vbcf final report_en

FINAL REPORT 2015

DisclaimerThis material has been funded by UK aid from the UK government; however the views expressed do not necessarily reflect the UK government’s official policies.

“Reducing poverty is no longer the exclusive responsibility of governments or the donors community; the private sector has a great business opportunity

and potential in this field. The VBCF has supported financially and technically more than 20 entrepreneurs to develop innovative inclusive

business models that deliver both commercial benefits for the company and social impact for the low income people. There are many other talented

entrepreneurs in this country. Just wake them up, challenge them, give them a hand and go by their side. They will make the change.”

- Javier A. Ayala - Executive Manager - Vietnam Business Challenge Fund

The companies for believing in this model and investing their financial and technical resources to test and implement innovative business models that have allowed millions of people to improve their lives.

The VBCF team for their hard work during the whole implementation of the programme and of course for organising this event. Without your work this wouldn’t be possible.

SNV is proud to deliver the VBCF to Vietnam and we look forward to continuing to use our experience and knowledge to support the private sector in the design and implementation of inclusive business model to contribute to achieving sustainable and inclusive economic growth for Vietnam.

Miguel MendezCountry Director

SNV Netherlands Development Organisation in Vietnam

ForewordThis report presents the Vietnam Business Challenge Fund (VBCF) as one of the flagship programmes in Vietnam. It is an example of how the private and public sector can work and invest together to achieve social impact at scale and at the same time create competitive advantage for the companies. This work made a great contribution to improving the competitiveness of Vietnam by increasing productivity, driving innovation and enhancing efficiency. Achieving impact at scale and ensuring the sustainability of that impact are two of the main goals that many development programmes struggle to achieve. The VBCF-supported companies are doing business with millions of low income people by enabling them to have a job, increase their income and/or have access to an LED lamp, medicine, clean drinking tap water, a cook stove, a biogas plant, a money transfer, and so on. But the most important thing is that this will continue tomorrow, next week, next month, next year and will continue wherever there is a business opportunity for both the companies and the low income people.

This success wouldn’t have been possible without the contributions of many actors. SNV Netherlands Development Organisation, the manager of VBCF, would like to express our since thanks to:

The United Kingdom Department for International Development (DFID) and the Embassy of the United Kingdom in Vietnam for their leadership, vision, financial contributions and their continuous support to create the conditions for a successful project.

The Vietnam Business Council for Sustainable Development from the Vietnam Chamber of Commerce and Industry for its strong support during the implementation of the project and especially because of its work in motivating the private sector to engage with the VBCF.

TraphacoSapa: Sustainable Medicinal Plant Production with Northern Ethnic Minorities 32

Infrastructure and Basic Services Portfolio 34

Howaco: Centralised Water Treatment, Purification and Distribution 34

MService: Mobile Banking Platform for Migrant Workers 36

M-Pay: E-Wallet and Mobile Payment Services 38

Liem Duyen Hai: Toll Bridge to Connect Vibrant Communities 40

Low Carbon Growth Portfolio 42

Rang Dong: Affordable LED Light Production 42

Green Generation: Green and Affordable Biomass Cook Stoves 44

Hi Tech: Efficient Cook Stoves Fuelled by Agro-forestry Waste 46

Green Environment: Biogas Digester Made From Recycled Plastic 48

Discontinued Projects 50

Part 3: Results 55Summary 56

Changes and Outcomes 58

Scalability and Sustainability 62

Value for Money 63

Additionality 64

Lessons Learned 66

Conclusion 69

A Final Word 70

ContentsSUMMARY

Part 1: Introduction 1Context 2

Approach 4

The Three Sectors 6

The Seven Challenges 7

Application Process 8

Criteria for Selection 11

Contracts Awarded 12

Part 2: Project Partners 15Evaluation of Projects 16

Agricultural Portfolio 18

Ecofarm: Transforming Rice to Corn Farming with Bio-char Production 18

SSC: Hybrid Corn Seed Production 20

Bio Spring: Probiotic Production for Livestock and Aquaculture 22

Hai Nam Seafood Company: Restoring Scallop Natural Resources for Sustainable Fishing 24

NSC: Japonica Rice Development 26

DHG Nature: Sustainable Medicinal Plant Production with Khmer Ethnic Minorities 28

A119: Innovative F1 Hybrid Seed Production 30

SummaryThe Vietnam Business Challenge Fund (VBCF) was designed to support the private sector in Vietnam to develop innovative business models that deliver both commercial benefits for the company and social impact for the low income population using Inclusive Business (IB) models.The first call for proposals was launched in late 2012 and, in 2013, 21 projects initiated activities. Of these, five were terminated for various reasons but the other 16 achieved positive results across the key objectives.

In total, VBCF invested over 113bn VND in the selected business initiatives, the equivalent of 24% of total investments made in these inclusive business projects, and the businesses made 2,293.4bn sales out of these specific business models.

As VBCF funding has now ended, an external consultancy company has conducted an evaluation study.

The purpose of this report is to summarise the VBCF approach and highlight its successes and lessons learned. Part 1 covers the background to the VBCF, Part 2 introduces each of the projects, along with their impact, and Part 3 summarises the overall results.

AbbreviationsBoP Base of the Pyramid

DFID The UK Department for International Development

IB Inclusive Business

LIP Low Income People

SNV SNV Netherlands Development Organisation

VBCF Vietnam Business Challenge Fund

VBCSD Vietnam Business Council for Sustainable Development

x 1

Introduction

2 3

Context Vietnam’s private sector development, marked by rapid and steep growth, is due in large part to foreign investment, export increase and industrialisation, transitioning the country from an agrarian-based economy to one based on manufacturing of value-added products.

Despite the remarkable economic achievements that have made Vietnam a middle income country, the poverty gap and inequality are increasing. Many, particularly in rural areas, still have limited access to markets, employment and basic services.

It is difficult for the government to address all the issues felt by the low income population as they are so wide spread and numerous, but private businesses could be in a position to help if they can access the financial and technical support they need to overcome these market inefficiencies with innovative inclusive business models.

4 5

INCLUSIVE BUSINESS Inclusive Business models generate profit for companies by bringing low income markets into the core business of the company as employees, producers, distributors and/or consumers. Profit is generated by increased efficiency in the business or the creation of new markets. At the same time, the low income population benefits due to opportunities for jobs, increased incomes or an improvement in their quality of life through access to basic goods and services. In this way, Inclusive Business models are win/win.

Boost economic growth of Vietnam + Increase company sales and income + Address social inequalities

INNOVATIVE INCLUSIVE COMMERCIALLY VIABLE

It provided technical assistance, training, mentoring and non-reimbursable funding of up to 49% of the total investment to models that were:

Technology, business model, product, service, market

Number of low income beneficiaries, impact level and type, benefits to other enterprises and wider community

Market demand, commercial feasibility and sustainability, technical and managerial capability, financial profitability, capacity and profile

The level of investment was determined based on how well the project met, or had the potential to meet, these three criteria and ranged from 100,000 - 800,000USD for each project.

“Our company uses the most cutting edge technology from the world to serve the most underprivileged communities.”

Huynh Minh Viet BIOSPRING CEO

ApproachVBCF is a specialised fund mandated to support the private sector in Vietnam to develop innovative Inclusive Business models that deliver both commercial benefits for the company and social impact for the low income population.

2012 - 2015Funded by

Managed by

Vietnam Business Challenge Fund

6 7

The Three SectorsThe VBCF operates in three main sectors:

AGRICULTUREFoods

Industrial raw material

Supporting services, machinery and equipment

LOW CARBON GROWTH

Renewable Energy

Waste Recycling

INFRASTRUCTURE AND BASIC SERVICES

Water and Sanitation

Housing

The agriculture sector remains of critical importance to the Vietnamese economy and has significant potential for job creation, especially among rural low income populations. The challenge - and opportunity - is to transform the sector from low quality high volume products to higher quality, market orientated and value added products. Solutions that employ environmentally friendly practices and technologies, and introduce infrastructure solutions for small farmers’ value chains are particularly beneficial.

Low carbon growth is an increasingly important area in Vietnam and a rapidly growing part of the economy. It offers an important opportunity for income increase and

basic services for low income populations, as well as improving quality of life through provision of low cost, safe, environmentally friendly and sustainable solutions.

