PHL potential for addressing poverty cited

The Philippines has a huge market potential for increasing so-called inclusive businesses (IBs) that could help address poverty, a study prepared for the Asian Development Bank (ADB) disclosed.

The “Inclusive Business Market Scoping Study,” prepared by the Asian Social Enterprise Incubator Inc. (Asei) for ADB noted that only a small number of companies in the Philippines could be classified as “inclusive business.”

ADB defined inclusive businesses as private-sector investments specifically targeting “the base of the income pyramid [BoP] or low-income market” with the double purpose of making reasonable profit and creating tangible development impact through the provision of jobs.

The BoPs are those living below the $3 to $4 poverty line and represent an “interesting business opportunity” as a substantial new market for goods and services.

“This segment of the population also doubles as a significant pool of entrepreneurship, assets, talent and productivity that can be leveraged for the supply of critical inputs, innovative distribution systems and skilled labor,” said ADB on its web site.

“Of the large number of non-governmental organizations and social enterprises and corporate-social responsibility companies active in the country, only a small number [maybe 50-100] could be classified under inclusive business, of which few are ready for investments on commercial terms,” the study noted.

So, the Asei study said, the market potential for IB in the Philippines remains large, especially given the large unmet needs of the poor, their strong consumption behavior and the large number of social enterprises and bigger firms that would like to upscale to IB models.

Per industry, the study found that the agricultural sector makes up the largest share of the inclusive businesses in the Philippines, followed by financial services and the manufacturing sector.

“The agricultural sector represents the largest share of IB in the Philippines with 26 percent. This is in line with the high prevalence of poverty in the rural areas of the country and the importance of agribusiness to the economy as almost one third of the population is engaged in this sector,” the study read.

The Asei study found that companies that are ready to scale up the inclusive business model are looking for debt financing in the range of $1 million to $10 million at interest rates between 4 percent and 8 percent.

The study recommended that the Philippines’s IB fund be integrated in a wider Southeast Asian IB fund as the current state of available equity deals and the infrastructure gap does not warrant a Philippine specific fund.

ADB should also contribute through technical assistance to develop an enabling eco-system for the development of inclusive businesses in the Philippines. –Jennifer A. Ng / Reporter, BUsinessmirror