Report on the Base Scan Survey on Inclusive Business in Bangladesh (1)

BASE SCAN SURVEY

ON

INCLUSIVE BUSINESS MODELS

IN BANGLADESH

Base Scan Survey on Inclusive Business Models in Bangladesh CSR CENTRE ǀ MAY 2010

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CSR CENTRE 16 May, 2010

BASE SCAN SURVEY

ON

INCLUSIVE BUSINESS MODELS

IN BANGLADESH


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Inclusive Business is fairly a new concept for the private sector of Bangladesh. To identify the current level of understanding of the private sector organizations of the country, CSR Centre was entrusted by IBLF and UKAID to conduct a Base Scan Survey within a smaller group of companies. The Report has some significant findings in this regard.


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EXECUTIVE SUMMARY

Bangladesh is a flourishing economy and holds key markets growing at rapid rates in almost all the fields and sectors of operation. Merrill Lynch has identified the country as one of eleven nations with the potential to emulate the recent growth patterns of the so-called ‘BRIC’ countries (Brazil, Russia, India and China). This fast growing-low cost and profitable key markets have attracted both the local and many major foreign investors to initiate operations in Bangladesh in a variety of fields such as Ready-made Garments (RMG), FMCG, pharmaceuticals, foods and beverages, banking, construction, etc. With the rapid growth rate, the business sector observed a tremendous expansion over the last two decades.

Businesses worldwide are profit oriented, seeking opportunities to maximize their return on investment. While the prime motive of business is totally focused on maximizing profit, it tends to be involved in some social/contributory works aiming at poverty alleviation, employment, and sustainable livelihood to aligning their vision with the agenda of the Millennium Development Goals thus adding value to their existence.

While value addition can be done through responsible behavior, another elegant approach is to integrate the supply chain through inclusivity. Companies worldwide are implementing innovative changes in their supply chain to be benefited from flexibility and steadiness, reduced costs and at the same time offering ample of opportunities to the low income communities. Usually they are done through establishing new relationships with smaller suppliers, marginalized producers, or through improving the existing chains by fetching inclusiveness of the tail end.


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The UKAID (UK Department for International Development - DfID) has launched a “Partnering with Business” initiative, which is programmed as a series of events in Africa, Asia and the UK meeting DfID's commitment to build stronger partnerships with business. The UKAID has partnered the International Business Leaders Forum (IBLF) for conducting the programs in different countries in Asia, Africa and the United Kingdom.

In Bangladesh, to explore the present understanding of Inclusive Business Models among the Business Houses, IBLF has partnered with the Corporate Social Responsibility Centre (CSR Centre) to conduct this Base Scan Survey among a number of Private Sector organizations. The sample size was determined to be 20.

CSR Centre selected 20 organizations from different sectors; those who are large, likely to have a story on how they became big with inclusiveness, and/or those who are concerned about corporate social responsibility, a buzz word in recent times, that encourages them to be involved in some social and/or community development projects aiming at reducing poverty or creating sustainable livelihood.

Inclusive Business is comparatively a new term in Bangladesh although during the Base Scan we found that most of the organizations, some way or the other, are replicating the model in their business aspects.

An Inclusive Business Model is a sustainable business framework that benefits low-income communities. While large corporations traditionally target consumers in the middle and high-income segments of society, and established suppliers and service providers from the formal economy, inclusive business finds profitable ways to engage the low-income segments into their business operations in a way that benefits both the business and the low-income communities and


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creates sustainable livelihoods for them and foster a win-win situation for both concerned.

The data collection method of this study includes semi-structured interviews and discussions with different stakeholders. The interviews were conducted with the top level management of the sample organizations and potential businesses and financial institutions.

Some recommendations are made based in the findings in the later part of this report.


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FOREWORD

International Business Leaders Forum (IBLF) and UKAID (DfID Bangladesh) had requested the CSR Centre Bangladesh to conduct a short but significant Base Scan Survey on Inclusive Business Models in Bangladesh in the period April 2010. The objective of the survey was to scope the business environment in Bangladesh to realize whether the private sector had some understanding on inclusive business and to what extent inclusive businesses models exist and what are its various forms.

The CSR Centre had conducted a Base Scan Survey of 20 larger sized organizations and companies who not only have large annual capital turnover but those who are well reputed in their specific sectors at the national level.

It was a challenge in selecting the proposed twenty organizations / companies within the short duration of the timeframe for the Survey itself. The other challenge was to gain the interest of the respondents as the survey team met or conversed with the senior managers or CEOs and heads of these organizations that would need to have a clear understanding of the needs and objectives of the survey in order to feed into the survey instrument effectively. It was rather difficult to get immediate feedback as companies needed time to think through the concept of inclusive business and then delegating the right person for filling in the survey instrument within the very short span of allocated time. Yet, nevertheless the Survey did give some idea on the status of “Inclusive Business” models and its challenges in incorporating this into the Bangladeshi private sector.

