Asian Development Bank and Inclusive Business

Want to know more about inclusive business in the Asia region? The Practitioner Hub and Asian Development Bank have developed the Inclusive Business in Asia Hub

Why Asia needs inclusive business

The Asian Development Bank actively promotes Inclusive Business in Asia.  While the private sector has been a key contributor to the economic boom in Asia, it has yet to fully realise its potential in making growth in the region more inclusive and more directly contributing to poverty reduction. Specifically, the private sector can develop more innovative business models that create – at scale – decent and well paid new jobs and provide affordable and relevant services for the poor and low income people.

Asian Development Bank and two development partners hosted the 2nd Asia Inclusive Business Forum in February 2016 in Manilla. More than 400 experts and representatives from companies with IB models, impact investors and banks interested in IB, government and development partners exchanged on recent developments for IB in Asia. Read the various background papers here.

 

ADB’s definition of IB

The Asian Development Bank (ADB) is defining Inclusive Business (IB) as a private sector core business activity that creates – at scale – innovative and systemic solutions to the relevant problems of poor and low-income people. IB targets the market at the base of the income pyramid (those living below $3-$4 poverty line; 60% of Asia’s population) by creating jobs and income, or offering affordable and relevant services to improve their living standards. IB involves the poor as suppliers, employers, consumer, or distributors. IB models can also include the better off as long as the poor are integrated, and the benefits to the non-poor are used for creating value for the poor and low income people (e.g. through cross-subsidies or selling models). ADB’s inclusive business approach does not entail the expansion of private consumption goods that are not directly related to poverty reduction. IB business models always follow double-bottom line, and sometimes also triple bottom line approaches. While designed to achieve social impact in scale, IB does not compromise on profit making. All IB companies make reasonable profits with internal rate of returns of 10-40%. IB solutions can be delivered by large and small companies. Inclusive business differs from social enterprises and corporate social responsibility activities in its higher realized profit making motive. It typically aims at broader social impact (companies in the growth phase and not start-ups) in scale and depth of systemic contribution to poverty reduction. Inclusive business also differs from the original base of the pyramid approach as it is more about a systemic contribution to a poverty problem rather than broadening consumption goods for the poor which are not always addressing key social issues.

 

History of inclusive business in Asian Development Bank (ADB)

In 2012, Asian Development Bank started its inclusive business initiative with market scoping studies in ten Asian countries, the development of an ex-ante impact assessment tool, and the due diligence for two possible Inclusive Business (IB) funds for Southeast Asia and for South Asia.  In December 2013, ADB’s Board of Directors approved a new regional technical assistance project to help Asian Development Bank’s private sector departments do impact assessments and due diligence work in IB investments, support the enabling environment for IB, and promote regional exchange and knowledge. In April 2014, Asian Development Bank added Inclusive Business under its corporate Strategy 2020 Update and it is currently finalising (by April 2015) an Action Plan for up-scaling its private sector investments, sovereign work, and knowledge and partnership support for inclusive business in Asia and the Pacific. ADB’s IB concept comprises not only investments in private sector companies that promote social impact, but also technical assistance and project support for the public sector to create a better enabling environment for IB.