Inclusive entrepreneurship, what is it? | TPSF

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Inclusive entrepreneurship, what is it? | TPSF

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Inclusive entrepreneurship: definitions

Inclusive entrepreneurship refers to all activities of a company that seeks to integrate vulnerable and low-income populations or the bottom of the pyramid (BOP) into the production chain such as workers, suppliers, distributors or even customers, with suitable products. The concept of “Base of the Pyramid” (BOP) refers to the theory of Stuart Hart presented in the work Luck at the bottom of the pyramid where, starting from Maslow’s pyramid of needs, it shows the economic potential of the poorest and most marginalized populations such as the disabled, migrants, ethnic minorities or single-parent families. Inclusive entrepreneurship contributes to social, economic and ecological development by associating entrepreneurial dynamics with the fight against inequalities.

In 2021, during the G7 summit, the 4 main characteristics of inclusive entrepreneurship were defined. First you have to an intentional engagement from the bottom of the pyramid (BOP). There are 4.5 billion people living on less than $ 8 a day, inclusive trade must deliberately and sustainably integrate these low-income populations into its business after targeting them. Their entry into the production chain gives them access to secure income, training, and relevant goods and services. Then you have to a search for financial profitability that is, the ability of the inclusive business to make a profit and remain competitive in the long term. This goal encourages companies to see their stakeholders as sustainable business partners and customers and to adapt to their imperatives. Furthermore, it is necessary business development, which results in a change of scale. In fact, BOP would represent a potential market of nearly $ 5 trillion a year. This is a highly underrated market with many opportunities that inclusive businesses want to seize through digital. Finally, it is necessary measure and manage the impact on the BOP in order to promote these dynamics in the market and among the players. Through evaluation tools, inclusive companies can maximize positive changes and correct negative effects, they can adapt their model and process.

Inclusive entrepreneurship, which oscillates between philanthropy and capitalism, is close to the model of social entrepreneurship, although both are substantially different. The first wants to insert the BOPs in the production chains and in the consumer markets, it wants to make them consumers and workers in the same way as other populations already integrated. To do this, inclusive trade is based on the balance between social objectives and economic profitability. While social entrepreneurship mainly aims at the development of goods and services aimed directly at low-income populations. Therefore, even if inclusive entrepreneurship tries to promote its model through a philanthropic approach, it remains Business. Economic profitability and corporate profit remain the primary objectives. In this way, the association with small suppliers allows large companies to be more flexible and adapt their products by reducing production costs or, hiring people who are part of the reference market allows them to stabilize it and be more attentive. to trends and needs. However, inclusive entrepreneurship has a structuring effect on the company itself to the extent that activities are transformed to include vulnerable populations. Business schools are also starting to offer courses geared towards these new models. For example, HEC opened a Social Business / Enterprise and Poverty chair in collaboration with Danone, Renault and Schneider. The latter is a pioneer in inclusive entrepreneurship with its BIPBOP (Business Inclusive People / Bottom of the Pyramid) program present in many countries.

Therefore, inclusive entrepreneurship allows economically vulnerable populations to move from a passive position to an active role, freeing them from their static position of assistantships to empower them. Economic actors thus acquire a freedom of action which allows them to undertake. Inclusive entrepreneurship creates a virtuous circle of development set in motion by the beneficiaries themselves. The BOP then becomes a consumer, an entrepreneur and a borrower with self-esteem and control over their own destiny.

Inclusive entrepreneurship to combat economic exclusion

The inclusive business model arises from the need to stem the economic exclusion of large sections of the population around the world due to social or economic discrimination. Economically disadvantaged people struggle to find a stable and sufficient source of income. However, they face difficulties in accessing essential goods and services, training, health care, decent housing or reliable transportation. Furthermore, they do not have access to credits and loans, which is an obstacle to improving their financial situation. The answers proposed so far, such as the redistribution programs and the social assistance system of states, international organizations and NGOs, have not been able to solve the problem in a complete and lasting way. Inclusive entrepreneurship has therefore been built as a lever to combat a situation that appears to be the result of a process rather than a voluntary action. There may be obstacles that prevent some people from engaging in economic activities structural for example the lack of adequate jobs for low-skilled workers or the excessively high cost of living, informative namely the lack of information on available jobs or the marketing of cheaper or even products socio-psychological for example, discrimination in hiring.