Although the infrastructure sector was affected by the economic downturn in 2009, it remains an important sector for short-term job creation and GDP growth. It also has an indirect impact on many other sectors, including agriculture and low carbon growth. There is an opportunity to find innovative models that meet the demand created by the significant gaps in infrastructure and basic services and provide solutions to benefit low income and remote rural households.

The Seven ChallengesPrivate sector companies operating in one or more of these sectors were invited to apply if their innovative business idea could address one of the following challenges:

AGRICULTURE

LOW CARBON GROWTH

INFRASTRUCTURE AND BASIC SERVICES

Increase global VALUE ADDITION of agricultural domestic and / or global value chains that benefit the low income consumer

Introduce ENVIROMENTAMLLY FRIENDLY practices and technologies for small farmers

Introduce INFRASTRUCTURE SOLUTIONS (irrigation, storage, drying, collection, etc.) for small farmers’ value chains

Provide HOUSING, WATER AND SANITATION, AND RURAL INFRASTRUCTURE (roads, bridges, irrigation, et.) solutions that benefit the low income population

Introduce new MOBILE SOLUTIONS improving access to value added services (information, financial services, etc. ) for the rural household

Introduce SUSTAINABLE ENERGY AND LOW EMISSION SOLUTIONS that engage and / or benefit the low income people

Reduce the environmental pollution and improve the economic conditions of the low income population by TURNING WASTE INTO ENERGY

8 9

Application Process Two rounds for applications were launched in from November 2012 to October 2013. To ensure an open and competitive application process, these were made through public adverts, offline and online communications at national and local levels and launch events and road shows across Vietnam.

Top-down activities were also conducted to attract applicants, including partnerships with business associations, training sessions, brand development and recruitment of “Ambassadors”, to identify investment opportunities countrywide.

Other communication tools used as support included: the VBCSD and SNV websites; social media; roadshows; flyers, posters; newspaper advertisements and promotions; and other materials such as brochures, guidebooks, videos and banners.

CALL FOR PROPOSALS

VBCF LAUNCH AND FIRST CALL FOR PROPOSALS

APPLICATION GUIDANCE

INCLUSIVE BUSINESS EXECUTIVE SUMMARIES SUBMISSION

EVALUATION AND SHORT-LISTING

GUIDANCE FOR INCLUSIVE BUSINESS PLAN DEVELOPMENT

FULL INCLUSIVE BUSINESS PLAN SUBMISSION

DUE DILIGENCE, SELECTION AND APPROVAL

CONTRACT SIGNING

10 11

Criteria for SelectionELIGIBILITY CRITERIATo be short-listed for assessment, applicants had to fully meet all the following criteria:

• Involve low income people in Vietnam

• Benefit both the business and low income people

• Be relevant to one or more of the three sectors

• Have proven and relevant experience of at least two years

• Be able to finance at least 51% of the project budget

• Be registered and operating in Vietnam

ASSESSMENT CRITERIAA standard set of assessment criteria was used to evaluate key elements of the concept note and full proposal:

• Compliance with the eligibility criteria

• Long term commercial feasibility and sustainability

• The number of low-income beneficiaries and the level of benefit

• Projects with large (thousands of beneficiaries) and medium (hundreds to a couple of thousands) scale impact potential were prioritised by VBCF

• The innovation in the project

• The cost effectiveness of the investment

• Benefits to other enterprises and the wider community

• Non environmental harm or negative impact

• Assurance of gender equity of beneficiaries

• Those projects with more than 50% of women’s participation were positively evaluated

• Enterprise record on corporate social responsibility actions

• Up-scaling potential

• Those projects with proven potential for significant scale ups were positively evaluated

• Capacity (financial and technical) in implementation of the investment project

• Those applicants with a private co-investment above 51% were positively evaluated.

1312

Contracts Awarded

COMPANIES APPLIED AND, OF THOSE

402

WERE SHORT-LISTED38

CONTRACTS WERE SIGNED WITH A VALUE OF MORE THAN

ULTIMATELY

23

MILLION AND

$5INITIATED ACTIVITIES21

PROVIDED FULL BUSINESS PLANS AND

37WERE SELECTED FOR CONTRACT NEGOTIATION25

CONTRACTS BY SECTOR

AGRICULTURE LOW CARBONGROWTH

INFRASTRUCTUREAND BASIC SERVICES

Japonica rice seedsMedicinal plantsF1 vegetable seedsFresh water sea bassMedicinal plantsCorn seedsProbioticsSustainable scallops restorationOrganic rice Corn – Biochar

CFL bulbsLED lampsBiogas digesterAgrochemical container recycling – (Didn’t start)Gasifier cookstoveBiomass cookstoveUnbaked brick machine

123

45

123

4

567

Centralised chemical free water treatment plantMobile bankingE-walletAmphibian housing(Didn't start)Water purifiersInclusive bridge

1

234

56

678

910

47% 29% 24%

Successful applicants were spread throughout Vietnam with a concentration in the Red River Delta and the Mekong Delta.

14 15

Project Partners

16 17

Evaluation of Projects The results and lessons learned shown in these case studies have been taken from the final evaluation report conducted by independent evaluators, MCG and Spark, on behalf of VBCF.The consultants used the following methodologies for evaluating the project:

• Desk review of documents provided by VBCF

• Interviews with representatives of the companies

• Interviews with other stakeholders

• Quantitative surveys with beneficiaries and non-beneficiaries

Social impact results include both direct and indirect impact figures.

18

Ecofarm: Transforming Rice to Corn Farming with Bio-char ProductionTHE MARKET OPPORTUNITYVietnam’s import of corn for the feed industry has increased rapidly at an average growth rate of 18.3% per year. Heavy reliance on imported products results in high animal feed prices, which generates a demand for locally produced feed materials. Additionally, the burning of agricultural residue causes serious environmental pollution.

A market business opportunity existed for effective solutions that converted biomass into useful and environmentally friendly products, and substitute corn imports for local production.

THE INCLUSIVE BUSINESS MODELEcofarm developed an innovative business model that addresses this market opportunity and engages LIP in its operations at two points:

1. As producers: Ecofarm engages low-income farmers with a new form of corn cooperative. These cooperatives are more organised than individual farmers would be and receive technical support and inputs from Ecofarm to improve farming productivity. Ecofarm also guarantees buy back prices.

The company has also invested in a factory to separate corn from the husks and pack ready for distribution. It then uses the husks in the production of bio-char, which helps improve soil quality and, ultimately, corn productivity.

2. As consumers: Ecofarm sells corn to feed processors that will sell animal feed to low-income consumers that raise livestock.

VBCF INVESTMENT

5.46 BN VND 29%of total investment

RESULTSEcofarm has achieved most of the key project performance indicators at the levels of beneficiaries, business and environment. There is also clear evidence of the project’s scalability and sustainability.

SCALABILITY Scalability has been achieved:

• Higher number of farmers and production areas than in original plan

• Expansion to new provinces and new crops

LESSONS LEARNEDThe following may have contributed to increased success:

• Production planning with farmers

• Bio-fertilizer needs to be adapted to specific soil conditions

Key success factors

• Good implementation capacity and previous pilot experience

• Strong cooperation with scientists and local authority

• Investment in R&D and retaining control of the knowledge for competitive advantage

• Not just selling seed and fertilizer but also buying the corn and selling it on

Business

Environmental

Social

SALES OF

22,350 BN VND

EMISSION REDUCTION

CREATED

1,186JOBS INCLUDING 983 FOR LIP

CORN PRODUCTION

6,150 TONS

DIRECTLY AND INDIRECTLY INCREASED INCOME FOR

2,832BENEFICIARIES, INCLUDING 2306 LIP

Other achievements:

• Farmers reduced Use Of Chemical Fertilisers

• New processing workshop

Other benefits: • Reduced cost of production for most farmers

• Access to new cultivation techniques

• Better access to credit through revolving fund

20

SSC: Hybrid Corn Seed Production THE MARKET OPPORTUNITYVietnam has high demand for hybrid corn seeds and it is expected to rise dramatically in the coming years. The domestic corn production capacity meets only 30% of the market demand, which is dominated by the animal feed industry, so the country relies heavily on imported corn seeds.

Farmers in Tra Vinh province, home to a majority of Khmer ethnic groups, have a long history of growing rice on sandy soil that provides low yields. As a result, they often earn very low incomes. There is a clear need for shifting from low-yield rice production to other crops that have a higher market value.