I would like to take this opportunity to thank all those twenty companies and organizations who gave the survey team their time and


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shared their business experience to make this Base Scan Survey of Inclusive Business in Bangladesh possible.

Thanks also go to IBLF and UKAID in addressing such a crucial issue of “Inclusive Business” in Bangladesh. I hope that this will be the first of many such studies for Bangladesh’s private sector in implementing good practices of Inclusive Business models.

Lastly I would like to thank my team at the CSR Centre who worked diligently through weekends to make this Base Scan Survey a success given the time constraint.

As Bangladesh is still coping with high population growth rates and minimum livelihood options, large portion of the population being unskilled and illiterate the Government of Bangladesh hopes to reach the Millennium Development Goals (MDGs) and to create substantial space for investment, the scope for inclusive business can support a public-private partnership approach to sustainable development.

I am hopeful that through the recommendations made in this Survey Report there will be a greater shared understanding of “Inclusive Business” models. Those companies possessing best practices can share their struggles and benefits of doing inclusive business strategies to uplift the socio-economic condition of the bottom pyramid of the population.

_______________________ Shahamin S. Zaman

CEO, CSR Centre, Dhaka, Bangladesh

May 14th 2010


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Executive Summary............................................................................................. 4

Foreword ............................................................................................................. 7

Introduction .......................................................................................................10

Methodology .....................................................................................................16

Overview of Inclusive Businesses in Bangladesh ............................................19

Survey Findings .................................................................................................23

Recommendations ............................................................................................31

Conclusion .........................................................................................................33

ANNEXURE 1: Questionnaire of the Base Scan Survey................................34

Contents


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INTRODUCTION

Inclusive businesses may engage low-income communities through, among other things, directly employing low-income people; targeting development of suppliers and service providers from low-income communities; or providing affordable goods and services targeted at low-income communities.

Inclusive business is not a form of corporate philanthropy, which has intrinsic limitations of scope and implementation. Rather, it is the search for a sustainable business model that "does well by doing good and being good" and have the potential to become a part of the mainstream business model within the companies concerned - the key to business having development impact at scale.

As employees and suppliers, through an Inclusive Business Model, the low-income segments gain access to the formal economy; including provision of training, access to finance and livelihood. As consumers, low income customers can be benefitted from products and services that meet their needs in an affordable way. If business does both, it opens up the virtuous cycle of business in development.

An Inclusive Business Model involves doing business with the base of the Bottom of Pyramid (BoP) across companies' value chains, incorporating them in the supply chain, production stream, distribution means and marketing channel of goods and services. This generates new employment, income, technical skills and local capacity. Given that most economic activity now occurs in developing countries, and given that over 90% of population growth will happen there, those companies that master Inclusive Business Models could be those who realize greater success in the coming decades.


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Inclusive Business investments need to generate a return. It is a matter of combating poverty through business solutions – not philanthropy. It is not just about selling cheaper products to the poor, but rather about looking holistically at opportunities to productively engage in a long term relationship with the private sector.

Large companies have the potential to make a contribution to poverty alleviation through the following four areas of business action:

Core business operations and value chains Corporate social investment and strategic philanthropy Hybrid models that combine social and commercial capital and/or

public and private resources Public advocacy, policy dialogue and institution building

Support from political leaders and the establishment of optimum framework conditions are crucial to succeed on Inclusive Business. Doing business with the BoP require bold innovative strategies from the state and a close collaboration with small and medium-sized enterprises (SMEs), large firms, and civil society organizations (CSOs), in order to prioritize key areas that, if addressed, could maximize the impact of development efforts while also reducing investment inflows.

In 2006, the World Business Council for Sustainable Development “WBCSD” and the Netherlands Development Organization “SNV” joined forces to form the Alliance for Inclusive Business in Latin America. The Alliance has reached out to 300 companies in these countries, and has generated 80 Inclusive Business ventures, now being implemented in areas such as agriculture, affordable housing, micro-insurance, mobile banking, forestry and biofuel, improving the lives of up to 400,000 people in the BoP by 2010. The WBCSD and SNV have begun expanding the uptake of inclusive business by starting activities in Asia and Africa. Projects have begun in Zimbabwe, Mozambique and Vietnam.


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THE BOTTOM OF THE PYRAMID – BOP: AN OPPORTUNITY FOR ENTERPRISES TO FACE THE ECONOMIC CRISIS

TH E BOP CON CEPT

1. In recent years, use of the terms “base of the pyramid” and “bottom of the pyramid” have proliferated. Technically, BoP is a socio-economic designation for the four billion people who live on less than USD 1,500 (according to the purchasing power parity exchange rate) per capita income.