Poverty is often accompanied by a paradox that could be summed up in the adage “only lend to the rich”: everything costs you more and no one wants to lend you money. This additional cost to the poorest people is called the “Punishment of poverty”, theorized by CK Prahalad. It is according to this principle that a liter of water in Nairobi’s slums costs up to 6 times more than a liter of water flowing from the taps of the city’s luxurious apartments. Economically vulnerable populations very rarely have access to lending organizations because they cannot demonstrate income or economic stability. Micro-credit, promoted by Nobel laureate Muhammad Yunus, has reduced inequalities and lifted thousands of people out of poverty. By removing obstacles, it is possible to correct market failures and contribute to the health of the global economy.

The first recurring obstacle affecting the BOP is the lack of infrastructure, in particular sanitation, energy or communication networks. This lack creates physical obstacles to the integration of disadvantaged populations into markets and production chains. This physical isolation leads to a noticeable increase in the price of products, this is called the cost of the “last mile”. But there is also a loss of accessibility and availability of the products or raw materials that these populations have to sell. Companies have to incur additional costs for purchasing and transportation, which reduces their competitiveness. Removing these obstacles would allow access to new opportunities for economic and social development.

The creation of new structure opportunities

Finally, to ensure the sustainability of the model, it is necessary to rely on its actors, especially companies, to support new dynamics and opportunities. As the market expands, the training needs increase. The company is an important training and education channel with all the interest in training its partners so that they can meet the required quality and service requirements. Companies entering a BOP market focus their efforts on training young people who are often the first victims of unemployment.

Governments, on the other hand, can propose new regulations and review those in force that limit the integration of the BOP to economic activities such as financial services and penalize it at a fiscal and legal level, improve access to different financing solutions, inform the BOP characterized by a systematic lack of information to make the best choices. Governments through their national statistical institutes can compile, aggregate and share market data, including data on households, consumption or social programs to enable companies to better understand the market and its needs. Several governments and national agencies can create or support the creation of new products and means of investment locally. In addition to traditional development finance institutions, new actors, philanthropic or for-profit, are innovating to offer new long-term and population-adapted financing services. These structures all seek to have a positive and above all measurable social and environmental impact.

International institutions can also support inclusive entrepreneurship initiatives. In 2019, during the G7 summit, the “Business for inclusive growth”(B4IG) was launched, marking a milestone in promoting inclusive business practices. 30 globalized companies then discussed and exchanged views on these new practices and signed an agreement to integrate inclusive measures into their structure. However, multilateral banks were the first to support this model. They have already invested more than $ 15 billion in inclusive entrepreneurship schemes. Local financial institutions such as co-operatives or microfinance banks are at the forefront as they create the link between investors and partners. These fair and transparent financial services are essential for the development of local businesses.

Therefore, it appears that inclusive entrepreneurship is characterized by a strong potential for creating and stimulating markets where the BOP is placed at the center of the model as well as the financial objectives. This model matches the initiatives that Bill Gates calls the “Creative capitalism” that is to find innovative, ethical and entrepreneurial solutions to extend the global market to areas and populations not yet economically integrated. To reach these new markets, everything has to be reinvented and rethought. Inclusive entrepreneurship therefore allows large groups to expand their market thanks to their ability to innovate, but also allows smaller companies to stand out and work for the common good. TPSF actively participates in inclusive entrepreneurship initiatives as a training intermediary between young people who do not attend school in Africa and public works companies.

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