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IB Impact Assessment
The inclusive business/base of the pyramid (BoP) approach promotes the inclusion of the poor as:
- suppliers (of goods and services within the value chain of a larger company or market);
- distributors; and
- workers/labor/income earners.
Research on inclusive business argues that generating employment and income opportunities for the low-income segment of the population at the base of the pyramid can be, when applied correctly, an important and sustainable driver of poverty reduction. Therefore, it is important that BoP/inclusive business models emphasize mutual value creation – the benefits to the low income segment in addition to the financial returns for the companies involved.
In addition, integrating the low-income segment as consumers can also generate mutual value, even if it does not directly contribute to income or employment opportunities for the poor. This is because the goods and services provided to the poor can improve their living conditions on a sustainable basis.
The ultimate goal of inclusive business is to embed poverty reduction within market-based solutions and economic development. This can be developed by developing additional markets for private sector enterprises. To this end, an inclusive business project should set up clear criteria for identifying inclusive business-focused companies and for promoting them. The project also needs to establish impact monitoring on poverty reduction and inclusive growth. A BoP Impact Assessment Framework provides a robust tool for BoP ventures to assess and enhance their poverty alleviation impacts.
The project, while scoping the BoP markets and developing a pipeline for financing, will also establish criteria for inclusive business that impact directly on poverty reduction. These criteria will include BoP demand for public goods, such as social and economic infrastructure, to address the needs of the poor, especially with regards to transport, urban services, energy, health, education and social protection.
Aspects of such frameworks have been developed by various think tank institutions, including the Global Impact Investing Rating System (GIIRS), the World Business Council for Sustainable Development (WBCSD) Measuring Impact Framework, and SNV, among others.
The project provided an overview of internationally used impact assessment tools and recommended ADB to develop its own tool for assessing the poverty and inclusive growth impact of its inclusive business investments. A summary of ADB's proposed Impact Assessment Tool was presented in the India IB Investment Forum. The tool will be further discussed during the regional investment forum with the intention to harmonize it for IB investments of various development partners in Asia.
Read more about ADB's inclusive business impact assessment tool, with its four dimensions:
- eligibility criteria
- impact channels
- impact scores and targets for individual projects
- assessing fund management performance
Harmonizing Impact Assessment Tool in Asia
Back to back with the Asia Inclusive Business Forum in November 2012, development partners and investors met in ADB to discuss how IB impact assessment in Asia can be further harmonized. They established a working group to come up by end 2013 with a toll that can be jointly used. Initially ADB will be the secretariat for this discussion.