The so-called Base of the Pyramid (BoP) Strategy involves the private sector in helping reduce poverty by serving these people in ways responsive to their needs, such as providing them with access to knowledge and technology.

2. The BoP concept does not merely relegate the poor to the area of charity, philanthropy or social responsibility (CSR) initiatives. It involves change in the functioning of companies as much as it changes the functioning of developing countries.

Annual per capita Income1 Tiers Population in MM The World Economic Pyramid Note: 1 Based on purchasing power parity in USD

Source: UN World Development Reports; ‘Bottom of the Pyramid’-C.K. Prahalad; The Fortune at the Bottom of the Pyramid, C.K. Prahalad and Stuart L. Hart


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PURPOSE OF THE SURVEY:

The UKAID (UK Department for International Development - DfID) has launched an initiative “Partnering with Business”, which is programmed as a series of events in Africa, Asia and the United Kingdom to meet up with DfID's commitment to build stronger partnerships with business. The International Business Leaders Forum (IBLF) has been partnered by the UKAID in this process for conducting the programs in different regions of Asia, Africa and the United Kingdom.

In Bangladesh to explore the present understanding of Inclusive Business Models among the Business Houses, IBLF has partnered with the Corporate Social Responsibility Centre (CSR Centre) to conduct this Base Scan Survey among some of the Private Sector organizations.

TH E OBJECTIVE OF THE SU RVEY IS:

To look at how businesses in Bangladesh perceive the notion of Inclusive Business

To identify the cases of inclusiveness and tales of partnerships that have been developed due to their social development projects

To explore the challenges/barriers, if any, of doing Inclusive Business in the context of Bangladesh

The findings of the Base Scan Survey will be presented in a day-long Conference on May 17, 2010 in Bangladesh where the program will focus on raising the awareness on Inclusive Business Models and how the private sector can contribute to human development as well as to the MDGs through such models and demonstrate the business sense for adopting Inclusive Business Models.


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INTERNATIONAL BUSINESS LEADERS FORUM:

The International Business Leaders Forum (IBLF) is an independent, not-for-profit global organization working with business leaders to deliver innovative solutions to sustainable development challenges.

IBLF is supported by a network of over 60 global and national companies from Europe, America, Asia and the Middle East. These businesses are leaders in their sectors, and often in the fields of social and environmental accountability, community investment, stakeholder consultation and partnerships.

Over the past two decades, IBLF has worked with businesses, governments, and civil society organizations in over 90 countries - both in developing countries and emerging markets, as well as the major financial hubs where companies are based.

IBLF also works with a range of partners, including government bodies and inter-governmental organizations such as the UN (United Nations) and the World Bank, NGOs and the public sector to create an ‘enabling environment’ in which business can have a positive impact on society.

An additional asset to this work is IBLF’s long-term relationship with regional affiliates and networks across the world in key markets such as Latin America, Asia Pacific, Europe, Russia and the Commonwealth of Independent States (CIS).

www.iblf.org


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CORPORATE SOCIAL RESPONSIBILITY CENTRE:

Established with private sector start-up funding to raise CSR awareness, the CSR Centre’s goal is to promote sustainable development through responsible business practices. Registered as a Trust, the autonomous CSR Centre was set up as a non-profit organization in August 2007 and launched publicly in September 2007 under the direction of a Board of Trustees comprised of leading private sector companies (BRAC Bank Limited, Rahimafrooz Bangladesh Limited, TATA International, and Youngone Corporation) and Civil Society Organizations (Bangladesh Centre for Advanced Studies, Bangladesh Enterprise Institute, Centre for Policy Dialogue, and Development Research Network).

The Centre’s mission is “to establish corporate social responsibility as a key strategy for corporate excellence in Bangladesh to maximize stakeholder benefits”. The primary objective of the Centre is to become the prime source of information, resources, and advisory services on CSR in Bangladesh, and the operational principal is to contribute to achieving the human development targets set in the Millennium Development Goals (MDGs) in Bangladesh through private sector led growth.

CSR Centre is the joint focal point for UN Global Compact in Bangladesh along with the Bangladesh Enterprise Institute (BEI). With BEI, the CSR Centre comprises the principal promoters of the UNGC and its principles in the country.