THE INCLUSIVE BUSINESS MODELAs a result of the company’s partnerships with leading institutes and research centres, SSC, a leading seed development company, developed an innovative business model that introduces advanced technologies in the development and production of F1 hybrid corn seeds.

SSC has made inclusivity a core aspect of its operations, engaging low-income populations at three points:

1. As producers: The company trains and provides farmers, the majority of whom are Khmer ethnic minorities, with

technical support in the production and processing of F1 hybrid corn seeds. It is also committed to buying back the seeds produced by its farmers, generating stable income.

2. As consumers: Corn growers can buy quality F1 hybrid corn seeds from the company at prices that will be up to 50% cheaper than imported seeds.

3. As employees: The company creates jobs and income opportunities for low-income individuals who engage in packaging, storage, and preservation of corn seeds.

VBCF INVESTMENT


RESULTSThis was a successful project achieving key project performance indicators at the levels of beneficiaries and business. There is clear evidence of project scalability beyond the scope of the project as well as a plan for continuing the inclusive business model. It is a strong inclusive business model with comprehensive support to effectively engage with LIP farmers in the supply chain of SSC.

SCALABILITY Scalability has been achieved:

• The farming area and number of farmers involved reached higher than the original target

• SSC has replicated this IB model to green beans in 40 ha and okra in 16 ha in Cau Ngang district of Tra Vinh

LESSONS LEARNEDKey success factors

• Close monitoring and support to farmers

• Enforcement and compliance with the contract

• Effective cooperation with qualified input suppliers

• Uniqueness of the satellite dryer model

• Bio-fertilizer needs to be adapted to specific soil conditions

Business

Social

SALES OF

103,800 BN VND

CREATED

3,162 JOBS INCLUDING 2,859 FOR LIP

INCREASED INCOME FOR

6,948 BENEFICIARIES, INCLUDING 6,250 LIP

IMPROVED ACCESS TO GOODS AND SERVICES TO

692,740PEOPLE, INCLUDING 630,393 LIP

• Income increased by an average of 328,000VND / month due to higher selling price

Other achievements: • Purchased 7,065.6 tons of corn cobs from farmers

• Produced 3,463.7 tons corn seed

• Enhanced business and project management skills within SSC

• New processing facility led to lower transportation costs

Other benefits: • SSC Conducted 241 training sessions and 24 review workshops

• Access to high quality input supply

• Access to finance and to the market

22

Bio Spring: Probiotic Production for Livestock and Aquaculture THE MARKET OPPORTUNITYMany farmers in Vietnam use antibiotics to prevent diseases among their livestock, which reduces production costs and increases profitability. However, the antibiotics content in animal feed is a major quality control hurdle for Vietnamese exporters that wish to enter the US, EU, or Japanese markets. By introducing probiotics, the use of antibiotics and harmful additives can be reduced.

Until now, the feed industry in Vietnam has primarily imported its probiotics at high cost. This is because there has not been much investment in research and development within the country.

THE INCLUSIVE BUSINESS MODELBio Spring developed new generation heat-resistant probiotics in close collaboration with leading research laboratories in Vietnam and overseas.

The probiotics are distributed through two main channels: (1) large scale contracts with established feed companies and (2) smallholder farmers. The smallholder farmers will benefit from technical support, affordable probiotics, and improved productivity in animal husbandry and aquaculture.

VBCF INVESTMENT


RESULTSThe project has completed the project activities and achieved key changes at the level of business and the number of farmers using the products. There is also a clear plan for continuing the project that confirms its sustainability and the company has invested in a new factory to increase capacity.

“The support of SNV, as the VBCF Manager, has been critical for BioSpring to understand the low income markets, define strategies, innovate and leverage resources to achieve our probiotics business targets”

Huynh Minh Viet, CEO Bio Spring

SCALABILITY There are clear signs of potential for scaling-up:

• The company has invested in a new factory

• Bio Spring currently only serves 6% of market demand so there is a big opportunity for the company to increase its share of the market

LESSONS LEARNEDThe main issue for consideration is that it takes time to change behaviour and for farmers to adopt a new habit.

Key success factors

• Innovative product at high quality with strong R&D capacity

• Unique heat resistant product suitable for the market

• Use of powerful marketing tools

• Highly educated and energetic management team

BusinessSALES OF

6.82 BN VND

Other achievements: • Expanded distribution network to 19 provinces

• Improved collaboration with feed mills to get feed at a good price

SocialCREATED

41 JOBSINCREASED INCOME FOR


• Economic benefits due to reduced medicine costs and increased animal weight

Other benefits: • Improved safety of pork and poultry for customers

Environmental • Reduced use of antibiotics leading to cleaner livestock production

24

Hai Nam Seafood Company: Restoring Scallop Natural Resources for Sustainable Fishing THE MARKET OPPORTUNITYBinh Thuan province is well known for its seafood products. However, the scallop natural resources have been degrading due to unsustainable fishing practices that jeopardize the livelihoods of thousands of households in the area. The volume of scallop has decreased by 5 to 10 times over the past 10 years while domestic and international demand is increasing.

THE INCLUSIVE BUSINESS MODELHai Nam Seafood Company developed a business model that contributes to recovering natural sources of scallop in Binh Thuan Sea. It works with various stakeholders on engaging LIP in the management, protection and sustainable exploitation of scallop and builds up a stable supply base through fishermen’s self-managed groups to ensure the quantity and quality of inputs. This is the first time in Vietnam scallop fingerlings have been produced and spread to the sea on a large scale.

VBCF INVESTMENT


RESULTSThe project has been successful, with performance at the beneficiary and systemic levels exceeding expectations. The project has brought about tangible changes in the fishing practice and income for participating farmers as well as changed perceptions of and approach to sustainable resource management of local government. More importantly, the project has demonstrated excellent cooperation between local government-business-scientific and community for recovering, farming, fishing and protecting fishery resources in general and scallop in particular in Binh Thuan.

SCALABILITY There are clear signs of potential for scaling-up:

• Production area has been expanded to other locations

• There is a plan to expand the farming areas in the coming years and continue the credit fund

LESSONS LEARNEDThe following may have limited project success:

• Fingerling suppliers didn’t have sufficient capacity, which delayed supply and slowed project progress

• Managing the increased scallop production zone was challenging

Key success factors

• Strong leadership of Binh Thuan Sub Department of Fisheries (FRD) with dedicated team

• Innovative project design characterised by shared benefits and responsibility

• Direct cooperation with fishermen/fishing model in cooperation with fishermen

• Strong partnership between private and public sector

SocialINCREASED INCOME FOR

282 BENEFICIARIES, INCLUDING 180 LIP

Other benefits: • Access to credit from the revolving fund

EnvironmentalThis business has a positive impact on the environment, as the communities are being trained in controlling destructive fishing practices and restoring natural scallop resources in the area.

• Significant increase in number of scallop and small fish

• 90% reduction in harmful net fishing

Business • Secured a large potential supply of scallop

• Obtained MSG certificate for export

26

NSC: Japonica Rice Development THE MARKET OPPORTUNITYDemand for Japonica rice accounts for 20% of the total global demand for rice. Because of its high quality, Japonica rice is often sold at a high price. For example, in Vietnam, Japonica rice is 1.3 times as expensive as Indica rice while the production costs of both varieties are almost the same.

There is an increasing demand for Japonica rice within Vietnam. Export markets such as Japan and Taiwan, which currently import a large volume of Japonica rice from China, also offer an opportunity for Vietnamese exporters that meet food safety and hygiene standards. Rice importers from these countries are reaching out to Vietnamese Japonica rice producers to reduce their dependency on Chinese suppliers.

THE INCLUSIVE BUSINESS MODELNSC, a leading seed company, made a breakthrough in innovation by developing a closed Japonica rice production cycle from seeding to distributing finished products. It combines traditional production methods and new biotechnologies to create Japonica rice seeds that are adaptive to deltas and mountainous areas and provide higher productivity, quality and market value.

The company made inclusivity a core aspect of its operations, engaging low-income populations at two points:

1. As producers: NSC builds production capacity through cooperatives

2. As consumers: NSC sells high quality Japonica rice seeds to farmers

VBCF INVESTMENT


RESULTSThe project has completed all milestones and achieved the scale of Japonica seed and commercial rice production. Development of the supply chain for Japonica commercial rice has gained good initial results.

