FAO’s Rural Infrastructure and Agro-Industries Division (AGS) convened a three day meeting with action-researchers to discuss guidelines for taking inclusive business models (IBM) to scale. The recent surge in the term ‘inclusive business models’ has led to a range of activities that have resulted in localized innovations, improved local capacity and some changes in policy direction and decision making. Few initiatives have led however, to the transformation of smallholder-based value chains capable of competing with imports or on an export market – and resulting in improved livelihoods for a wide number of smallholders.
Partners at the meeting came from the research, NGO, and private sector fields. They included the International Center for Tropical Agriculture (CIAT), the International Institute for Environment and Development, Centre for Development Innovation at Wageningen UR (IIED), Endeva, International Development Enterprise (iDE), the Sustainable Food Lab (SFL), Unilever-Oxfam, the Policy and Technical Advisory Division of IFAD and the Rural African Ventures Investment (RAVI).
The main discussion outputs were: Overview of the approach
For partners working with the private sector, such as SFL and Oxfam, the focus of the IBM approach is on the inclusion of developmental concerns among the business community. For partners, including FAO, whose clients are the public sector and small actors in agriculture, the focus is on mainstreaming business thinking and improving competitiveness, so that smaller actors are able to compete more viably with larger actors.
Despite differing entry points, there was consensus that the term inclusive business model implies a business case for trade between business of all scales, with mutual benefits for the poor and the business community – based on the objective that people transition out of poverty.
Learning on IBM
Engaging smallholders in markets can take different forms, depending on the local context, market and commodity. Provided the linkage arrangement contributes to sustainable livelihoods improvement, the engagement can be buyer, broker or farmer led.
The approach is useful for those companies, large and small, that are already procuring from smallholders, as it enables a more structured interface with the development community
Smallholder producers and buyers of staple crops operate in a different environment to high value or cash crops and there is a lot of scope for exchange of lessons on how business is done in the different crop environments
A rethink is needed on the roles of market intermediaries and their exit strategies – such as NGOs and project teams that facilitate linkages between smallholder suppliers and buyers.
Focus needs to be given to upgrading the local institutional capacity so that smaller actors do not become overly dependent on any single facilitator, market outlet, buyer and/or crop.
The role of policy
For successful IBM cases to be taken to scale there needs to be alignment between micro and macro level policies.
Private sector investment in smallholder agriculture needs guidance from the public sector so that business results in smallholders transitioning up in the agricultural market system - for instance moving from trading surpluses on the informal market to engaging with the formal sector.
More work is required on defining the characteristics of an inclusive supply chain. Inclusive business is not only about ensuring that more smallholders are included in value chains, but consideration needs to be given to the quality of that inclusion.
A common set of indicators is required to respond to the diversity of stakeholder groups - public sector, business sector, NGOs, etc. - so that the same information can be extrapolated but interpreted in different ways.
Steps forward: Partners agreed to work in the following areas to consolidate work efforts and gain synergies
knowledge management - common questions and answers, high quality documentation and development of common metrics
private sector engagement – how to guide the engagement of small and large firms in business with smaller less endowed suppliers
policy guidance based on best practices identified from existing multi-stakeholder platforms and the results of IBM on target groups and communities
guidance on the role of market facilitators in linking smallholders to businesses.