Inclusive Business – AF-Campus AG

Definition and Characteristics

Inclusive Business is a terminology in the new business literature. Inclusive Business (IB) are commercially viable companies of the private sector that provide – in scale – systemic and innovative solutions to the relevant problems of the poor and low-income people in developing and emerging economies.

IB typically address well-paid income opportunities or relevant and affordable goods andservices for the bottom 40% income groups (the B40 or base of the pyramid BoP). Theyhave systemic and transformative character for sector and industry, a large geographicalarea or even the whole country.

IB business models are typically long-term oriented and such companies are very consciousnot to exploit the beneficiaries. In IB companies there is no trade-off between the businessbottom line and the benefits for the poor; rather both dynamize each other.

IB models can be found in all sectors (many are in agrobusiness). They are sponsored bycompanies of all sizes, mostly however by flexible and innovative medium sized companieswith a strong culture of flexibly adjusting to changing market conditions, supply chains, andneeds of the poor.

How IB differs from other business approaches

From Mainstream Business

From mainstream business, IB differs as they deliberately create solutions for the problems of the poor and low-income people. Business return is important but not the main goal. IB firms do not emphasize short-term profit maximization but rather long-term sustainability through good business returns. As responsible businesses, all IB models have a strong awareness of environmental and social standards and ensure good business governance.

From Corporate Social Responsibility (CSR)

IB differs from Corporate Social Responsibility (CSR) by making solutions to the problems of the poor part of the core business philosophy, and not a small add on of otherwise mainstream business.

From Social Enterprises

IB also differ from social enterprises in their commercial success und in the scale of theirimpact. Redistribution of profits is not a required characteristic of IB, although using thebusiness returns to address risks of the poor is typically part of the IB philosophy.

Where are the IBs?

Inclusive Businesses are mostly found in developing and emerging economies, where the market of the poor is big but less served, offering high potential for an innovative private sector to engage in a meaningful and non-exploitative way.

In high-income economies (like the OECD world) there are only a few IB models. Here nearly all companies also serve the lower-income markets. Social business in these economies focuses on niche markets.

Worldwide, since the 2010s there is a strong trend for establishing IB models and for investing in IB companies through impact investing. For example, the International FinanceCorporation (IFC, the private sector arm of the World Bank) has increased its IB investments to meanwhile 15% of its deals. Similarly, other bi-and multilateral development banks as well as commercial finance institutions (e.g. Credit Suisse, J.P. Morgan, impact funds) establish new financing instruments for IB. The investment side often claims that “… there is no shortage in money for IB but problems of finding good deals…”.

For developing and emerging economies IB models are particularly relevant because they help the poor (that is their purpose), the business making money (obviously), and the government addressing social needs with flexible approaches that work for which the state if often less well equipped. Many countries in Asia, therefore, welcome the emergence of companies and have prepared specific promotion programs. 6 To this end, ASEAN has recently developed an Inclusive Business Policy Guide recommending economies in southeast Asia to set up IB promotion strategies, policies, and programs.

Why is AF-Campus an IB?

Many companies deal with the poor or provide services to them. Engaging the poor however does not make such firms automatically to be an Inclusive Business company. IB characteristics require commercial viability, innovative solutions, targeting the poor, scale of services or income opportunities created, sustainability, and contribution to systemic change.

AF-Campus is a good example of an IB model in the technical training sector. It offers systemic solutions in scale to generate in a sustainable way good income opportunities. It offers that to the poor, the Philippines society (through including the Azubi component), and to the German (and Swiss and Austrian) people who pay for the services and have a big and major benefit. AF-Campus also introduced many innovations to reduce the risks of the poor in such training courses. Over 10 years It arranges 25.000 people o find well-paid jobs in good working conditions, and has with this large number a systemic impact.