SCALABILITY AND SUSTAINABILITYPositive signs of scalability:

• Opportunity to expand production area

• Strong management capacity

• New factory

• Expand into rice for consumer market - down the value chain

NSC will continue to work with farmers as seed producers and purchase Japonica rice from commercial producers. The market is growing fast, they have just closed a deal to supply 45,000 tons to an Australian buyer.


• Good network with local partners to get production model organised and operated

• Good quality Japonica rice bringing higher economic benefits for farmers

• Flexible in its business operation to adapt to changing context

• Good brand already established

BusinessSALES OF

37.45 BN VND

Other achievements: • Produced 940 tons of seed and 700 tons of rice

• Organised 74 training sessions and 59 workshops for farmers

• Built new rice processing and packing factory

CommunityCREATED JOBS FOR

1,691 PEOPLE, INCLUDING 1,269 LIP



IMPROVED ACCESS TO GOODS AND SERVICES FOR



Other benefits: • Access to higher quality input supply through involved cooperatives

• Improved access to market with higher selling price

28

DHG Nature: Sustainable Medicinal Plant Production with Khmer Ethnic Minorities THE MARKET OPPORTUNITYThere is an increasing demand for pharmaceutical products made from natural materials, including Plectranthus Amboinicus, which are used in traditional medicine.

Bay Nui are in An Giang province has favourable climate and soil conditions for growing Plectranthus amboinicus, and local authorities have earmarked the area for medicinal plant cultivation. Plectranthus amboinicus, among other medicinal plants grown in the area, has higher market value than rice and other crops. However, cultivation of the crop has room for improvement.

This presents a market opportunity for the development of medicinal materials that meet international quality standards.

THE INCLUSIVE BUSINESS MODELDHG Nature (DHG), a leading domestic pharmaceutical company, has developed a business model that addresses this market opportunity. In doing so it has developed Plectranthus amboinicus cultivation area to

meet GACP-WHO standards. The company has made inclusivity a core aspect of its operations, engaging low-income populations as suppliers. It provides farmers with seedlings, credit for production inputs and cultivation techniques. It also supervises the growing process and buys back the Plectranthus amboinicus products.

VBCF INVESTMENT


RESULTSDHG has successfully implemented a new working model with farmer groups for mutual benefit. The farmers were provided with technical training to comply with GACP-WHO standards and got higher income from a new crop. The company established a more stable and better quality supply of medicinal materials and was able to increase its processing capacity.

BusinessSALES OF

4.2 BN VND

Other achievements: • Adopted GACP-WHO practices

• Installed and operated oil extraction machines to increase processing capacity

• Developed and piloted a new working model with farmer groups

• More stable supply of better quality medicinal material


353 PEOPLE, INCLUDING 318 LIP



Other benefits: • Access to revolving fund

• Introduced to new crops and new farming practices

Environmental • By applying GACP-WHO standards in cultivation, use of pesticides has been reduced significantly. Farmers were trained in making compost from extraction waste and using it as a substitute for chemical fertilizer, saving costs and preserving the environment.

SCALABILITY AND SUSTAINABILITYDHG will continue to purchase PA from farmers in the coming years but rather than sending its own technical staff to work with farmers, will appoint a 3rd party to supervise the technical aspects of cultivation.

The company also plans to utilise the extraction factory at full capacity to process other medicinal materials in Tri Ton.

For the project to be further scaled-up, DHG either needs to share the implementation model with other companies, or consider growing other medicinal herbs for its own production.

LESSONS LEARNEDIt would be more efficient for the company to play a management role and appoint and train a contact person in the field rather than send its own staff to the province.

DHG suffered from bad weather, a discontinued order and wet weather but had plans in place to deal with these eventualities.

30

A119: Innovative F1 Hybrid Seed Production

THE MARKET OPPORTUNITYThe seed market is an important part of the growing agriculture industry in Vietnam, with an estimated value of USD 45 million.

THE INCLUSIVE BUSINESS MODELA leading horticultural seed company is creating jobs and increasing income for thousands of low-income farmers in the highland areas of Vietnam. Its model has integrated low-income groups as producers; smallholder seed farmers are given access to training, fertilizer and equipment to grow high-quality F1 seeds; and the farmers receive stable income from the contract sale of their seeds to the company.

VBCF INVESTMENT


RESULTSThe model was very profitable and had a strong impact on jobs and incomes, due to higher yield and higher selling price. Farmers were very happy with the collaboration.








SCALABILITY AND SUSTAINABILITYThe project requires a high level of technical know-how. This must be retained by the company for competitive advantage so the project cannot be replicated or scaled-up by other businesses.

Sustainability is high for the model thanks to the firm’s experience in the project area and expansion to overseas markets.


• The company was bought by a foreign company leading to expansion, increased technical know-how and increased crops

• In addition, there was a focus on the quality of seeds, backed by a strong brand name

SALES OF

100.72 BN VND

Business

32

TraphacoSapa: Sustainable Medicinal Plant Production with Northern Ethnic MinoritiesTHE MARKET OPPORTUNITYThe northern mountainous area of Vietnam, home to many low-income and ethnic minority communities, has favourable climate and soil conditions for the cultivation of high quality pharmaceutical plants that meet GACP-WHO standards.

The demand for herbal medicine extracted from plants such as Cynara scolymus (Artichoke), Angelica sinensis (Duong Qui Root), and Ampelopsis cantoniensis (Dried Tea Leaf) is a source of millions of dollars per year in revenue for a leading pharmaceutical company in Vietnam. The current domestic supply has met only a third of the company’s demand.

THE INCLUSIVE BUSINESS MODELTraphacoSapa, a leading pharmaceutical company, has seized this market opportunity while including low-income communities in their core business operations as producers. The farmers are provided with seed inputs, fertilizers, technical support and cash advances in order to grow pharmaceutical plants. In return, the farmers increase their

income by selling products with prices guaranteed by the company.

VBCF INVESTMENT


RESULTSTraphacoSapa successfully implemented an IB model with LIP and ethnic minority as contracted suppliers. They secured high quality, GACP-WHO standard supplies resulting in more stable quality and have expanded to a new processing factory in Lao Cai to produce other medicinal products.

SCALABILITY Project is scalable and sustainable. Although demand for artichoke has been met so cannot be increased, purchase of duong quy and che day will continue to increase. Also, a new factory has been built.

LESSONS LEARNEDThe key lesson learnt for this project is that the duration of the project needs to be long enough to test the processing facilities invested. The company would also benefit from diversifying its market: not only selling to the mother company but also direct to customers.

“The company uses part of VBCF to run a revolving fund to provide farmers with seed money to buy fertilizer and pay for labour. This revolving fund will be running for many years. After the VBCF supported programme ends the revolving fund will support the development of other crops.”

Do Tien Sy, TraphacoSapa Director

Environmental • GACP-WHO certified cultivation is an environmentally friendly farming practice thanks to proper use of chemical fertilizers and pesticides

BusinessSALES OF

72.73 BN VND


517PEOPLE, INCLUDING 124 LIP

INCREASED INCOME


34

Howaco: Centralised Water Treatment, Purification and DistributionTHE MARKET OPPORTUNITYLong An, a southern province, is one of many regions in Vietnam that lacks access to a sustainable source of drinkable tap water. Local people have instead been using saline water that is often contaminated with chemicals discharged from factories in surrounding areas. They are forced to choose between paying high prices for clean water supplied by vendors from other provinces, or using untreated surface or underground water that comes with serious health risks.

The rapidly growing population also adds to the pressing need for water treatment facilities in the area to comply with water safety regulations. This presents a market opportunity for the development of business models that meet the growing local demand in peri-urban/suburban and rural areas in Vietnam.

THE INCLUSIVE BUSINESS MODELHowaco, a water supply company, developed a centralised water treatment facility and distribution system that effectively supplies clean drinking water that meets quality standards at an affordable price. The company has designed an inclusive business model that engages the low-income population of

Vietnam at two points:

1. As producers: Howaco creates new jobs for workers involved in installation and operation, as well as long-term employment for its agents and distributors.

2. As consumers: Howaco sells clean drinking water at an affordable and regulated price and provides 24/7 water supply service to local low-income households and wholesaler.

VBCF INVESTMENT


RESULTSThis was a successful project achieving all key project performance indicators at the levels of beneficiaries, business, scalability and sustainability, with appropriate co-investment from VBCF. After 12 months, 3,205 users have better access to quality clean water supply at affordable prices. The project has created positive changes in the market and more competition on quality and price for the benefit of the end users.

