The ultimate purpose of the TA is to contribute directly to the reduction of poverty and vulnerability by accelerating private sector development and investments solutions relevant for the poor. The project will also impact on gender equality and environmental sustainability through gender sensitive investment design and impact assessment studies, and through including investment projects that create environmental and climate change relevant impact (e.g. in the area of renewable energy).
The final outcome of the project will be increasing the investments in inclusive business by ADB and other investors through (a) strengthening the commercial viability, business model and social impact of proposed IB investments with concrete financing opportunities, and (b) helping governments nurture a positive investment climate and ecosystem for inclusive business, including improvements in regulatory frameworks, target setting in development plans, governance coordination, monitoring and impact reporting, as well as knowledge sharing on the potential of IB in Asia.
The project will have 4 components as following: (a) due diligence support for inclusive business projects financed by ADB's private sector operational department; (b) imapct assessment work for IB projects of ADB and others; (c) working with selective governments to improve the business environment for IB; and (d) exchange on innovatibve knowledge regardig IB relevant for Asia.
The project will be co-financed by the Swedish International Development Agency (SIDA) and by Credit Suisse. In addition there is parallel financing from KfW for various activities.
ADB will be the executing agency for the TA. TA components will be implemented through consultants hired as either individuals or firms. As inputs need to be provided in line with the needs of companies and public-sector partners, sector specific advisory services, legal advice, business development, and impact assessment advice cannot be predetermined and will be developed during the implementation of the project. Given the demand based approach followed with this TA, consultants will be engaged under various standard ADB selection methods, including quality based selection (for complex assignments with high downstream impact), fixed budget selection, and - for small assignments with exceptional experience - through single-source consultant selection.
|Project Rationale and Linkage to Country/Regional Strategy
There are practical constraints on government's ability to effectively address the challenges of inclusive growth in Asia, especially in creating employment and providing essential services at affordable prices and conditions for the poor and low income groups. Against this background, the private sector is increasingly recognized as delivering potentially significant contribution by providing jobs and income opportunities, and delivering innovative solutions for the poor's housing, health, education, transportation, finance, information, and energy needs.
Commercially sustainable enterprises whose core business models is designed to provide shared benefits (i.e. business and social returns) in scale to address systemic poverty issues of the poor and low income groups (i.e. those below the $3 poverty line, or 63% of Asia's population) are defined as inclusive businesses (IB). While maximizing profitability and social impact, IB provide poor and low income people with essential goods and services (while addressing issues of access, affordability, quality and choice), as well as improved livelihoods and income-earning and employment opportunities. Inclusive businesses integrate poor people into the mainstream economy as consumers (by providing essential goods and services that meaningfully improve people's lives by addressing issues of access, affordability, quality and choice), as suppliers or/and distributors (by creating income earning opportunities by incorporating the BoP into their value chains), and as employees by creating decent jobs that directly benefit unemployed, underemployed, and low-income workers.
Inclusive business ventures differ from corporate social responsibility in scale of investment, profitability, business purpose, and scale of social impact. CSR programs are typically based on a grant model, and often are not integrated into the core business of an enterprise. An inclusive business can also be a social enterprise, but the latter tends to operate on a smaller scale and may not integrate poor people into its business processes. However, an inclusive business can emerge out of a not-for-profit CSR program or a small social enterprise.
While there are some examples of private sector investments in Asia that target the poor, the key challenge is to upscale such business models, strengthen their poverty reduction impact, link the investments better with the governments' targets for poverty reduction, and increase the knowledge and relevance of IB investments in the business community, among the government, and in the development community. Market scoping studies in 10 Asian countries done by ADB showed that in Asia the IB sector is still in a very nascent stage of stage. This is also true for ADB, where a recent portfolio analysis showed that only 7% of ADB's private sector investment between 2000 and 2012 can be classified as IB (compared to 12-15% for IFC and IADB). On the other side, the review of Strategy 2020 emphasizes an increased private sector contribution to ADB's overarching goal of poverty reduction. More IB investments by ADB's private sector department, and more public private partnerships through linking public sector investments from ADB's regional department to IB will promote this.
This technical assistance (TA) is designed to creating better conditions through which IB Can be identified, funded, implemented, monitored, and systematized with the ultimate aim of contributing to inclusive growth and poverty reduction in target Asian markets. In specific the TA will address the following development challenges:
- Accelerating bankable inclusive business investment opportunities for the private sector,
- Leveraging private-sector capital alongside ADB initiatives,
- Setting impact measurement standards
- Promoting an underdeveloped inclusive business ecosystem in the public sector and enhancing partnerships for IB, and
- Reducing information and knowledge asymmetry for more effective (and targeted) private sector support for poverty reduction and inclusive growth in Asia.