WBCSD-SNV Alliance: Creating inclusive business opportunities by linking local communities with big business

Reducing the risks of the poor through microinsurance: Allianz

Microinsurance in emerging economies represents a market of great potential growth and profitability. As insurance markets in many rich countries become saturated and growth prospects limited, insurance companies are looking to new opportunities in emerging markets. In India alone, more than 250 million people are in need of microinsurance. And worldwide, the Allianz Group (Allianz), a leading global provider of insurance, banking and asset management, predicts that by 2011 the microinsurance market will double the size it was in 2008.

The Allianz Group's work on microinsurance began in early 2005, as the Management Board of Allianz in Munich , Germany, realized that the South-East Asian Tsunami of December 2004 did not leave much of an impact on the balance sheet of the company, despite being one of the worst natural catastrophes in the last 100 years. As Heinz Dollberg, head of the Asia-Pacific division of Allianz, explains, "the risks faced by the poor are much the same as those for most individuals, but research has shown that they experience those risks with greater frequency and with a relatively greater financial impact."

Is it fair to do business with the poor?

What is the role of commercialization, commercial capital and commercial investors in delivering microfinance to poor people? Is it ethical to make money out of the poor? These were the central questions of a debate organized by the World Microfinance Forum Geneva between Muhammad Yunus, Founder of Grameen Bank, and Michael Chu, one of the visionaries behind Compartamos Banco.

The context for this debate is nicely summarized in an article in The Economist of 26 June 2008 titled Doing good by doing very nicely indeed. The article explains how “for years Muhammad Yunus reigned as the public face of microfinance. It seemed only right when, in 2006, the Bangladeshi economist cum social entrepreneur and his Grameen Bank shared the Nobel peace prize for a micro-lending revolution that has helped millions to earn their own way out of poverty. Yet for the past year or so, microfinance has had another public face, one that troubles people like Mr Yunus. Compartamos Banco argues that the best way for microfinance to help the poor is for it to make a socking great profit.”

Access to finance the key to helping the poor, WBCSD tells conference on Financing for Development

At the Doha Conference on Financing for Development, Ricarda McFalls, Managing Director of the World Business Council for Sustainable Development (WBCSD), stressed that access to finance was one of the cornerstones of a thriving small and medium enterprise (SME) sector in developing countries, and she presented successful models for integrating local SMEs into the supply chain of big corporations operating in developing countries.

Mobilizing the necessary finance for SMEs and helping the poor access finance in the context of the current global financial crisis was the subject of the Second International Business Forum on Financing for Development, which preceded the United Nations's Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus.

At the forum, attended by some 200 international business, government and civil society leaders, McFalls said innovative partnerships between business, government and development organizations were required to scale up efforts to meet the urgent demands for credit and skills development of this sector. As well as providing access to credit, governments had a role to play in unleashing capital for infrastructure projects that stimulate business activity in the short-term while paving the way for long-term growth.

Making money fair in Cambodia: ANZ

In Cambodia, there is a limited ability for the poorest in the community to save, make payments, or transfer money securely and quickly. Australia and New Zealand Banking Group (ANZ) has recently launched an inclusive business initiative (see the 5-minute video below) that aims to provide this population segment with the ability to carry out these functions.

Called Wing, the initiative provides payment services to Cambodia's unbanked, about half of the country’s 14 million people, allowing them to perform a range of financial services through mobile phones. Wing account numbers do not have to be tied to a customer’s mobile phone number. This means that the service is also available to the many people who do not own phones but who have access to one via family and friends.

Desarrollando negocios inclusivos en Bolivia

Click here to access the English version of this article (2 pages)

En el marco de la Alianza WBCSD-SNV para los Negocios Inclusivos, el Consejo Empresarial para el Desarrollo Sostenible (CEDES) Bolivia, como miembro de la red regional del WBCSD, y la oficina local del SNV, han asumido en Bolivia el desafío de desarrollar y difundir el concepto de negocios inclusivos como una solución sostenible que contribuya a la reducción de la pobreza, con la participación y el liderazgo del sector privado.

El programa tiene como objetivo el promover el desarrollo de negocios inclusivos mediante asesorías, facilitación de procesos, alianzas de actores y movilización de recursos para desarrollar un mayor nivel de conciencia en el sector empresarial sobre el concepto de negocios inclusivos.

Este artículo se enfoca en el trabajo cumplido en dos sectores: el sector agrícola y el sector financiero.

The Role of the Financial Services Sector in Expanding Economic Opportunity

This report (pdf, 45 pages) by Harvard University focuses primarily on large domestic and multinational commercial banks. These large firms are using increasingly deliberate strategies to expand economic opportunity through business models that serve poor individuals and SME clients. They are also developing initiatives to build human and institutional capacity and using their experience and influence to shape policy frameworks in the regions in which they work.

Despite their potential, to date the impact of large commercial banks on expanding economic opportunity has remained limited in the developing world, where a vicious circle of insufficient information, inappropriate products, inadequate infrastructure, and inflexible regulatory environments has kept costs and therefore process, high, limiting companies' markets to clients within the top tiers of the economic pyramid.

IDB Fund Supports Inclusive Business Development in Peru and Ecuador

(Para la versión en español de este artículo, véase el comunicado de prensa del BID)

The Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) today announced approval of financing for two non-reimbursable technical cooperation projects in Peru and Ecuador, totaling US$1.6 million and US$1.5 million, respectively. Both projects will target inclusive business development at the base of the economic pyramid in order to boost income and employment levels for the low-income population. The two projects will incorporate low-income entrepreneurs into the value chain of private-sector enterprises.

More than 5,250 micro and small enterprises in Peru will receive technical assistance and training enabling them to participate in the value chains of seven anchor businesses committed to the project (Perhusa, Acopagro, Dole, Comys, Rainforest Expeditions, Condor Travel, and Masisa).

Beneficiaries in Ecuador will include more than 4,850 micro and small enterprises that will be incorporated into the value chains of seven other anchor businesses (Pronaca, Toni, Cafiesa, Ile, Colineal, Floralp, and Supermaxi).

The executing agencies for the projects will be the Peru and Ecuador offices of SNV Netherlands Development Organisation. Country counterpart financing will total about a million dollars for each country.

Barriers to financial access act as a brake on development

Between 50 and 80% of adults in many developing countries have inadequate access to financial services, finds a new World Bank policy research report entitled Finance for All? Policies and Pitfalls in Expanding Access. Failure to provide more households and small and medium enterprises (SMEs) with the financial services they need acts as a brake on development.

While noting the microfinance industry’s progress in delivering credit to poor people, the report calls for a broader financial strategy that delivers services to all excluded people and firms. Inclusive financial systems ultimately benefit the poorest people and the smallest firms the most, by creating more jobs, raising incomes, and generating more opportunities for small businesses, the report says.