CSR Centre also holds the Secretariat of South Asian Forum on Responsible Business (SAFoRB) in Bangladesh. The Centre has wider access to business sectors and a strong local and international network to promote responsible business.

www.csrcentre-bd.org


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Besides its mission to create awareness on CSR amongst the Bangladeshi Business community, CSR Centre has conducted several studies on behalf of foreign investors regarding the present CSR positioning and sustainability issues in different business sectors in Bangladesh. The Centre is also capable of providing services for CSR policy development, capacity building programs, CSR trainings and workshops, conformities with international standards (i.e. GRI, SA8000, BSCI, WRAP, GOTS, etc), corporate governance, stakeholder engagement and dialogue, sustainable appraisal, and so on.

METHODOLOGY

ST UDY TE AM

The following members of the CSR Centre have conducted the study and prepared the report:

Ms. Shahamin S. Zaman (Chief Executive Officer) Dr. Feroz Kabir Khan (CSR Operations Manager) Mr. Shafiq R. Bhuiyan (Officer, CSR Resource Mobilization)

SA MPLE

IBLF and CSR Centre agreed upon conducting the Survey of a sample size of 20 large organizations in Bangladesh who are likely to have some Inclusive Business Models prevailing in their activities.

CSR Centre selected the companies so as to have various sectoral representations.


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DATA COLLEC TION ME THOD

The data collection method of this study includes: company visits, factory visits and semi-structured interviews and discussions with different stakeholders.

The survey was conducted by the study team in the month of April 2010 in Dhaka city, Bangladesh.

Template for case studies provided by the IBLF was used to structure the basic questions in the interviews focusing on their understanding on Inclusive Business, story of projects undertaken for inclusiveness, challenges they faced in doing so and the step forward that they plan to implement in future. The questionnaire is enclosed in Annexure 1 of this report.

Company websites were also visited to explore relevant information.

Based on the findings, the recommendations have been made at the end of this report.

The major constraint of the study is the short time-period. The initial time line for the study was 20 days, was insufficient to cover the large organizations and explore their perception on a relatively new concept of “Inclusive Business”. However, it was clearly identified that the perception is not so clear among the private sector organizations that created the impediment to finish the study in time. Many of the respondents had to take more time than stipulated as they needed more interaction with the team from CSR Centre to get a clearer understanding of the issue of “Inclusive Business”. This led to a need to revisit and assist a majority of organizations more than once in order to get the desired interest in responding to the survey itself.


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The Base Scan took into account 20 of the larger companies / organizations for its sample size. Yet there was an attempt to include the various sectors which have larger companies / organizations involved so as to get a better picture of the Bangladesh scenario.

SU RVEY R ESPONDENTS:

The following organizations were included in the Base Scan Survey:

1. Advanced Chemical Industries Limited (ACI Limited)

2. AK Khan and Company

3. Akij Group

4. Apex Adelchi Footwear Limited

5. Apex Leather Craft Limited

6. Bank Asia Limited

7. Concord Group

8. Elite Group of Companies

9. Hatil Complex Limited 10. Janata Jute Mills Limited

11. Kazi & Kazi Tea Estate

12. M. M. Ispahani Limited

13. Navana Group

14. Otobi Limited

15. Partex Group

16. Rahimafrooz Bangladesh Limited

17. Summit Group

18. Square Pharmaceuticals Limited

19. Unilever Bangladesh Limited

20. Viyellatex Group


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OVERVIEW OF INCLUSIVE

BUSINESSES IN BANGLADESH

As mentioned earlier Inclusive Business is comparatively new phrase in Bangladesh although during the Base Scan Survey it was found that most of the organizations, some way or the other, is active with the activity of inclusive business.

Bangladesh is a country with a population over 150 million people with major concentration in the rural areas. But surprisingly, “Inclusive business”, being a much unheard concept, has been one of the key sources of earning for many in the rural areas though the model has not been realized in most of the cases. With the growing number of businesses and their affiliations with NGO’s, Inclusive Business models have become more visible and have helped the economy grow significantly with a more efficient distribution of resources and increased cash flow.

Bangladesh has made considerable progress in its economic development over the last two decades. At the same time, Corporate Social Responsibility (CSR) has had a good coverage among the business organizations encouraging them to be involved in different social and development works. As part of their social commitment, many companies are involved in donating money, establishing school for educating the poor, setting up health camp, considering the potential of small suppliers, vocational training, community investment, equal employment practices, taking care of the vulnerable group, partnering NGOs for development projects, and so on. Promoting initiatives like vocational training and skill development to accelerate this growth process will help reducing poverty.


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The main challenge for the skill development system is to overcome its inadequate orientation to the labor market. Although recently in some business houses, financial institutions are supporting the technical and vocational education, and training and skill transfer thus driving the changing in the patterns of labor demand, with proper incentives to build those connections, which would ensure that skill development courses are relevant and useful to potential new employees and the employers.

