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Page 1 Unlocking the massive potential impact of Inclusive Business in Agriculture in the Philippines Presentation

Unlocking the massive potential impact of Inclusive Business in Agriculture in the Philippines

Presentation at Social Business Summit on 2 October 2013

Social Business Summit 2013

For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph

GK Enchanted Farm - Bulacan, Philippines

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There is high growth in the Philippines …but it is not inclusive:

High level of poverty in the ASEAN context

Philippines Vietnam Indonesia Thailand Malaysia Singapore PovertyIncidence (2009) 0.00% 5.00% 10.00% 15.00%
Philippines
Vietnam
Indonesia
Thailand
Malaysia
Singapore
PovertyIncidence (2009)
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%

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GK Enchanted Farm - Bulacan, Philippines

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There is high growth in the Philippines …but it is not inclusive:

High growth but no poverty reduction

8.0% 60.0% 7.0% 50.0% 6.0% 40.0% 5.0% 4.0% 30.0% 3.0% 20.0% 2.0% 10.0% 1.0% 0.0%
8.0%
60.0%
7.0%
50.0%
6.0%
40.0%
5.0%
4.0%
30.0%
3.0%
20.0%
2.0%
10.0%
1.0%
0.0%
0.0%
2009
2010
2011
2012
2013Q2

GDP growth (annual %)*

Poverty Incidence Among Families, NSO (%)

Self rated poverty SWS

3

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GK Enchanted Farm - Bulacan, Philippines

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There is high growth in the Philippines …but it is not inclusive:

High and rising inequality

Philippines Thailand Singapore Indonesia Malaysia Vietnam 0.34 0.36 0.38 0.4 0.42 0.44 0.46
Philippines
Thailand
Singapore
Indonesia
Malaysia
Vietnam
0.34
0.36
0.38
0.4
0.42
0.44
0.46

Gini Coefficient (2009)

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GK Enchanted Farm - Bulacan, Philippines

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There is high growth in the Philippines …but it is not inclusive:

Persistent and high un- and underemployment

8.0% 25.0% 7.0% 20.0% 6.0% 5.0% 15.0% 4.0% 10.0% 3.0% 2.0% 5.0% 1.0% 0.0% 0.0%
8.0%
25.0%
7.0%
20.0%
6.0%
5.0%
15.0%
4.0%
10.0%
3.0%
2.0%
5.0%
1.0%
0.0%
0.0%
2009
2010
2011
2012
2013Q2

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2009 2010 2011 2012 2013Q2 Social Business Summit 2013 GDP growth (annual %)* Unemployment rate Underemployment

GDP growth

(annual %)*

Unemployment

rate

Underemployment

rate

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GK Enchanted Farm - Bulacan, Philippines

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The private sector can make growth more inclusive

• Decent jobs and income

• Goods and services relevant, affordable and accessible for the poor

Strong Social Consciousness

300,000 NGOs 20,000 Social Enterprises 70% of companies have CSR programs 50% of companies have corporate foundations

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Weak Engagement as Business

70 companies in ADB study with inclusive business models

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GK Enchanted Farm - Bulacan, Philippines

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Private sector engagement in IB

Benefits

Reasons to engage the BoP

1. Increase growth and profitability

2. Localize supply chain

3. Strengthen reputation and brand

Benefits to the company

1. Create shared value

2. Improved sales

3. Improved reputation

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Obstacles

1. Poor regulatory environment for IB and lack of targets

2. Problems to access capital

3. Lack of government incentives

4. Lack of social appreciation on the role of IB in inclusive growth (media, government, civil society)

GK Enchanted Farm - Bulacan, Philippines

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Inclusive Business

Inclusive business - core business activity that integrates the low-income segment within its value chain as suppliers, consumers, distributors and/or employees in such a way that it creates shared value, addresses pressing social (and environmental) issues and contributes systemically to poverty reduction.

High Mainstream Inclusive Business business Social enterprise Low Finacial returns
High
Mainstream
Inclusive
Business
business
Social
enterprise
Low
Finacial returns

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Low

Social Impact

High

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GK Enchanted Farm - Bulacan, Philippines

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Social Impact

- Reach

- How many people in the low income segment does it reach

- Depending on sector and mode of engagement

- Depth

- How intensive is the project impact on the poverty situation

- Job generation: Stability, Sustainability, Quality

- Access to products/services: Relevance of products/services

- Relevance and Systemic Contribution

- How relevant is it to the country’s poverty situation

- How systemic is does the model contribute to poverty reduction

- Scale

- Replicability

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GK Enchanted Farm - Bulacan, Philippines

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Social Impact

- Innovation

- How innovative is the model

- What other benefits brings the model to the low income population

- Participation

- Gender empowerment

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GK Enchanted Farm - Bulacan, Philippines

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What is the Base of the Pyramid (BoP) in the Philippines?

