Challenge funds are good, if not too heavy and thus slow. Support to small entities for pilot projects which are light on bureaucracy will encourage speedy take up would be good
Let's move on to the second finding of the BIF pilot: Models that engage the BoP as consumers or as producers are very different. Consumer models need to build demand, the market, and distribution channels, aside from an affordable product. Producer focused models need not only a manageable smallholder product and production system, but have to work out how to build in credit and a role for intermediaries. It may sound easy but it's not. A few things are common to both however, particularly the need for pilots to adapt the model, partners to go outside company competencies, and perseverance to adapt when it does not work.
Any reflections, examples?
For the first PRIDE, it took us about 6 months. We did a unique thing by going into the field without introducing any technology and followed the old-fashioned way of building person to person rapport using knowledgeable field agents. Once the rapport was established, technology was introduced gradually to make things more efficient.
Nadia, we assessed the result of the technical assistance given by BIF, which cost under £50,000 on average and did find that it added clear value to the majority of businesses, which is not bad for such a small input. Lots of details are in our report for donors on Adding Value to Innovation? bit.ly/BIFDonorreport
We consider it a quasi-challenge fund, but more hands on.
Interesting development that we have had at iSchool, where we are primarily trying to target schools at the BoP, is that the teacher unions (60,000 members) have become very involved and are keen to sell to their members and to schools, and they take a percentage as both a credit union and supplier.
Some of the key findings in our Innovations Against Poverty report were around the importance of building trust with those you are working with. We also looked at the importance of dignity and appealing to people's aspirations. These principles apply both to customer and to producer focused business models. They are certainly the 'soft' side of things but proved to be really important.
Something that struck me from the start of BIF work with companies was the fundamental difference between the challenges and models, depending on whether the company is selling to the poor or sourcing from them. I was surprised that this does not seem the be the starting point of other discussions around inclusive business, when for us it was critical to any discussion about how a company could progress.
I'm glad you brought up the issue of distribution models. At Opportunities for the Majority at the IDB we strongly believe that this is one of the key innovations in BoP business models. Precisely for what Caroline notes: the absence of a real market. BoP markets are still undeveloped and we need to be innovative in order to reach out underserved populations. It's a matter of "breaking the code" of the BoP consumer and the ways to provide goods and services.
I think perception of demand also matters for the BoP consumers. There were examples where they didn't want to pay for fresh water, but they are willing to pay a premium price for cosmetics. Cheap it may be, but certainly not cheaper than water that was being sold to them at a minimum price.
I'm really interested in this idea of "building demand" for consumer models. When we interviewed Paul Polak on his new book Business Solutions to Poverty he spoke about the need to use "Aspirational Branding" to generate in the buyers' minds an appreciation for the products attributes. Have you found this and as a follow up is it ethical to use such techniques when selling products to the world's poorest people?
Mark that's a great example that ties in Suzanne's issues around trust, and the issue of innovation in the distribution system. Many energy companies have struggled with their distributors as they don't know the product and 'churn' is high. Looks to me like you don't have that problem when teaching unions are promoting ZEduPad. And it has solved the consumer credit problem at the same time too. Fab!
In the mKRISHI-PRIDE model, we use the PRIDEs to eliminate the middle-men on both the input side and the market side. Through the mKRISHI platform, PRIDEs are empowered to directly deal with agri-input companies for their needs. Same goes on the market side. The value-prop for the input companies is that their supply chain issues are smoothed out as they have better visibility on the market needs along with the accompanying timeline. This leads them directly to a mode of JIT manufacturing. On the market side, the PRIDEs are able to plan their cropping based on the market demand.
Innovations Against Poverty was the opposite to BIF in that we provided funding but little technical advice, whereas BIF provided TA and no funding. We felt that the funding that IAP gave to start ups would have been very well complemented by technical business advice. There is scope for donors to do both together - funding and advice - or support organisations such as incubators, business mentoring programs etc that can help social entrepreneurs and start ups overcome the challenges they face. We had some specific recommendations at the end of our report From Paper to Practice, available at http://bit.ly/IAPKEReport13
I work at OMJ at the IDB. We're currently developing a mapping of the base of the pyramid in Latin America and the Caribbean. Our goal is to understand the BoP consumer and understand what are the factors behind their decision making when it comes to choose between goods or services in finance, health, housing or education. We've discovered interesting facts that shows us we tend to assume the BoP consumer aspires to replicate a higher income individual. The BoP consumer wants to be better off but it's not as concerned about brands, and is loyal to its customs and culture.
Sure, there are a couple of good links between BIF and Oxfam work, especially:
- Enterprise Development Programme (www.oxfam.org.uk/edp): Oxfam supporting particular enterprises in working for the benefit of poorer people. Interestingly, there might be some similarities coming up with between BIF 2 and EDP 2!
- Oxfam-Unilever Project Sunrise: Joint study of smallholder-inclusive business models, looking particularly at Unilever's supply chains, but also at other companies. Results not out yet, expected later this year.
Really useful discussion!
In the interests of time, let's move on to the third lesson from BIF: The journey from inception to scale is about a decade. It's not just a bit bumpy, due to inevitable things going wrong; it is zigzagging because testing a model on the ground will lead to new information, upheaval of the model, and a new direction.
Thanks Graham. Certainly we found aspiration branding to be important. Companies in BIF didn't sell toilets to slum dwellers by saying 'they are good for you' but by emphasising dignity, safety - and perhaps a touch of 'this is what others do in smarter areas'. We worked with a couple of businesses on nutritional products, and as we all know companies selling sugary foods are very good at aspirational branding. One of the issues was how to apply those skills when selling more healthy foods.
When a product is new, there is nothing better than demonstrating the product's attributed. ERAS promote soil testing kits in Bangladesh, and show the results of seedling that did and didn't grow using test results. d.light entrepreneurs throw the lantern on the floor in Nigeria to show durability. THis seems essential to me to inform consumers properly about the product. I think unethical behaviour comes in if there is misinformation or hidden costs, that take advantage of people.
My sense, but I speak for myself here, is that a poor person who has very little money is going to be harder to convince than others to part with money on a whim or a bit of hot marketing. Many companies found that people follow neighbours and leaders in the community, waiting until they can see a product works.
Yes, and also rapid changes to technology and communication bring new opportunities into the equation, and an ability to bring new partners.
really interesting insights, thanks.
Hi Suzanne and Caroline, I wanted to ask a similiar question and will now read the IAP report. What would you say is more effective (I know, how long is a piece of string...) - direct support to inclusive businesses from programmes such as BIF and IAP or should more be done to build up market eco-systems to facilitate private sector investment in inclusive businesses, such as impact investing?