Inclusive business - a new approach to poverty reduction

Like other Asian countries, the concept of inclusive or new business is being introduced as an additional strategy towards poverty reduction in Bangladesh. Formalised in a 2008 United Nations report titled Creating Value for All: Strategies for Doing Business with the Poor, this new business model includes people with low income on the demand side as clients and customers and on the supply side, as employees, producers and business owners at various points in the value chain. The benefits from inclusive or new business models are profits and higher incomes. They comprise new customers, expanding workforce, and strengthening supply and delivery chains for business. They are inclined to meeting the basic needs, having sustainable earnings and achieving higher productivity for people with low income.
What is poverty? Poverty is hunger; it is lack of shelter; it is being sick and not being able to see a doctor. Poverty is incapability to go to school and know how to read.
In Bangladesh, 35 millions, that is 26 per cent of the population, face acute poverty. After execution of a lot of programmes for eradication of poverty during the last few decades in Bangladesh, poverty came down from 46 per cent to 26 per cent in 2013. Per capita income of the people has increased substantially. The living standard of the people gradually has gone up. Nutrition intake has increased. Bangladesh has started its journey to become a middle-income country within a couple of years.
Despite significant reduction in poverty during the last two decades, most important concern of the country is still poverty reduction, income and employment generation and improving living standard of the low-income and poor people. NGOs (non-governmental organisations) and microfinance institutions, which are engaged in poverty reduction programmes for the last few decades, could not contribute significantly to poverty reduction and act as catalyst for sustainable development in Bangladesh. The high target of poverty eradication and improving living standard of the poor people by providing micro-credit has proved inadequate. It could not help the poor households to get out of poverty. Rather, according to some critics, a large number of poor people remain trapped in a vicious circle. On the other hand, several safety net programmes, pursued by the government, have helped reduce poverty substantially. Now, only 26 per cent of the population is under poverty line.
In Bangladesh, mainly due to a large number of government programmes like Ashrayon, Ghore Fera, Ekti Ghar Ekti Khamar and Kajer Binimoye Khaddyo   poverty has come down to 26 per cent in 2013 from 46 per cent in 2000. It reflects success of the government-initiated programmes.
As an addition to microfinance, the concept of inclusive or new businesses covers low income and marginalised section of the population introduced by the United Nations Development Programme (UNDP) in East European and Central Asian countries. After immense success of inclusive business programme in the European and Central Asian (ECA) countries, it was expanded to Vietnam, Laos, Cambodia and many other developing countries of the world. Recently, similar programme of new business model has been initiated in Bangladesh also.  
The private sector around the world is aware of the fact that people with low income have untapped potential for consumption, production, innovation and entrepreneurial activity. Such a potential is present among the poor and low-income people of the country. These people remain an untapped resource. This is mainly due to the fact that business houses are unaware of the opportunities of inclusive or new business models. To overcome this knowledge gap and promote inclusive business models, the UNDP and some donor agencies took steps in many countries of the world.
People with low income can benefit from inclusive business ventures by increasing income, meeting basic needs, and gaining productivity.  Inclusive business can increase income and generate employment opportunity. It can provide access to clean water, improved sanitation and health services to poor and low-income people. Inclusive business can enhance access to goods and services, increase productivity, access to electricity and financial services.
New businesses can benefit by attracting new consumers, expand workforce and strengthen supply and delivery chains. Similarly, a large segment of unemployed or under-employed people can be provided jobs. Micro, small and medium enterprises and small and medium farms are able to offer services as suppliers in the delivery chain. Inclusive business models are not just created to increase profits but also to provide economic opportunities for low-income communities.
However, five areas of constraints affecting inclusive or new business have been identified. They are limited market information, insufficient regulatory environment, insufficient physical infrastructure, lack of knowledge and skills, and restricted or no access to financial services. The strategies that were mainly used to overcome them were 'investment' to remove constraints and combining resources and capabilities with others.
Government, business association, public agencies, NGOs and development agencies can play a critical role in the success of inclusive or this new business model. They are able to create necessary foundations by policy formulation, continuous research and advocacy. These organisations can act as partners providing finance and other complementary capabilities.
The writer is former Executive Director, the Bangladesh Bank                and CEO, BCFInAS. [email protected]