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THE SECOND RESPONSIBLE MANAGEMENT EDUCATION RESEARCH

CONFERENCE: INCLUSIVE BUSINESSES

THE AMERICAN UNIVERSITY IN CAIRO (AUC)

PRESENTED BY:

Nahla ZeitounAssistant Resident Representative

Poverty Team Leader

United Nations Development Programme (UNDP)- Egypt

UNDP ENGAGEMENT WITH THE PRIVATE SECTOR

TO PROMOTE DEVELOPMENT

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Outline

• Growing Inclusive Markets Initiative (GIM).

• Business Solutions for Human Development (2007).

• Upcoming 2015 UNDP Report: Second Edition of

Business Report.

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UNDP Growing Inclusive Markets InitiativeInsights from the first report

http://www.growinginclusivemarkets.org/

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The Growing Inclusive Markets Initiative

• Conceived in 2006 following the success of Unleashing Entrepreneur-ship: Making Business Work for the Poor

• Offers a platform for collaboration and already gathers over 20 key stakeholders including business associations, academic institutions and development agencies

Goals:

• Raise awareness about how doing business with the poor can be good for poor people and good for business.

• Clarify the ways that businesses, governments and civil society organizations can create value for all.

• Inspiring the private sector to action.

Principles:

• Core business emphasis

• Empirical approach

• Human development framework, guided by the Millenium Development Goals (MDGs)

• Partnership and multistake-holder approach

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Commercial business activities done “right” is the most effective way for

business to bring development benefits

Inclusive business

models /

entrepreneurship

Development

benefits

Business

benefits

Policy dialogue /

advocacy

Philanthropy

CSR / Social

investment• Dialogue which

contributes to more

effective governance

institutions, rules,

policies and

processes• Contribution of

financial or in-kind

resources to

development

projects

• Social investment

that is strategic to

the core business

and that

contributes to

achievement of the

MDGs

• Enterprise

solutions that

accelerate and

sustain access by

the poor to needed

goods and services

and to livelihoods

opportunities

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Report – Main Messages

1 Opportunities exist to build bridges

between business and the poor and

create value for all.

2 Capturing these opportunities is

challenging due to five widespread

market constraints in the rural

villages and urban slums where the

poor live.

3 Entrepreneurs have used five core

strategies to overcome these

constraints.

4 Business leaders, but also govern-

ments, donors, NGOs, communities

and other stakeholders must work

together to create value for all and

make markets more inclusive.

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Poverty Remains Pervasive – Challenge and Opportunity

2.6 billion people live on less than US$ 2

per dayBillions of people lack

access to essentials

•No clean water: 1 billion

•No adequate sanitation: 2.6

billion

•No electricity: 1.6 billion

•No internet: 5.4 billion

•No job / working poor:

700 million +

Poverty is best understood as a lack of opportunity to lead a life one values.

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Poverty in Egypt

• Egypt’s poverty rate has increased, reaching 26.3 per cent for the

year 2012/13 compared with 25.2 percent in 2010/11

• A CAPMAS report stated that the domestic poverty line stands at

an annual LE3,920 ($569) per person.

• Poverty remains predominant in rural areas compared to urban

areas. The highest rates in the country are in Upper Egypt:

Assiut, Sohag and Qena.

Source: (CAPMAS, 2013)

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Explanation

• Businesses know too little about the poor, their

preferences, resources, skills, etc.

• Regulation is not conducive to business. Rules and

contracts are not enforced. Entrepreneurs lack access

to the legal system.

• Lack of transportation and infrastructure for water,

electricity, sanitation and telecom.

• The poor may lack knowledge / skills to benefit from a

product or service or participate in a supply chain.

• People lack access to credit, insurance, savings and

transactional banking services.

Capturing these opportunities is challenging due

to five widespread market constraints

Market

Information

Regulatory

Environment

Physical

Infrastructure

Knowledge

and Skills

Access to

financial

services

Constraint Area

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Entrepreneurs have used five core strategies to

overcome these constraints.

Explanation

• Avoid constraints through

technological adaptations or

business process redesign.

• Remove market constraints

through own investments – brings

private and social value.

• Engage the poor in the business

model and build on social

networks increases access, trust

and accountability.

• Businesses collaborate with other

organizations and pool resources

• Informing the policy making

process can help to remove

constraints on a broad scale.

Example

• Mobile banking uses wireless

technology; operates without

bank account.

• Garment company trains all

employees in basic and job-

related skills.

• CFW franchises shops and

clinics in Kenya to people in

poor communities.

• Forestry company works with

bank to provide credit to its

eucalyptus growers.

• Mobile banking companies

work with Govts to introduce

appropriate regulation.

Adapt

products and

processes

Invest in

removing

constraints

Leverage the

strengths of

the poor

Combine re-

sources and

capabilities

Engage po-

licy dialogue

with gov‘ts

Strategies

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Case studies from Egypt

1. Case Study Orascom Housing Communities Youssef, Samir. "Orascom

Housing Communities." GIM Case Study No. B085.

2. Case Study Kheir Zaman: A New Player in Food Retail. Youssef, Samir.

"Kheir Zaman: A New Player in Food Retail." GIM Case Study No. B074.

3. Case Study GiroNil: Building A Payments Highway in Egypt, Nader,

Pascale. "GiroNil: Building A Payments Highway in Egypt." GIM Case

Study No. B063.

4. Case Study Appropriate Development, Architecture and Planning

Technologies (ADAPT),Nader, Pascale. "Appropriate Development,

Architecture and Planning Technologies (ADAPT)." GIM Case Study No.

B052.

5. Case Study Siwa Sustainable Development Initiative Hatem, Tarek. "Siwa

Sustainable Development Initiative.“ GIM Case Study No. A042.

