusiness Coffee for Peace sourcing coffee from indigenous HH Rocky Mountain Coffee sourcing of coffee MCPI sourcing seaweed from fisherfolks Coco Technologies sourcing coco fiber from coconut farmers Kennemer Foods sourcing of cacao Unifrutti Rainforest Alliance certified Cavendish banana sourcing
Food & Beverage Jollibee Farmer Entrepreneurship Program Nestle sourcing of coffee beans RFM sourcing of ube Manufacturing Gandang Kalikasan Sourcing for Human Nature cosmetics
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IB Potential in Agriculture Products and Services
Agriculture and Agribusiness SL Agritech Affordable Hybrid Rice tripling farmers income
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IB Potential in other Key Sectors Job generation
Manufacturing All Home Design Subcontracting handicraft production
Retail Microventures Hapinoy Sari-Sari store program Julies Bakeshop Micro kiosk franchising program Tourism Islands Banka Cruises Small boat operators
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IB Potential in Key Sectors Provision of Products and Services
Finance Climbs affordable life and non life insurance Globe BanKO mobile microfinance products Energy Powersource Group Rural electrification SURE Rural electrification plus job generation Health Generika Drugstores low cost medicine Family Vaccine Clinic affordable rabies vaccination
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IB Potential in Key Sectors Provision of Products and Services
Information Technology Smart and Globe Mobile Phone plus Encash Deployment of ATMs in rural areas Education STI technical and vocational courses Phinma quality and affordable education Urban Development Phinma Properties On-site relocation PPP with Q.C. Clean Engines affordable retro-fitting of motorcycle engines
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Recommendations of IB Country Study

Development of enabling environment
Business associations Promote IB among members Government Remove barriers promoting ease of doing business Integrate private sector in development planning and implementation with meaningful target setting Legislators Incentives for IB Development Partners Support with Technical Assistance Financing Investment opportunities
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Progress Report
IB is gaining momentum
More companies identify themselves as IB Business associations and NGOs are committed to inclusive business and inclusive growth agenda PBSP, LCF and GK Government is working with private sector DAR Senators with social entrepreneurship agenda were elected Impact investors are focussing on the Philippines Conferences are organized 1st and 2nd ADB IB Forum Social Business Summit
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Conclusion
A lot still needs to be done
Develop the network and eco-system Aligning inclusive growth agenda with inclusive business initatives Bringing investment to inclusive business
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Maraming salamat po
For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph, or Armin Bauer, ADB, Tel: 632-5550; abauer@adb.org

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Page 1

Social Business Summit 2013

GK Enchanted Farm - Bulacan, Philippines

There is high growth in the Philippines but it is not inclusive:

There is high growth in the Philippines but it is not inclusive:

3.0% 20.0% 2.0% 10.0% 1.0%

0.0% 2009 2010 2011 2012 2013Q2

Social Business Summit 2013

There is high growth in the Philippines but it is not inclusive:

Gini Coefficient (2009)

There is high growth in the Philippines but it is not inclusive:

GDP growth (annual %)*

2.0% 5.0% 1.0%

0.0% 2009 2010 2011 2012 2013Q2

Social Business Summit 2013

The private sector can make growth more inclusive

Private sector engagement in IB

Social Business Summit 2013

GK Enchanted Farm - Bulacan, Philippines

- Relevance and Systemic Contribution

What is the Base of the Pyramid (BoP) in the Philippines?

Source: PovcalNet / 2005 PPP USD, 2009 data

Social Business Summit 2013

GK Enchanted Farm - Bulacan, Philippines

Base of the Pyramid (BoP) Market

Source: FIES, 2009 data, Top 10 expenditure items

Social Business Summit 2013

GK Enchanted Farm - Bulacan, Philippines

Findings of ADBs IB Country Study

Low awareness in finance community

Low awareness among government and donor community

BUT, there are good examples demonstrating potential of IB

Findings of ADBs IB Country Study

Findings of ADBs IB Country Study

Findings of ADBs IB Country Study

Findings of ADBs IB Country Study

Findings of ADBs IB Country Study

Recommendations of IB Country Study

Social Business Summit 2013

GK Enchanted Farm - Bulacan, Philippines

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