Full Economic Citizenship

March, 2007

FEC initiative – India 2007

 Our definition of “Full Economic Citizenship”

• By “Full Economic Citizenship” we mean that the global economy should be

more inclusive and offer opportunities for all. It implies that all over the world:

• Low-income consumers should have economic and physical access to

basic products and services at a fair price, in a way that leads to a better
quality of life and increases their economic opportunities

• Small producers should have access to the distribution channels,

equipment, technology and materials so that they are able to increase or
get a fairer share of the value they create

• Communities and individuals should be able to borrow against their

assets, regardless of the location or the size, to finance their own economic
growth

FEC initiative – India 2007 2

 To advance Full Economic Citizenship globally, we
have defined a three-prong approach

HYBRID VALUE CHAIN

Serving low-income
consumers
Improve products and services
to low-income communities
around the world thanks to
business social hybrid
collaborations
CLASSES OF SMALL PRODUCERS
FULL Support the restructuring of production and
ECONOMIC distribution systems for a whole cluster of
CITIZENSHIP small producers to allow them to get an
increased value for their production

Transforming small
producers economies
Enable a faster development
of mechanisms that allow
low-income people and
organizations to leverage the
economic value of their assets

Leveraging assets
of the poor
Core programs
WEALTH OF THE POOR Current focus

FEC initiative – India 2007 3

 Millions of people are currently underserved and
are paying a premium on essential goods

Warden road
Cost of product Dharavi slum Poverty
(upper-class area,
or service (Mumbai) Premium
Mumbai)

Credit
600% - 1,000% 12 - 18% 53 x
(annual Interest)

Water $1.12 $0.03 37 x

Phone call
$0.04 - 0.05 $0.025 1.8 x
(per minute)
Diarrhea
$20 $2.00 10 x
medication
Rice
$0.28 $0.24 1.2 x
(per kilogram)

These cost differences common around the world could be reduced if low-income
communities could benefit from the scope, scale and supply chain efficiencies
of large companies.

FEC initiative – India 2007 4

 In order to map out collaboration opportunities, we have
developed the Hybrid Value Chain framework

Citizen
Business
organization

Hybrid Value Chain

Low-
Distribution & Sales &
Product/ service Production Financing income
development logistics marketing
markets

The Hybrid Value Chain model draws on each sector’s core competencies.
Together, businesses and social entrepreneurs can combine assets and skills to
better serve low-income markets.

FEC initiative – India 2007 5

 Our goal is to create a new generation of collaborations
to successfully serve these low-income markets

Creating value for low-income consumers, business partners and social

partners:
Access to affordable and
appropriate products and services,
empowered customers

Low-income
Consumers

Win-Win
Business Social
Partners Organizations
New markets, goodwill Sustainable sources of
and pioneering income and higher
corporate image social impact

FEC initiative – India 2007 6

 Key elements of FEC strategy

• Change the mindset of large private companies so that:

• They integrate low-income consumers in their business
strategy
• They realize the benefits of partnering with social
entrepreneurs to do so

• Change the mindset of social organizations so that they realize

the potential of partnering with the private sector

• Implement demonstration projects to illustrate the potential of

win-win hybrid models to reach low-income market segments
and strengthen social organizations

FEC initiative – India 2007 7

FEC initiative – India 2007 8
FEC initiative – India 2007 9
 The Amanco business model

• US$ 1 million in sales during the pilot phase

Amanco • Potential large rural market for irrigation products
(Mexico and Latin America)

Social entrepreneur • 35% discount on list price

(rural distributor) • Expected profits between $100,000 and 130,000 during
the pilot phase

• Drip irrigation technology at a competitive price

Small-scale farmer • Pilot goals: 500 hectares irrigated

• 1.5% on the total sales to the distributor for

Ashoka 3 years

FEC initiative – India 2007 10

 Summary a “win-win-win” collaboration leading to the
creation of a competitive model of rural distribution

Small-scale farmers

• Have access to affordable irrigation

systems that were previously not available
for small plots
• Have access to financing mechanisms, and
now to technical and marketing assistance
• Able to grow higher-value crops, increase
their family revenue and improve family
food security

Amanco Mexico Competitive model Ashoka Fellows

• Accelerate their growth through
new markets
• Create social value in addition
to economic value
• Strengthen their image of
socially responsible company
for stakeholders
of rural
• Increase their social impact in their
distribution
regions of intervention
• Access alternative sources of
financing independent of grants
• Continue to innovate through new
forms of strategic alliances

FEC initiative – India 2007 11

 Opportunities for Hybrid Value Chain
collaborations
Steps of the Common barriers for businesses willing
value chain to enter low-income markets
Product/ Service • Limited knowledge of low-income individuals’
Development needs, capacities and value system
Production • High cost structure of current business
model
Distribution & • Cost of reaching individual consumers in
Logistics rural areas or urban slums due to the lack of
existing distribution channels
• Business in low-income markets is based on
low margins
Sales & • Traditional promotion channels are not
Marketing adapted to low-income markets (illiterate,
less connected…)
• Limited understanding of low-income
individuals’ value system
• No existing relationship with low-income
communities
Financing • Limited disposable income
• No access to formal banking services
FEC initiative – India 2007
Potential contributions of citizen
organizations
• Provide insights on consumers’ needs, values
and their actual utilization of new products
• Implement a “bare foot” business model to
reach out low-income communities
• Build capacities of communities to participate
in market processes
• Aggregate demand/supply thanks to their
local networks
• Concentrate business delivery in single points
• Help maximize the value of services for
customers by providing an integrated solution
and by mobilizing various local players
(education, civil rights, community
development, etc.), thereby strengthening
demand
• Able to mobilize community and implement
behavior change campaign to create
awareness around a need or issue
• Facilitate trust-based promotion and sales
through established local networks
• Provide micro financing or develop alternative
financing methods (leasing)
• Help mobilize available subsidies
12