6. Case Study SEKEM: A Holistic Egyptian Initiative Hatem, Tarek. "SEKEM:

A Holistic Egyptian Initiative." GIM Case Study No. A041

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Example 1: SEKEM: A Holistic Egyptian Initiative

Key constraints

• Knowledge and skills:

• Lack of education, literacy and

vocational training in the community

• Lack of technical organic farming

knowledge among farmers

• Regulatory environment: complicated

government administration and regulation

to introduce organic certification

Key solutions

• Invest in removing constraints: SEKEM invested

part of its profits to establish a foundation to

administer programs in education, literacy and

vocational training

• Combine resources and capabilities:

• SEKEM partnered with IFC to introduce a

technical assistance program

• SEKEM engaged alliances w/ NGOs and

corporations to introduce an organic

certification into the market

Development outcomes

• SEKEM sources from 850 farmers and provides

work to 2,000 people

• Opportunities to enhance education, health and

living conditions for the community

• SEKEM Medical Center provides healthcare

services to approx. 300,000 patients

• Organic agriculture protective of the environment

Business outcomes

• Revenues of US$19 million in 2005

(original investment US$1 million in

1977)

• 3,500 hectares of land under

cultivation (vs. 70 ha in 1977)

• 45% of products exported, including

to key European markets

• 79% national market share in herbal

drinks

Group of 8 companies (focused on organic agriculture) and a development foundation, which goal is to

contribute to the comprehensive development of the individual, society and environment

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Example 2: SIWA Sustainable Development Initiative

Key constraints

• Knowledge and skills: lack of trust and

awareness in the initiative amongst the

local community

• Access to financial services: lack of

access to affordable financing schemes

Key solutions

• Leverage the strengths of the poor:

• Holistic approach based on intensive

consultations with the local community

• EQI set up community development projects

and ensured that the preservation of the

community was paramount

• Combine resources and capabilities: EQI partnered

with IFC, which provided technical assistance and

loan (at market rate but rebate if targets achieved)

Development outcomes

• 75 local employees + income-generating

activities for 300 local people (esp.

women)

• Employees provided on-the-job training

• EQI helped providing healthcare and

financial services to the community and

built library, cinema, craft stores and social

gathering area

• Respect for Siwan culture, including

traditional building methods and materials

• Organic agricultural protective of the

environment

Business outcomes

• SIWA has become a key destination for

European eco-tourists (inc. royalty)

• Women’s artisanship workshop sells to

Italian haute couture

• Biodigesters converts animal waste into

energy and organic fertilizers, thus

reducing costs

Community-based eco-tourism initiative including lodges, women artisanship, organic farming and art

projects that provide income-generating activities to the local Siwan community

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Cases from Africa:

Tiviski (Mauritania): Africa‘s first camel milk dairy

Key constraints

• Physical infrastructure: inexistent

infrastructure for milk collection,

processing and distribution. Scattered

herders and lack of transportation facilities

• Knowledge and skills: herders lack

knowledge about business and best animal

husbandry practices + cultural challenges

• Regulatory environment: lack of regulation

to export camel products to the EU

Key solutions

• Adapt products and processes: flexible collection

system (collective transportation, donkey carts, etc)

• Invest in removing constraints:

• Building own dairy facilities

• Creating NGO to support herders (credit for

animal feed, veterinary care, etc)

• Engage in policy dialogue with gov‘t: EU delegation

working towards establishment of standards and quality

assurance institution

Development outcomes

• 1,000 semi-nomadic herders

earning income as suppliers while

keeping their traditional way of life

• 200 direct local jobs created

• Local milk substitutes imported

milk

Business outcomes

• Sufficient cashflow to invest 1 million

euros in new milk processing plant

• Processed milk sold twice the price of

raw milk purchased

• Camel cheese now sold in NY

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Actors in Society Must Collaborate to Support

Development of Inclusive Markets and Inclusive

Business

The State /

Government /

The Private

Sector

Civil SocietyBilateral &

Multilateral

organizations

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Key Messages

- The importance of partnerships and neutral brokers to actas intermediaries to facilitate these partnerships.

- Examples include: Partnerships with universities and schools,Partnerships with intermediaries such as business associations,Public private partnerships (PPPs), with quasi-governmental agenciesor ministries.

- Concrete model presented for future engagement.

- New role of each sector outlined: government, private

sector, and civil society

- Mapping of proposed future actions.

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Recommendations

- Assign dedicated CSR executive/personnel to plan and implement well designed initiatives

- Seek and identify credible partners and projects

-Plan corporate engagement for the long term seeking to engage the poor in their core business and value chain

- Work through intermediaries and neutral brokers

Private Sector

- Reduce bureaucracy and

red tape.

- Understand and promote

CSR, actively encourage

the private sector to

participate in the country's

development by supporting

and co-financing projects

- Establish a CSR monitoring and evaluation system to ensure accurate identification of gaps and effective implementation of solutions

- Co-design specific activities with private companies, particularly those related to basic needs.

Government

- Collaborate on sectoral and/or regional issues.

- Seek support from the private sector to professionalize NGO sector management capability

Inform the private sector about the MDG’s and development work.

- Familiarize corporations about severity of situation and range of options for corporate engagement.

NGO

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Upcoming 2015 UNDP Report: Second Edition of

Business Report (under Publication)

Social

EnterpriseWomen equality &

empowerment in the workplace

Global Compact

principles

Sustainable

Business Models

New Forms and Types

of Private Sector Engagement

Base of the Pyramid

(BOP)

Identify Policies related to the way forward for all stakeholders

including government, civil society, academia and private sector

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Thank You