SCALABILITYStatistics show that only 40% of the rural population in Vietnam has access to safe water. This indicates high potential to scale up the inclusive business model to meet the market demand for clean water in rural and suburban areas of the country.


• Innovative operation model and modern water treatment technology making it a cost effective investment

• Innovative distribution strategy through agents, enabling Howaco to reach clients who live far away from the main water supply network

• Using SCADA and GIS to manage water supply and inefficiencies such as water loss/leakage

• Strong inclusive business model using modern technology to deliver affordable, quality products and services

“We don’t use any chemicals, it’s all natural. That’s why we try to keep costs as low as possible so the price can still be low for the beneficiaries but the company still has a margin that we can reinvest in water meters, the pipelines and upgrade of the water treatment systems. In 10 years we will supply to 6,000 households talmost double the current capacity.”

Ngo Xuan Vinh, Howaco Deputy Director

Environmental • Utilises a non-chemical water treatment process that is safe for human health and the environment

SocialCREATED JOBS FOR


INCREASED INCOME

500 BENEFICIARIES INCLUDING 460 LIP



MADE SAVINGS FOR


• Lower price for clean water: average saving of 32,462VND / month / household

BusinessSALES OF

9.3 BN VND

Other achievements: • Increased water treatment and supply capacity of the two plants from 3000m3/day to 6000m3/day.

36

M-Service: Mobile Banking Platform for Migrant Workers THE MARKET OPPORTUNITYIn Vietnam, cash-based transactions dominate the market as tens of million of people have little or no access to basic financial services. Most banks and their branches are located in big cities and urban areas that have high population densities. As a result, millions of migrant workers do not have access to basic financial services for their primary needs such as remittances to their families in rural areas.

THE INCLUSIVE BUSINESS MODELM-Service developed a “mobile money” solution to provide these financial services to migrant workers and rural populations using their cell phones. By co-branding with Vinaphone (a mobile network operator) and Vietcombank (a local bank), the company set up a network of agents in 45 provinces to provide payment and money transfer services using existing mobile network infrastructure.

The business model is inclusive of the low-income community at two points:

1. As consumers: Low-income migrant workers and rural population are able to store money and send it to their families in rural areas more cheaply and

conveniently that with the post office or other money transfer services.

2. As distributors: The company’s agents earn a commission by acquiring customers and acting as service providers of the money transfer service in rural areas.

VBCF INVESTMENT


RESULTSThe VBCF grant had helped M-Service upgrade its infrastructure and attain a large number of agents and users (380,000 users) to form a solid foundation for the company to continue expand services to be provided to Momo users nationwide.

SCALABILITYM-Service is working on further expansion of the suite of services offered.

LESSONS LEARNEDFor future success M-Service should consider the following:

• Improve its sales and aftersales capability to satisfy and retain customers

• Expand the reach of its sales agents to improve access

• Develop its services

Key success factors

• Partner with Vinaphone and Vietcombank

• Strong marketing team with clear vision

• Strong technical and marketing team

“VBCF’s funding has enabled us to invest in new technologies and in marketing development, getting fast access to low income customers in Vietnam.”

Nguyen Ba Diep, M-Service JSC Executive Vice Chairman

Business

Community

SALES OF

1,827 BN VND

CREATED JOBS FOR

240INCREASED INCOME FOR




CREATED SAVINGS FOR

1,553,020 BENEFICIARIES, INCLUDING 1,009,463 LIP

Other achievements: • Established a network of agents and increase revenue of all agents

• Obtained E-Wallet license from the State Bank of Vietnam

38

M-Pay: E-Wallet and Mobile Payment Services

THE MARKET OPPORTUNITYIn Vietnam, a large percentage of the population has little or no access to basic financial services. Most LIP, university students and migrant workers in industrial zones fall into this “unbanked” category, as they do not have access to basic payment services. However, demand from these consumer segments is significant.

This presents a market opportunity for the development of financial and payment services to meet the growing demand of the unbanked populations of Vietnam.

THE INCLUSIVE BUSINESS MODELM-Pay developed a business model that addresses this market opportunity. In doing so the company has made inclusivity a core aspect of its operations, engaging low-income workers as consumers. M-Pay provides e-wallet payment services for thousands of migrant workers and students in eight selected industrial zones and universities. Users benefit from an easy access to basic payment services by mobile phone with very low transaction fees.

VBCF INVESTMENT

7.44 BN VND 35 %of total investment

RESULTSM-Pay is one of the few pioneers in Vietnam exploring the use of latest mobile applications to serve the underserved population. Thanks to its 95,265 e-Monkey users, M-Pay has formed successful partnerships with major merchants, suppliers, banks and investors so it can further upgrade and enrich e-Monkey and expand to other market segments.

SCALABILITYM-Pay already has a large bank of customers. If they continue to introduce products and services they will be able to retain and grow this customer base. They have already scaled-up their services to meet the needs of the other sectors.

LESSONS LEARNED • To diversify value-added services to incentivise users to continue to use the e-wallets

• To develop the Apps for not only users but also the sellers (merchants)

Key success factors

• Strong ownership of technology: in-house expertise to develop systems

• Core competence providing a unique selling point (competitive advantage)

• Competency of management team

BusinessSALES OF

37.18 BN VND



INCREASED INCOME

1,452 PEOPLE, INCLUDING 56 LIP



CREATED SAVINGS FOR


40

Liem Duyen Hai: Toll Bridge to Connect Vibrant Communities THE MARKET OPPORTUNITYA survey on the transportation needs of local people from Thoi Binh and U Minh districts in Ca Mau province showed that more than 1,500 people and approximately 1,000 vehicles cross the Trem River by ferry each day. These ferries, which operate from 5am to 7pm, don’t offer professional 24-hour service or meet safety standards.

Khanh An Industrial Park in U Minh district, which is planned to start operation in 2020, will attract thousands of workers who need to cross the river to come to work. The improved roads in both U Minh and Thoi Binh will also contribute to the increased number of heavy vehicles.

THE INCLUSIVE BUSINESS MODELLiem Duyen Hai developed an innovative business model called “Bridging the Blessings” that addresses this market opportunity. It aimed to construct and operate a 24-hour toll bridge that had capacity to service 1,200 people daily. It made inclusivity a core aspect of its operations, engaging LIP as consumers, and set the toll fee at an affordable level.

VBCF INVESTMENT

3.81 BN VND 28 %of total investment

RESULTSThe traffic flow of the bridge, after two weeks of operation, has exceeded LDH’s initial target. This demonstrated the acceptance of the new bridge by local people and illustrated positive impacts on their life and livelihoods.

SCALABILITYThere is a high potential for scaling up this inclusive business model and the company plans to invest in similar IB models.

LESSONS LEARNEDStrategic investment in the internal capacity and knowledge of the company should be improved to facilitate scalability and implementation.

The project highlighted the need for policy advocacy to be taken into account with project: good advocacy capacity is needed to get approvals and avoid delays to the project.

BusinessSALES OF

63.7 BN VND

Other achievements: • Increased company credibility

“It was a consensus among local people that the new bridge has brought enormous benefits to people of Khanh An and Ho Thi Ky communes from time-saving benefit for daily commuters to more business opportunities for potential entrepreneurs.“

MCG Consultancy, Evaluation Report



INCREASED INCOME




Other achievements: • Reduced travel time and cost and reduced risk

• Opportunities for traders to expand their business

CREATED SAVINGS FOR

9,210 BENEFICIARIES INCLUDING 7,829 LIP

42 43

Rang Dong: Affordable LED Light Productions THE MARKET OPPORTUNITYIn 2013, Vietnam officially banned the production and distribution of 60W or above incandescent bulbs. While high-quality LED products are already popular in middle-income communities, because of the cost and energy savings and long life cycles, low-income communities do not have access to them because of the high initial investment and lack of adequate information.

Low-income market segments account for more than 50% of Vietnam’s population, representing a large market opportunity for low-cost LED lighting products.

THE INCLUSIVE BUSINESS MODELRang Dong, a leading lighting company, developed a high quality line of LED products that are affordable for low-income communities nationwide. The inclusive business model engages low-income individuals from the rural and mountainous areas of Vietnam at three points:

1. As employees: The company employs low-income workers in its factories. These employees would otherwise be out of a job as the company has eliminated

its production of incandescent bulbs over 60W.