Bangladesh at a Glance

General Economy Development

Land Area: 130,170 sq km (2007) Population: 144.5 million (Male 74.0 million,

Female 70.5 million) (2008) Population Density (people per square km):

1218.19 (2007) Annual Population Growth: 1.64 (2007) Urban Population 26.66%, Rural Population

73.34% (2007) Life Expectancy at Birth: 64.07 (Male 63.16,

Female 65.02) (2007) Fertility Rate (births per woman): 2.83 (2007) Literacy Rate 53.48% (Male 58.67%, Female

48.05%) (2007)

GDP per capita: US$431.45 (2007)

Per capita income: US$599 (2007-08)

Labor Force: 74.25 million (Male 60.81%, Female 39.19%) (2007)

Inflation, Consumer Prices (annual): 9.11% (2007)

Human Development Index: 0.547 (140th in the world) (2007-08)

Official Development Assistant: US$1.502 billion (2007)

Aid consisting of Central Government Expenditures: 21.72% (2007)

Aid per capita: US$9.47 (2007) Population living at/below

US$1.25 a day: 13.08%, at/below US$2.00 a day: 33.78%

Source: Bangladesh Bureau of Statistics (2009); Statistical Pocket Book of Bangladesh 2008, Dhaka: Bangladesh Bureau of Statistics

Inclusive business models are to be designed and delivered for mutual benefits for business – generating sales and profit growth – and for low-income communities – creating jobs, providing access to new products and increasing incomes. Without any pre-acquaintance with the concept of Inclusive Business, these practices have been profoundly been into action under many social and community development projects. Building sustainable livelihoods requires targeted support from


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governments, private sector and civil organizations to ensure impact, long term commitment, scale and sustainable development.

Inclusive Business Model in some cases is considered as an addition to the Social Enterprise Model. Social Entrepreneurs are initiators who undertake businesses for social causes while social businesses are self-sustaining, profitable ventures that aim to alleviate poverty. But it is important to mention that while Social Business/Enterprise Model is completely about commencing a new entity aimed at operating in either profit/non-profit framework with a social cause, inclusive business model is the integration of the marginalized stakeholders in the existing business outline that goes beyond the immediate return and ensures the sustainability of its value offering.

One of the pioneering examples strained many times of such model is Grameenphone Limited’s “Polly Phone” (village phone) program which offered mobile phone for commercial purpose to the disadvantaged population, specially women in the rural areas, on the basis of small loans to outreach the rural areas with wider coverage at the same time creating a means of earning for them. (Source: www.grameenphone.com)

An alike inclusive business model can be found in the case of Bata Shoe Company (Bangladesh) Limited. Bata in partnership with Care Bangladesh initiated a “Rural Sales Program” with an objective to generate employment and address profitability of the private sector through increasing sales. It aimed at promoting gender equality and empowering women, building their capacity for sustainable enterprise development and creating a win-win business partnership. While Bata provided the women with the necessary trade credit, training support and delivery of products in time, Care provided the support of credit guarantee, training and support services to the self-help groups. (Source: www.socialenterpriseportal.org)

Photo of GP’s Polly Phone and Bata’s Rural Sales Program


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A good example of Social Enterprise is Hathay Bunano Proshikhan Society. Hathay Bunano p.s. is a social enterprise, aiming to create flexible employment opportunities for women, which is fairly paid, good quality, flexible and local, through centers in the rural areas while generating returns comparable to a for-profit enterprise. It is a non-profit society and as such any profits achieved are re-invested in the communities. (Source: www.hathaybunano.com)

Inclusive Business models include the poor on the demand side as clients and customers and on the supply side as employees, producers and business owners at various points in the value chain. The model builds bridges between business and the poor for mutual benefit (win-win situation). The benefits from inclusive business models go beyond immediate profits and higher incomes. For business they include driving innovations, building markets and strengthening supply chains. And for the poor they include higher productivity, sustainable earnings and greater empowerment.

As mentioned earlier, Inclusive business is completely a new package for higher productivity for the business organizations in Bangladesh. However, showcasing an ideal model can create a lot more business sense for the private sector at the same time can play a revolutionary role in fostering the creation of extensive sustainable livelihood options for the poor and marginalized producers of the bottom pyramid and hence contribute to the greater objective of alleviating poverty.

Photo courtesy: Hathay Bunano p. s.


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SURVEY FINDINGS

This Base Scan Survey was conducted among a sample size of 20 large organizations of Bangladesh. CSR Centre selected 20 organizations from different sectors; those who are large, likely to have a story on how they became big with inclusiveness, and/or those who are apprehensive in social commitment / responsibility (CSR) that encourages them to be involved in some social and/or community development projects aiming at reducing poverty or creating sustainable livelihood.