62% of the Philippine Population (57 million) with family income below PHP 18,000

Population (57 million) with family income below PHP 18,000 Source: PovcalNet / 2005 PPP USD, 2009

Source: PovcalNet / 2005 PPP USD, 2009 data

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62.5% of population = 57.4 million people with income/expenditure of less than US$3 per day/capita (ca 18,000 PhP per family per month) in international Purchasing Power Parity

41.7% = 38.1 million US$2 per day/capita (self rated poverty (SWS) / minimum wage; ca PhP 12,000 per family per month)

18.4% = 16.9 million US$ 1.25 per day/capita (Philippines poverty line)

GK Enchanted Farm - Bulacan, Philippines

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Base of the Pyramid (BoP) Market

BoP consumes US$ 33.4bn (48% of total PH expenditure) Education 435 Household Operations 490 Gift
BoP consumes US$ 33.4bn (48% of total PH expenditure)
Education
435
Household Operations
490
Gift and Contributions
506
Medical Care
507
Clothing, Footware and Other…
677
Personal Care and Effects
1,437
Transportation and Communication
1,935
Fuel, Light and Water
3,077
Rent/Rental Value of Dwelling Unit
5,830
Food
16,292
0
5,000
10,000
15,000
20,000
US$ Million

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Source: FIES, 2009 data, Top 10 expenditure items

GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB in the Philippines is in a nascent state

• Low awareness of IB among business community

• Many IB models are early stage

• IB eco-system does not exist

• 70 IB companies of which only 30 are investable at the moment

• Low awareness in finance community

• Only 3 deals with total of US$ 5 million in last 3 years

• Low awareness among government and donor community

• BUT, there are good examples demonstrating potential of IB

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GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB Potential in Agriculture - Job generation

• Agriculture and Agribusiness

• Coffee for Peace – sourcing coffee from indigenous HH

• Rocky Mountain Coffee – sourcing of coffee

• MCPI – sourcing seaweed from fisherfolks

• Coco Technologies – sourcing coco fiber from coconut farmers

• Kennemer Foods – sourcing of cacao

• Unifrutti – Rainforest Alliance certified Cavendish banana sourcing

• Food & Beverage

• Jollibee – Farmer Entrepreneurship Program

• Nestle – sourcing of coffee beans

• RFM – sourcing of ube

Manufacturing

• Gandang Kalikasan – Sourcing for Human Nature cosmetics

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GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB Potential in Agriculture – Products and Services

• Agriculture and Agribusiness

• SL Agritech – Affordable Hybrid Rice tripling farmer‘s income

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GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB Potential in other Key Sectors – Job generation

Manufacturing

• All Home Design – Subcontracting handicraft production

• Retail

• Microventures – Hapinoy Sari-Sari store program

• Julie‘s Bakeshop – Micro kiosk franchising program

• Tourism

• Island‘s Banka Cruises – Small boat operators

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GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB Potential in Key Sectors – Provision of Products and Services

• Finance

• Climbs – affordable life and non life insurance

• Globe BanKO – mobile microfinance products

• Energy

• Powersource Group – Rural electrification

• SURE – Rural electrification plus job generation

• Health

• Generika Drugstores – low cost medicine

• Family Vaccine Clinic – affordable rabies vaccination

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GK Enchanted Farm - Bulacan, Philippines

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Findings of ADB’s IB Country Study

IB Potential in Key Sectors – Provision of Products and Services

• Information Technology

• Smart and Globe – Mobile Phone plus

• Encash – Deployment of ATMs in rural areas

• Education

• STI – technical and vocational courses

• Phinma – quality and affordable education

• Urban Development

• Phinma Properties – On-site relocation PPP with Q.C.

• Clean Engines – affordable retro-fitting of motorcycle engines

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GK Enchanted Farm - Bulacan, Philippines

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Recommendations of IB Country Study

Development of enabling environment

• Business associations

• Promote IB among members

• Government

• Remove barriers promoting „ease of doing business“

• Integrate private sector in development planning and implementation with meaningful target setting

• Legislators

• Incentives for IB

• Development Partners

• Support with Technical Assistance

• Financing

• Investment opportunities

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GK Enchanted Farm - Bulacan, Philippines

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Progress Report

IB is gaining momentum

• More companies identify themselves as IB

• Business associations and NGOs are committed to inclusive business and inclusive growth agenda – PBSP, LCF and GK

• Government is working with private sector – DAR

• Senators with social entrepreneurship agenda were elected

• Impact investors are focussing on the Philippines

• Conferences are organized

• 1st and 2nd ADB IB Forum

• Social Business Summit

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GK Enchanted Farm - Bulacan, Philippines

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Conclusion

A lot still needs to be done

• Develop the network and eco-system

• Aligning inclusive growth agenda with inclusive business initatives

• Bringing investment to inclusive business

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GK Enchanted Farm - Bulacan, Philippines

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Maraming salamat po

Social Business Summit 2013

For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph, or Armin Bauer, ADB, Tel: 632-5550; abauer@adb.org

GK Enchanted Farm - Bulacan, Philippines