2. As distributors: Sale agents distribute the new LED products and earn an income from their product sales.

3. As customers: Low-income consumers are able to purchase high-quality LED products at an affordable price. They will save money by reducing their usage of electricity with the conveniently purchased bulbs.

VBCF INVESTMENT


RESULTSThis was the first time that Rang Dong had developed a product and implemented marketing activities specifically to reach LIP and it was a successful project: sales were 1.7 times the target. Some of the results have exceeded the set targets such as production capacity, sales and number of jobs. Outreach has helped enhance business and project management skills for Rang Dong.

SCALABILITY AND SUSTAINABILITYThere is a large market opportunity - the market is over 20m households - supported by a clear plan for continuing the project and the opportunity to replicate to other market segments.

LESSONS LEARNEDKey learnings

• Mixed marketing approach is required to reach the LIP market

• Need a practical approach to track outreach to LIP

Key success factors

• Strong R&D capacity for diversified and innovative product offering various choices for LIP users

• Strong commitment and leadership from the General Director

• Proactive communication in project targeted areas helped to improve the awareness of the users

• VBCF enforced business plan implementation discipline, a breakthrough for enhancing project execution capacity

“Since my family switched to LED lamps, our electricity costs are half of what we used to pay with other types of lamp. We’ve been using this lamp for more than a year now, but we haven’t had to replace it. We used to replace older lamps once za year. “

End User, Rang Dong LED Lights

BusinessSALES OF

500 BN VND

Other achievements: • Significant increase in production capacity: 3.4 million products in 2014 and estimated 4.5 million in 2015, including 3.56 million for LIP

• 100 major sales points and 2,030 retail stores

• Reduced R&D time and reduced costs

SocialCREATED JOBS FOR

1,317 PEOPLE, INCLUDING 812 LIP




4,029,571PEOPLE, INCLUDING 2,820,700 LIP

CREATED SAVINGS FOR

4,029,571 PEOPLE, INCLUDING 2,820,700 LIP

EnvironmentalThe LED products are eco-friendly and energy efficient, leading to a reduction in CO2 emissions.

44

Green Generation: Green and Affordable Biomass Cook Stoves THE MARKET OPPORTUNITYWith approximately 57% of the Vietnamese population using firewood for cooking, there is a large potential market for a stove that uses an alternative fuel source that is more environmentally friendly and less harmful to health.

THE INCLUSIVE BUSINESS MODELGreen Generation developed an eco-friendly biomass cook stove that burns agricultural by-products and crop residues in addition to firewood for a more cost-effective and efficient cooking solution. The stove is top-lit so it does not need to be fanned, it is mobile, and convenient to use.

It engages low-income individuals at three points:

1. As employees: Workers of the Company earn an income producing the stove parts in its factories.

2. As distributors: Sales agents in local areas earn commission by assembling and distributing the cook stoves.

3. As consumers: Low-income customers

can purchase the cook stove at an affordable price. They will benefit from low cost fuel and reduction in exposure to harmful CO2 and particle matter (PM).

VBCF INVESTMENT


RESULTSGreen Generation has been a successful project achieving key project performance indicators with modest co-investment from VBCF. Green Generation has become a growing business from a small start-up in short period of time.

SCALABILITY Current project outreach and spread across 16 provinces are clear signs of scalability. Green Generation has also expanded its business partners for R&D and business expansion, with Lao and Myanmar potential markets.

LESSONS LEARNED • New products should be tested first before launching to markets

Key success factors

• Innovative product with competitive advantages offering various choices for users

• Innovation mixed sale forces employed to improve accessibility to any potential users

• Passion of the leader at Green Generation

• Affordable price offering competitive advantage

BusinessSALES OF

3.63 BN VND

Other achievements: • Established a distribution network of 250 agents and 16 sales staff

• Capacity to produce 6,000 cook stoves / month while lowering costs

SocialCREATED

65 JOBS INCREASED INCOME FOR

71,072BENEFICIARIES INCLUDING 42,585 LIP IMPROVED ACCESS TO GOODS AND SERVICES AND MADE SAVINGS FOR


AVERAGE COST SAVING FOR FUEL =

87,000VND PER MONTH

EnvironmentalThe biomass cook stove is eco-friendly. It uses agricultural by-products and crop residues, consumes less firewood, and creates less smoke than traditional alternatives, and therefore emits less CO2 into the environment.

EMISSIONS REDUCTION IS ESTIMATED AT

22,712,860 KGe

46 47

Hi Tech: Efficient Cook Stoves Fuelled by Agro-forestry Waste THE MARKET OPPORTUNITYIn rural Vietnam, the use of traditional cook stoves that burn firewood and fossil fuels that pollute the air and endanger people’s health is still popular. There is a pressing need for efficient and affordable cook stoves for low-income populations in rural areas where agricultural residues are abundant. A market opportunity also exists for innovative cook stoves that address pollution, health risks, energy scarcity, and affordability.

THE INCLUSIVE BUSINESS MODELHi Tech developed an innovative business model that addresses this market opportunity. In doing so it has made inclusivity a core aspect of its operations, engaging low-income populations in rural areas as consumers. The company produces a biomass cook stove that is fuelled by agro-forestry waste. The stove is designed to be convenient, user-friendly, energy efficient and affordable for LIP, and is distributed through a network of low-income individuals acting as agents. The company also promotes sales by raising awareness of the health and environmental benefits of the stove.

VBCF INVESTMENT


RESULTSThe project has achieved key performance indicators despite experiencing difficulties in personnel and project management and not having an effective distribution chain.

The cook stoves are well appreciated by the users for their higher energy efficiency, cleanliness and reasonable prices. VBCF’s investment in equipment and its role in supporting Hi-Tech to make the product more affordable and accessible to mostly LIP rural users (68%) was effective.


• Innovative and quality product with low production cost

• Good understanding of business challenge and user demand

• Good targeting of promising market and effective distribution channels

Business

Community

SALES OF

7.12 BN VND

CREATED JOBS FOR



27,668 PEOPLE, INCLUDING 18,366 LIP DIRECTLY IMPROVED ACCESS TO EASY TO USE, CLEANER AND SAFER ENERGY EFFICIENT SOLUTIONS AND COST SAVINGS FOR


Other achievements: • Sold 6,823 stoves (up to 30 June 2015)

• Enhanced production capacity and lowered production costs

e

EnvironmentalESTIMATED AT

8,879,267 KGTHANKS TO THE USE OF 6,823 HI-TECH STOVES

48

Green Environment: Biogas Digester Made From Recycled Plastic THE MARKET OPPORTUNITYVietnam’s livestock industry has been growing steadily at a rate of 5-6% per year. This has created a need for the management of animal waste, and biogas digesters are considered an effective solution.

A biogas digester is a mechanism that manages and processes manure into a source of clean energy for cooking, lighting and powering home appliances at farm households. There is a market opportunity for biogas digesters that are environmentally friendly and low-cost.

THE INCLUSIVE BUSINESS MODELGreen Environment developed an innovative business model that addresses this market opportunity. In doing so it has applied a new technology - plastic injection pumping into a sealed mould - to the production of biogas digesters from recycled plastic. This is the first time that this technology has been used to produce biogas digesters in Vietnam. The digesters are assembled with interchangeable modules that can be expanded if needed. They also have a self-discharge function that will reduce maintenance cost and are 20-30% cheaper than digesters made from other materials.

Green Environment has made inclusivity a core aspect of its operations, engaging low-income populations in rural areas as consumers and employees.

VBCF INVESTMENT


RESULTSAlthough the project was considered successful, sales were limited by the poor sales and marketing strategy. Green Environment has overcome technical challenges to optimise the product for the target consumers.

“We received funding to invest in market development and we located 20 agents across many provinces and cities. Serving agents across the country is a challenge. Without VBCF I am sure this factory would never have been developed in Vietnam.”

Ngo Duy Dong, Green Environment Director

SCALABILITY The project promises great scalability thanks to huge market demand. Sustainability is also high as the project has been lucrative for the company. It plans to expand production to all of its workshops by 2019.

