Inclusive businesses have to become truly embedded in the local context to reduce poverty in BoP communities. Therefore, Hart and London (2005, p.30) suggested that they must develop native capability, i.e. ‘’the ability to develop fully contextualized solutions to real problems in ways that respect local culture and natural diversity’’. This capability consists of five key competences: (1) working with non-traditional partners, (2) co- creation of local solutions, (3) development of local expertise, (4) coping with central government, and (5) building social, not legal, contracts. As shown in the figure above, my research* confirms that these competences positively influence the impact of inclusive businesses, in terms of improving the (1) economic situation, (2) capabilities, and (3) relationships of buyers, sellers and communities at the BoP (London, 2009).
Working with non-traditional partners:
Looking at the first component of native capability, it was found that NGO’s, government agencies, cooperatives, and local providers of inputs and services are very common non-traditional partners. They can help to provide (the capacity for) trainings in order to improve farmers’ capabilities, but also to create an agricultural value chain.
Moreover, local research institutions are very important for agricultural inclusive businesses in Africa. According to ELAGA1 (case of this research as well as partner of the project), local research institutions help to build local expertise on the crops: ‘’The national research institution helped us in giving the know-how, which is very crucial as our product is a new cash crop. It is not very well-known yet, there is no documentation about how much water we need for example, so we have to make our own with the help of our research institutes.’’
Co-creation of local solutions:
It is very important that the products and/ or services that are introduced by inclusive businesses fit the local BoP context. Therefore, they are often collaborating with cooperatives, other socially oriented projects, NGO’s or the local community, to seek local solutions. As an example, VOS2 set up an onion project in consultation with local leaders to reduce the high unemployment rate after the export season. Besides extra work opportunities that offer extra income, it involves workshops and open days through which transfer of knowledge is ensured, leading to improved capabilities as well. Another example was given by DADTCO3, who is necessitated to work together with NGO’s in order to reach all farmers for training because its capacity as a private company is limited.
Development of local expertise:
Inclusive businesses usually lack prior knowledge on the (constraining) conditions in the BoP context. An example hereof is the extreme drought in combination with a lack of water access. Especially in the agricultural sector, where prices of products are strongly dependent on quality, it is very important to work with local or foreign (e.g. Wageningen University) research institutions. As a result of their research, inclusive firms can implement suitable irrigation systems (e.g. drip irrigation) and better farming or soil management techniques, so that quality and production are improved. In turn, this will result in higher revenue for the farmers.
Furthermore, CDPIT4 also investigates (actors on) the market, so that farmers know where to sell their products: ‘’In the potato market we try to do as much research as possible on the operation of the market. And we use that information, share that information with the farmers, so they can better leverage the markets.’’
Coping with central government:
The findings of this research show that the central government is a very important actor with regard to the sustainability of the inclusive projects, as they are able to extend the projects after their lifetime. However, the cases argued that it is important to follow local rules in order to earn that support from the government.
Building social contracts:
Finally, findings showed that most of the cases conclude both formal and social contracts. In general, the cases build formal contracts for the government and commercial actors, but social contracts with the local community: ‘’There are relationships of course based on mutual trust as we have to engage, interact with these people on a daily basis.’’ (HortInvest5)
Finally, the research findings also implied relationships between components of impact. First, it was found that inclusive businesses seek to provide trainings that improve farmers’ capabilities in order to produce higher quality and quantity. And in turn, this will increase farmers’ revenue. Second, sustainable linkages with the private sector enable farmers to produce and sell more products, which will increase their revenue as well.
I hope that this paper could make inclusive businesses reconsider the importance of native capabilities in their work field, so that negative impact can be limited and poverty will be truly reduced.
*You can find my full report here
1 ELAGA Burundi
2 Van Oers Senegal
3 DADTCO Mandioca Mocambique Lda
4 Center for Development of Potato Industry Tanzania
5 HortInvest Rwanda