The companies included in the Survey represented different business sectors:

Name of the Company

Representing Sector

1. ACI Limited FMCG, Pharmaceuticals, Agro

2. AK Khan and Company Jute, Textile, Trade

3. Akij Group Jute, Beverage, Tobacco, Cement

4. Apex Adelchi Footwear Limited Leather

5. Apex Leather Craft Limited Leather

6. Bank Asia Limited Bank

7. Concord Group Construction, Textile

8. Elite Group of Companies Steel, Textile, Paints

9. Hatil Complex Limited Furniture

10. Janata Jute Mills Limited Jute

11. Kazi & Kazi Tea Estate Tea

12. M. M. Ispahani Limited Tea

13. Navana Group Automobile, Battery, Construction

14. Otobi Furniture

15. Partex Group Furniture, Bank, Beverage

16. Rahimafrooz Bangladesh Limited Battery, Renewable Energy

17. Summit Group Energy

18. Square Pharmaceuticals Limited Pharmaceuticals

19. Unilever Bangladesh Limited FMCG

20. Viyellatex Group Textile, Tea


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RE SEARCH FINDINGS

UNDERSTANDING OF INCLUSIVE BUSINESS

Majority of the respondents highlighted that they do not have a concrete understanding regarding the model of Inclusive Business. But they also mentioned that it should be a business model that allows organizations integrating its supply chain to create a wider impact on its market value or value offered. Some mentioned that inclusive business starts very much from the suppliers, includes the banks, buyers, workforce and ends at final consumers. Some mentioned that inclusive business is renovating businesses to help the poor in becoming better by providing access to critical goods, service, jobs and incomes.

One interesting statement was, “to my understanding Inclusive Business means incorporating of individuals, institutions and service providers from all section of the society, mainly from the low income group to facilitate them in ways that benefit them and the cooperation for better livelihood of this group and the overall society”.

However, most of the respondents stated that Inclusive Business is what the terms suggest, business inclusive of all the stakeholders. The business model is not so clear to them is considered how to measure the impact and how to scale success.

In the context of Bangladesh, the respondents feel that as the country is poverty stricken and it has a huge population, businesses have a better opportunity to engage them as human resource and workforce that will enhance the growth and sustainability of the firms. Some think that engaging with Inclusive Business can also create goodwill for the brand in the market and the society.

…inclusive business starts very much from the suppliers, includes the banks, buyers, workforce and ends at final consumers…


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CASES OF INCLUSIVE BUSINESS

CASE 1: OTOBI LIMITED – Linking with Mini Suppliers

A good example can be set of Otobi Limited. As a part of Otobi’s brand reposition from being a furniture manufacturer to being a provider of complete space solutions the company built an alliance with multiple mini suppliers thus rugs, linens, ceramics, vases, bamboo accessories, table lamps, candles and toys were introduced beside their world class furniture and home décor at Otobi. It created a substantial linkage of mini suppliers with the brand name of Otobi and enabled them to earn a handy amount of yield. By outsourcing certain elements of their production, Otobi creates job for a large group of workers who lost their job during the financial crisis and reduces cost considerably which also made it possible to expand their consumer base to include lower income people.

CASE 2: KAZI & KAZI TEA – Community Development

From its inception, Kazi & Kazi Tea (K&K Tea) has been eager to engage the communities in a mutual benefit way. This is why K&K Tea initiated a Cooperative that is open both to worker, and to neighbors in

…thus rugs, linens, ceramics, vases, bamboo accessories, table lamps, candles and toys were introduced at Otobi…

Photo courtesy: Otobi Limited


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surrounding villages. K&K Tea’s cooperative began with innovative method focusing on dairy. Co-op members receive milking cow, for which they pay back not in cash but with milk and cow dung. Members pay only one liter of milk per day, keeping the rest for their children and the calves. They pay 10 to 20 kilograms of cow dung per day, keeping a measure for their own. This easy barter form of payback takes off the pressure of cash payments, making the co-op a practical alternative even to the micro-credit operations for which Bangladesh is now famous. Most members manage to pay off their cow within 2/3 years. Best of all, they keep any calf that the cow bears.

CASE 3: APEX ADELCHI FOOTWEAR LIMITED – Training and Education

Apex Adelchi Footwear Limited (AAFL) factory in Shafipur has areas of 300,000 square feet, using environmental complaint finished leather from either AAFL’s own tannery or from imported leather. Since its inception, Apex Adelchi has been facing difficulties to get skill manpower available in the market.

With the support from PRICE (Poverty Reduction by Increasing the Competitiveness of Enterprises), a USAID funded economic development project with a mission is to reduce poverty by increasing the

Photo courtesy: Kazi & Kazi Tea

Co-op members receive milking cow, for which they pay back not in cash but with milk and cow dung.


