4 Inclusive Business

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4 Inclusive Business

  1. 1. How Can the Private Sector Alleviate Poverty? Inclusive Business
  2. 2. BoP proposition <ul><li>Selling to the poor can be profitable & can help to eradicate poverty </li></ul><ul><li>CRITIQUE </li></ul><ul><li>The poor: first producers, then consumers </li></ul><ul><li>Poverty alleviation requires raising the real income of the poor </li></ul>
  3. 3. BoP proposition <ul><li>Private companies can make significant profits by selling to the poor. </li></ul><ul><li>Private companies can bring prosperity to the poor, and thus can help eradicate poverty. </li></ul><ul><li>Large multinational companies (MNCs) should play a leading role in this process of selling to the poor. </li></ul>
  4. 4. Counter arguments <ul><li>Costs of serving these markets are very high </li></ul><ul><li>Makes it difficult to have economies of scale </li></ul><ul><li>Weak infrastructure: transportation, communication, media, legal </li></ul><ul><li>Small size of each transaction </li></ul><ul><li>MNCs sell to people above the poverty line </li></ul><ul><li>The poor do not buy luxury items </li></ul>
  5. 5. Counter arguments <ul><li>The “Single Serve Revolution” increases the per unit price </li></ul><ul><li>Multinationals do not have a sound knowledge of these markets </li></ul><ul><li>The poor should better spend their money on nutrition, education, health </li></ul><ul><li>The poor are easily exploited, they make choices that are not in their self interest </li></ul>
  6. 6. Counter arguments <ul><li>Getting the poor to consume will not make them save money </li></ul><ul><li>The only way to help them is to raise their real income </li></ul><ul><li>You can do that 1) by lowering the prices of the goods they consume, or 2) by raising their income </li></ul>
  7. 7. 1. Reducing prices <ul><li>Reducing your profit </li></ul><ul><li>Reducing costs by reducing quality </li></ul><ul><li>It is often necessary to reduce quality in order to reduce costs, in a way that is acceptable to the poor </li></ul><ul><li>The poor simply cannot afford the same quality products as the rich </li></ul>
  8. 8. 2. Raising their income <ul><li>Buying from the poor, as producers </li></ul><ul><li>Incorporate them in value chains </li></ul><ul><li>Provide access to microfinance </li></ul><ul><li>Inclusive business </li></ul><ul><li>Government involvement in infrastructure, legal environment, efficient markets, public safety, basic education, public health </li></ul>
  9. 9. Toni, Ecuador <ul><li>&quot;Doing well by doing good&quot; is at the heart of concept of Inclusive Business, i.e., sustainable business opportunities that are good business and benefit low-income communities. </li></ul><ul><li>Inclusive Business marries profitability and development </li></ul>

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