The role of Inclusive Business for inclusive growth

Inclusive Businesses (IB) are defined as commercially profitable companies whose core business model is to provide innovative systemic solutions in scale to address the problem of poor and low income people living below the international poverty line (less than $3 a day) in Asia (about 60% of Asia’s population, also referred to as the Base of the Pyramid (BoP)).

IB differ from corporate social responsibility (CSR), social enterprise, microfinance, and contract farming through their business scale, growth potential, and focus on systemic changes for poor people. IB is also distinguished from impact investments in that it places the impact on poor and vulnerable people at the center, and de-emphasizes impact on the environment or good governance.

With governments realizing the limitations of their role in reducing poverty, decreasing official development assistance, and new responsibilities taken by the private sector to create “shared value” for business and society, IB that create meaningful and affordable impact for low income people increasingly play an important role in poverty reduction. Therefore, the private sector is increasingly recognized as providing jobs and income opportunities for the poor, and offering innovative solutions for their housing, health, education, transportation, finance, information, and energy demands. While IB development is based on private sector motivation, it needs government support by creating space and legitimacy as well as standards and targets for engagement that create systemic impact (and scale) for poverty reduction.

In 2012 the Asian Development Bank created its inclusive business initiative to increase its public and private sector investments in IB deals and funds, document better social impact of such projects, promote in cooperation with governments in selected countries a more conducive environment for inclusive business, and support knowledge exchange and partnerships with IB. For more information on ADB’s IB initiative please visit the IB website.

Dr. Armin Bauer,
Principal Economist,
Asian Development Bank