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competitiveness in aquaculture, horticulture and Leather sector, particularly for the benefit of women, young adults and SME suppliers, Apex Adelchi Footwear Limited started training utilizing their factory premises to train over 200 individuals every three months time, resulting in a total of 2400 operators trained in three years and create employment opportunities in footwear and leather goods sectors.

The sector lacks sufficient skilled workers, particularly in the growing footwear and leather goods industry. Under the partnership, PRICE commits to work jointly with LFMEAB (Leather and Footwear Manufacturers Exporters Association of Bangladesh) to address this critical sector constraint by leveraging its members’ resources to facilitate workers’ skill development and a continuous supply of new skilled workers to the sector.

CASE 4: RAHIMAFROOZ BANGLADESH LIMITED – Sustainable Development

Rahimafrooz Bangladesh Limited (RBL) did not initiate inclusive business as a project rather it got started from the “Bottom of the Pyramid” (BOP) market opportunity and the vision of doing good business. RBL has employed over 2,000 low income people in their Storage Power, Energy Services, Automotive After Market, Electronic and Retail Businesses. For their Storage Power, Energy Services and Retail Business an average of 30% of the local suppliers are from the low income

Photo courtesy: Apex Adelchi Footwear Limited

…started training utilizing the factory premises to train over 200 individuals every 3 months, resulting in a total of 2400 operators trained in 3 years and create employment opportunities…

RBL did not initiate inclusive business as a project rather it got started from the “Bottom of the Pyramid” (BOP) market opportunity and the vision of doing good business.


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communities. Most importantly another 25% grew with their business and graduated to relatively upper level. Through their renewable energy business they have installed 100,000 Solar Home Systems (SHS) to benefit the lives of 600,000 low income community people in different rural areas in Bangladesh.

COMMUNITY IMPACT

Different social responsibility projects of the respondents somehow was able to sustain the livelihood condition of the poor and these marginalized people have been provided with the opportunity to dream about a better future through means of generating income, transfer of skills to small businesses, education and training, better means of leading a healthy life and so on.

Through some of the branches of Bank Asia Limited in some rural and agro-based areas, farmers now have a better access to capital, trade and transaction. Viyellatex Group has an agreement with CRP (Centre for Rehabilitation of the Paralyzed) to train physically challenged women to give them with an opportunity to join the mainstream work at their textile unit. Summit Group supports Acid Victims through

Photo courtesy: Rahimafrooz Bangladesh Limited


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“Prothom Alo Shahayak Tahbil” and meritorious students for quality higher education as needed. Partex Group and MM Ispahani Limited have established some schools for educating the poor and disadvantaged children while Partex Group also providing some of them with free education with free books and stationeries. Organizations like Apex Leather Craft and Square Pharmaceuticals have shown many initiatives to capacity development of its workforce, who they consider as their main asset.

All the projects of the respondents are somehow aimed at community development for creating a better society to live in. But, most of them have not identified the scale of measuring the impact on the community. However, scalability ensures businesses in creating a win-win situation for their business.

CHALLENGES

The survey revealed that one of the main challenges in Inclusive Business is the clogged mindset of marginalized producers that obstruct the maintenance of the standard of compliance and quality through supply chain integration. Another challenge is to retain the skilled workforce after their skill development. Capacity development program itself sometimes gets difficult to execute due to lack of transparency and accountability.

Respondents sense that Government should be more proactive in responding to the inclusive growth of businesses. The present scenario of power failure and lack of access to finance are also big impediments for Inclusive Business models in Bangladesh. Private-Public Partnership (PPP) can play a vital role in fostering the growth of Inclusive Business in Bangladesh.


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A vital challenge lies in identifying the risks associated with Inclusive Business Model or integration of the supply chain. Most of the respondents also stated that it is important to measure the impact of inclusive business as it requires investment for community development.

Another basic challenge is to differentiate between a Social Enterprise and an Inclusive Business. It needs a lot of awareness raising programs and showcases of good Inclusive Business Models to place the model strategically to align with the business motive of maximizing profit through sustainable value offering.

OPPORTUNITIES

GENERATE ECONOMIC SUSTAINABILITY

Large untapped market looking for innovative products to meet tailored needs (Bottom of the Pyramid).

Contribute to increased economic opportunity and wealth.

DEVELOP NEW MARKETS

Regional channels and suppliers to enrich the local value chain and generate new supply channels.

Disseminate products, services, and technologies as tailored low-cost solutions.

DRIVE INNOVATION

Appropriate and affordable products and services that meet the needs of underserved markets.