LESSONS LEARNEDThe following may have improved the project results:

• Get technical advice from experts in the field before implementation

• Invest in building capacity of management and staff

• Out-source marketing to a specialist company

Key success factor

• Established a network of sales agents at commune level in the targeted market

• Using recycled plastics to reduce costs led to reduce prices

Business

Social

SALES OF

54BN VND

CREATED JOBS FOR




IMPROVED ACCESS TO BIOGAS DIGESTERS FOR


CREATED FUEL COST SAVINGS FOR


Other achievements: • 2,720 biogas digesters installed by 15 September 2015

• New production line installed, producing 30 units per day

• Trained 100 production workers, installers and technicians

Environmental • Using recycled plastic as a primary input and applying a closed production process reduces pollution significantly. The company’s technology also creates renewable energy through effective waste treatment.

EMISSIONS REDUCTION OF

9,209 TONS OF CO2e PER HOUSEHOLD / YEAR

e

5150

Discontinued ProjectsFive of the 21 initiated projects did not continue.

1. FRESHWATER FARMING OF SEA BASS

The Market OpportunityFarm-raised sea bass is a high market value seafood. The fish is in demand in both the domestic and export markets for its good taste and high mineral content.

Thai Binh, a northern coastal province of Vietnam with a long history of producing sea and freshwater products, has favourable natural conditions for freshwater fish farming. This presents a great market opportunity for the adaptation of sea bass to a freshwater farming environment.

The Inclusive Business ModelThrough a rigorous research and development processa company successfully domesticated sea bass in freshwater.

The company has made inclusivity a core aspect of its operations, engaging LIP as producers. It provides these farmers with bass fingerlings and technical assistance in sea bass farming in freshwater and committed to buying back the fish that the farmers produce.

VBCF Investment


ResultsThe project experienced an unexpected termination after 10 months

2. ORGANIC RICE FARMING IN U MINH AREA

The Market OpportunityVietnamese producers don’t have enough capacity to address the global market opportunity for organic and healthy food products. This is partially due to difficulties in obtaining organic certification.

The buffer zone of U Minh Ha nature reserve in Ca Mau province has favourable conditions for organic farming. Isolation from other intensive farming areas has left U Minh Ha rice producers unfamiliar with the use of chemical fertilizers and pesticides.

The Inclusive Business ModelA company developed an organic farming complex and made inclusivity a core aspect of its operations, engaging LIP as producers. The company supports their suppliers in the improvement of irrigation systems and provides organic rice seeds, organic fertilizer and bio-products.

The farm owned by the company is the only one in Vietnam that has been certified as organic and the improved irrigation system helps farmers increase their rice production from one to two crops per year. The company also trains farmers in organic farming techniques that meet international standards and is committed to buying back the organic rice they produce.

VBCF Investment


ResultsThe project was terminated by VBCF as the market growth was slower than expected.

3. DECENTRALISED WATER PURIFICATION

The Market OpportunityThere is an urgent need for clean water in Vietnam, especially in rural areas. Statistics show that only 11.7% of the rural population has access to tap water and that 85% of

common diseases in rural areas are attributed to the use of unhygienic water. A water filter market in rural areas exists, but there are not many trusted decentralised clean water providers. Many rural locations are too remote for connection to centralised water facilities, and for others the service is too expensive.

The Inclusive Business ModelA water supply companydeveloped an innovative business model related to the development of decentralised water purification technology. The mechanism uses an environmentally friendly and patent-protected technology and a distribution network that brings it to low-income markets at an affordable price.

VBCF Investment


ResultsThe project was terminated by VBCF as the company failed to fulfil the committed 2nd and 3rd milestones.

52 53

4. DECENTRALISED UNBAKED BRICK MACHINE PRODUCTION

The Market OpportunityVietnam is undergoing a transition from traditional construction materials to lower-cost and environmentally friendly alternatives. The government has begun to remove traditional brick kilns while supporting the proliferation of unbaked bricks.

While there is a growing demand for unbaked bricks in both the domestic and international markets, the required production technology has not previously been developed. Unbaked bricks in Vietnam are currently made manually, which means there is low productivity and high production costs. A huge potential market exists for the economical production and distribution of unbaked bricks.

The Inclusive Business ModelA companydeveloped a standardised unbaked brick machine that it will sell to entrepreneurs who will use it to make bricks for sale to consumers. The machine is user friendly and can product bricks in different sizes that are suited to the customer’s need. The company has made inclusivity a core aspect of its operations, engaging low-income populations at two points:

1. As producers: The company sells brick moulding machines to producers (entrepreneurs and trade groups) that employ low-income workers.

2. As consumers: Producers sell unbaked bricks to low-income people for an affordable price.

VBCF Investment

222.7 M VND 30%of total investment

ResultsThe project was terminated due to incompliance with VBCF procedures.

5. WATERPROOF LIGHTING FOR OFF-SEASON DRAGON FRUIT FARMING

The Market OpportunityDragon fruit producers in the southern provinces of Vietnam are increasingly using electric lighting to enable production during the off-season. However, the use of 60-75w incandescent bulbs for this practice has drastically increased power consumption and is harmful to the national power grid.

It is estimated that millions of energy efficient light bulbs are needed for off-season dragon fruit production in Vietnam. Small farmers who use incandescent bulbs and own less than 1 ha of farmland represent more than 60% of this market need and would benefit most from a high quality and low priced alternative.

The Inclusive Business ModelA leading lighting company in Vietnam developed a compact bulb specifically for dragon fruit farming. It is energy efficient, waterproof, and certified by international standard IP65.

The IB project engages low-income dragon fruit farmers as their primary customers. These farmers benefitfrom a marketing programme that aims to educate farmers to use the products in farming dragon fruits, ultimately, increased productivity during the off-season and improved income.

ResultsThis project was terminated due to delays in implementation.

54 55

The Results

56 57

SummaryThe 16 completed projects were all aligned with VBCF mandates and met most of the key performance indicators at the beneficiary, business and environment levels, as well as being scalable and sustainable.

At the business level, companies also benefitted from enhanced project management skills and the opportunity to expand production and processing facilities.

When farmers were involved in the model, as well as increased income, they learned new skills and farming practices and benefitted from improved cooperation with other farmers and access to credit and quality inputs.

Tangible systemic changes were evident in many of the projects. This included changes in farming and fishing practices, access to and use of basic goods and services, and changes to market systems.

VBCF’s role extended beyond financing: among other things, their support helped shape project design, facilitated equal access to credit, enhanced product design, helped commercialise products and improve project management skills.

Importantly, VBCF helped and incentivised all projects to engage low-income people in the value chain of their companies. For example, in the agricultural portfolio, farmers were engaged as suppliersand incentivised with funding, seedlings, inputs, technologies, etc. When low-income people were buyers or users of services and goods provided, as was the case in both the basic services and infrastructure portfolio and the low carbon growth portfolio, VBCF offered co-funding to share risks with companies in their development of goods and services targeting low-income users and buyers.

58 59

Changes and OutcomesThe impact of the VBCF has far exceeded expectations. Nearly 11,000 people have new jobs, including over 8,000 LIP; 262,469 people have seen increases in their incomes, including 166,518 LIP; and over 5 million people have gained access to basic goods and services, including 4 million LIP.

IMPACT RESULTS ACHIEVED UNTIL SEPTEMBER 2015

10,899 243,949 5.7 million 6 million467.4

5000

2,786BILLION

112.9 BILLIONVBCFINVESTMENT

116

3.3M (55%)3m (52%)123,715 (51%)

4,263 (39%)

NEW JOBS PEOPLE -INCOMEINCREASE

PEOPLE -ACCESS TOGOODS & SERVICES

DFID Targets Female Percentage %

VNDINVESTMENT COMPOSITION

PEOPLE -CREATEDSAVINGS

VND SALES

billion

4.2 million

LIP

157,570 LIP

LIP

4 million

0,060,2

8,224LIP

AT THE BENEFICIARY LEVELThe largest number of new jobs and highest additional income was created in the agriculture portfolio. VBCF funded IB projects provided poor and ethnic minority farmers with a way to improve their livelihoods sustainably. Thanks to training, technical advice and supply of quality inputs, in most cases, farmers’ income increased.

Although the number of jobs created was not as high in the basic service and infrastructure portfolio, these projects provided access to goods and services to a substantial number of people and, in some cases, a significant number of working days were created for seasonal workers. For example, 10,440 working days created for seasonal workers for land clearance and installation of a pipe network by the Howaco project.

The low carbon growth portfolio provided users with more choices to select products and goods that reduce energy costs while preserving the environment.

AT COMPANY LEVELProject management tools and knowledge provided by VBCF proved extremely useful for the management of the IB project and also for business operations in the longer term. Capacity of the managers and staff who worked closely with VBCF was also found to be improved.

“It is interesting to witness the improvement in capacity of my staff. This is an unexpected outcome for the company. My staff is now applying what they had learnt from VBCF colleagues in their daily work. I believe that as they understand the tools and work on VBCF requirements, they have become master of what they are doing now.”

Director of TraphacoSapa

Most firms achieved brand building through increased awareness and sales. This was supported by positive recognition and enhanced credibility among communities and local authorities.

All companies gained valuable experience working with LIP as suppliers and users and developed models that improved their sustainable operations.

60 61

AT MARKET AND INDUSTRY LEVEL (SYSTEMIC CHANGE)VBCF specifically emphasises the expected systemic change through the replication of innovative business models of IB firms and new market structures in production and service delivery that benefit more low-income people.

Several projects across all three portfolio showed signs of systemic change including behaviour of farmers, new types of services available, large outreach, collaborative management and shared benefit, and policy endorsement.

Solid systemic change results are evident in the portfolio, including cases that developed a robust inclusive ecosystem for their operations such as Rang Dong, Hai Nam and M-Service. Many are pioneers and game changers in their own industries, avoiding the operation of integrated business models and instead

applying an open approach, leveraging the capacities of other stakeholders in their ecosystems, specialising and maximising efficiencies and outreach.

These cases are the drivers for inspiration and change which are been expanded and replicated.

6362

ScalabilityThe majority (80%) of completed projects have scaled the IB models either within the project scope or in other areas/levels or both.

Of the 16 partners, 11 were able to introduce new products or services and 10 entered new local consumer markets. To a lesser

extent, they connected with new local suppliers,export markets, business partners or investors. Four companies (BioSpring, Rang Dong, Ecofarm and Howaco) were awarded extra funding for scaling up activities due to their good performance. This is a significant result given the very short project timeline.

SustainabilityThere is clear evidence of sustainability for all 16 completed projects. They all have a clear plan for continuation of the IB model, targeting new markets, new products or services. Signs of scalability as mentioned in previous section are indications of sustainability of the projects.

In September 2015, the VBCF portfolio companies participated in the first Inclusive Business Match Making Marketplace in Vietnam. The inclusive entrepreneurs

had an opportunity to pitch to 12 impact and commercial investors, which reacted positively to these potential deals. There are several on-going investor-investee discussions which are expected to result in actual investment agreements and expansion of these successful inclusive business models.

SCALING UP ACTIVITIES CONDUCTED BY THE 16 COMPANIES

10

20

40

60

80

100

%New products or services

New local suppliers

New local consumer markets

New export markets

New business partners

New investors Imitators 6%

65

24 2459

29 29

06

Value for MoneyIn 2014, Ernst & Young conducted a Value for Money assessment of VBCF for the period 1st October 2012 to 31st March 2014.

It was assessed against the “4Es” of the Value for Money Framework defined by DFID, based on surveyed samples and data analysis.

THE 4ES

Economy EfficiencyAre inputs of appropriate quality being bought at the right price?

How well does the project convert inputs into outputs?

EffectivenessHow well are the outputs achieving

the desired outcome?

EquityAre the development results targeted at

the poorest and do they include targeting of women and girls?

VBCF was rated at 4.5 out of 5. This means the project has maintained effective mechanisms, processes and capability to monitor the project.

IN ITS ANNUAL PERFORMANCE REVIEW, 2015, DFID AGREED THE FUND HAD “EXCEEDED TARGETS”.

64 65

Additionality: mid-2014It is important to try and assess how much of the observed impact can be attributed solely to VBCF activities. One approach to doing this is through the concept of additionality.

This is difficult to measure: it is not enough to compare the situation at the start with the situation after the intervention as that does not take into account other potential influences on the outcomes. Comparison companies therefore need to be identified and in the case of VBCF, an aggregate, programme-level approach was used.

Six partner companies and 13 companies that applied but were not successful were selected at random. Conclusions were drawn based on the partner company’s self-report on what would have happened if they had not been funded, comparison between the two groups, case studies, interviews with VBCF staff and further analysis.

“Without this funding it would be considerably harder for us to bring the products to the market and it would take much longer for our company to grow.”

CEO, BioSpring

RESULTSOverall, VBCF as an organization and through its programme, demonstrated various forms of additionality. There were positive as well as less positive aspects of this additionality. Although this assessment did not quantify the net additionality the evidence suggest that on the whole VBCF created net positive additionality.

Its strongest contribution to additionality was probably in the form of financial and agency additionality, and from subsidising risk and encouraging innovation. The systemic changes that will result from this programme will only be observed in its full spectrum in the future.

The weakest contribution to additionality from VBCF is probably the displacement it may have caused. Since creating additionality is one amongst other goals for VBCF, its performance on this aspect seems sufficient. Whether it should have placed more or less weight on additionality with respect to other goals is a larger debate to be had.

Applying the concept of additionality through every stage of the programme would help create more of it. Making it a part of processes of planning, establishing criteria and targets, selecting projects, monitoring the portfolio and finally assessing impact, allows for a more holistic and integrated approach to creating and measuring additionality.

Additionality = The total value created that would not have been created without VBCF

Low Moderate High Very High

SOURCE OF ADDITIONALITY

FINANCIAL

WILLINGNESS TO IMPLEMENT

SCALE

SCOPE

TIME

DISPLACEMENT

RISK AND INNOVATION

AGENCY

Relative level of additionality

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Lessons Learned1. A large part of the success of VBCF was

due to having a capable independent investment panel in place.

2. The governance structure employed proved to be much more effective than VCF-M4P2. Public Officers tend to be risk adverse, contradicting the nature of a Challenge Fund, so processes were often distant from what is required by challenge funds and low in risk appetite.

3. Many businesses were unaware or sceptical about the funding opportunity. Directly approaching potential partners was hugely successful, increasing both the quality and quantity of applications.

4. Challenge funds of short duration need to set lower impact and outcome targets and select innovations that can be realised within a shorter timeframe.

5. The main barriers businesses need to overcome in order to generate and implement innovative and inclusive solutions are skills, capacities, funding, BoP knowledge and access to markets.

6. Challenge funds need to be more than a fund manager and should equip themselves with sector specific expertise to support the IB firms if needed.

7. Key factors for project success are business size and the presence of a “champion” within the company who commits to the task and is an advocate for change.

8. Major barriers during implementation:

a. Mis-timed calls with short deadlines limited the number of quality applications received

b. Underestimating the time required and complications to be faced to obtain licenses, land clearance, etc.

c. Non business friendly procedures

d. Enforcement of Intellectual property is not optimal, so confidentiality and low profile must be a valid alternative

e. Climate disasters occur

f. Lack of specialised service providers

g. Non compliance with procedures

9. Challenge Funds can deliver systemic impact if there is a solid market systems analysis and the challenges are well defined.

10. For systemic change:

a. Large/medium companies should be prioritised

• 40% of partners were large enterprises

b. Time is required

• The VBCF ran for only three years

c. An ecosystem perspective must be adopted

• Different actors must be engaged

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ConclusionThe results from the VBCF programme have been positive but limited, as the programme only ran for three years and and due to its limited resources could only support some companies. With hundreds of thousands of entrepreneurs in Vietnam, and a new generation

that are not only interested in maximising profit but also want to have a positive impact on society and the environment, the scope for businesses to get involved in Inclusive Business is still huge.

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The Final Word“The outcomes of the Vietnam Business Challenge Fund are very much in line with the efforts to facilitate more sustainable and equitable growth by the Government and Private Sector organizations of Vietnam. Following the success of the Inclusive Business models funded by VBCF, we would like to share the potential to grow of these models, as they are pivotal for

sustainable development and poverty reduction. We want to get other people interested in it: government, other donors and a wider range

of private sector partners. We hope the donors will have more similar Challenge Funds. We also hope that the models supported by the VBCF will inspire other businesses to do inclusive businesses. Together, we will

deliver at scale and unleash the potential of the private sector in ways that haven’t been seen before in Vietnam”

- Ann Freckleton - Head of UK Department for International Development in Vietnam

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Tel +84 (0) 4 3846 3791 Fax +84 (0) 4 3846 3794 Website www.vbcf.org.vn

vbcf final report_en

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