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Generate a competitive advantage.

EXPAND LABOR POOL

Build the capacity and competency of enterprises in new market technologies.

Access an existing and untapped labor market.

RECOMMENDATIONS

Based on the findings of this Survey, following are some recommendations that will foster the strategic inauguration of Inclusive Business Models in Bangladesh:

CREATING AWARENESS ON INCLUSIVE BUSINESS MODELS:

It requires significant numbers of awareness raising programs to make the business community familiar with the concept of Inclusive Business Models. The programs should be comprehensive to the specific business needs with a sectoral approach. It is also important that the program comprehends the techniques to sensitize the business community with the benefits of Inclusive Business at the same time showcase the scope of its wider implementation to the existing outline.

MEASURING IMPACT:

Organizations often fail to measure the impact of their social endeavors. It is important to identify tools and techniques to measure the positive impact of such initiatives and identify scope for further improvements.


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PARTNERSHIP:

It is also important to get the involvement of the Government to initiate partnerships that will foster the growth of inclusiveness in the business community. Private-Public Partnership (PPP) can be a useful instrument to address the situation. With the encouragement from the Government side, companies will be driven to integrate the marginalized people into their business chain while creating better livelihood options for them that will contribute to a wider scale to reduce poverty. NGOs and Civil Society Organizations (CSOs) should also join hand in addressing the relevant issues.

SHOWCASING BEST PRACTICES:

“Seeing is Believing” – it is perhaps more applicable and suitable in the context of Bangladesh. Showcasing the existing local good practices and also some from the Global perspective can be a positive driver for the private sector to initiate more inclusive methods with their operations.

ACCESS TO INFORMATION:

Organizations motivated to incorporate Inclusive Business Models should be given proper access to information to generate necessary knowledge base on “how to do it” and “where to start from”. In the donor driven economy of the country, the private sector can be a prime force for fostering national growth through inclusive approaches and thus the nation as a whole can address the Millennium Development Goals (MDGs).


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CONCLUSION

Companies are still struggling with the challenges associated with starting and scaling of Inclusive Business Models in Bangladesh. These challenges range from lack of knowledge about the target market to scarcity of financing and technical expertise suited to the task. Companies, donors, development finance institutions, civil society organizations, and others are increasingly interested in working together to address these challenges and unlock the potential of inclusive business for development.

Poverty is multidimensional. At its core is the lack of opportunity—or, in the words of Indian economist Amartya Sen, the inability to choose a life ‘one has reason to value’. Causing this lack of opportunity are not only a lack of money or resources, but also a lack of the ability to use resources. Bad health, lack of knowledge and skills, social discrimination, exclusion and limited access to infrastructure can hinder people from converting resources into opportunities.

Improving these can bolster both access to resources and the ability to transform resources into opportunities. Indeed, the case studies show that doing business with poor people can make them better off beyond.

Two well-known examples of ‘cracking the code’ (Doing business with the poor) to do business with the poor are microfinance and mobile telephony. Both show how inclusive business models can set off a virtuous circle, improving people’s lives and incomes and benefiting from the growth that results. Both sectors, moreover, can still expand greatly by reaching out more broadly within countries and more deeply into low-income populations.


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ANNEXURE 1: QUESTIONNA IRE OF THE BASE SCA N SUR VEY

SURVEY ON INCLUSIVE BUSINESS STATUS IN BANGLADESH

An inclusive business is a sustainable business that benefits low-income communities. Building inclusive business models requires entrepreneurship. Entrepreneurs perceive opportunity and take advantage of it.

Does your company have a project that contributes to sustainable development

and the eradication of poverty by supporting employability? And would you

let it be for inspiration to other companies?

Then please fill in the blanks to the extent possible, and you will be contacted by an IBLF employee who will make the case study ready for publication.

Company

Contact person

Email

Telephone


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Background

1) What do you understand by “Inclusive Business”?

2) What do you think of Inclusive Business in context of Bangladesh?

3) Do you have inclusive business model in any of your activities?

Project story

4) How did the project begin? What inspired it and who drove it?

5) What’s the main idea behind the project and how has the project itself developed?

6) Have you thought of any further steps ahead?

Community impact

7) How does the project help the low income communities?

8) What measurable impact has it had? Is there any data?

Business sense

9) How is it beneficial for your company?

Scalability

10) What are the opportunities for scale and how they can be reached?


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Partnerships

11) What partnerships have been developed – have these been beneficial and if so how? If not, why not and how could they be improved?

Challenges

12) What have been the main challenges and how were they overcome? What are the main challenges ahead? Think about the context of Bangladesh as well.

Documents

Report on the Base Scan Survey on Inclusive Business in Bangladesh (1)