Inclusive business finance

by Okonkwo Sunday 08097223518 for more, Inclusive business finance refers to capital that supports the creation, growth, and sustainability of entrepreneurs, small holders, and small enterprises who were previously excluded from the financial markets. The instruments used in inclusive business finance include (but are not necessarily limited to) debt, equity, quasi-equity, grants, insurance, guarantees, development finance and various shared risk instruments and mechanisms. The definition of inclusive business finance also goes beyond exclusively referring to the funding activities of regulated and non-regulated, formal and informal, financial services providers. It also includes the provision of a variety of financial resources (guarantees, loans, equity, leasing) by corporations to small holders and micro-small and medium-sized enterprises (MSMEs) as distributors and suppliers within their value chains.[1]

Background

Financial inclusion improves the range, quality and availability of financial services to the under-served and the financially excluded (the poor).[2] In the context of financial inclusion for enterprise and business purposes, “inclusive finance”[3] falls within the context of inclusive business models that offer sustainable business solutions and finance models that expand access to goods, services, and livelihood opportunities for low-income communities.

Inclusive business models involve conducting business with low-income populations within a company’s value chain by incorporating them in the supply, production, distribution and/or marketing of the company's goods and services. This engagement creates new jobs, boosts income, improves technical skills and expands local capacity. Poorer consumers can benefit from products and services that meet their needs in affordable and appropriate ways.[4]

By focusing on commercial viability, these models have demonstrated the potential to be scaled up to engage thousands, even millions, of lower-income individuals. The important emphasis is on establishing a relationship through the company’s core business, rather than on providing philanthropic support.

The concept of financial inclusion as a way to view a financial system has become increasingly widespread after first being articulated in 2005 at the end of the UN International Year of Micro-credit. An inclusive financial system is one that services all clients, not just the relatively well-off. This means that it is necessary to reach out to low-income clients and provide them with affordable financial products and services tailored to their needs.

An inclusive financial system is one that recognizes both the market potential and the development opportunities of providing banking and financial services to the poorer communities. This generally involves fostering:

In many countries, those with low income do not even have access to basic savings accounts. Therefore, they do not have access to more advanced financial services that could provide security, predictability and the seeds of economic growth for their households. An inclusive financial sector supports the full participation of lower income households in the financial system.

There is now a significant body of research that shows that having access to financial services is a critical tool necessary for both economic growth and human development. Global experience also shows clearly that the poor can be reliable clients, and that institutions that service their needs effectively enjoy profitable business from this segment of the market.

Addressing the missing middle

Micro-small and medium-sized enterprises (MSMEs),[5] particularly in developing nations (such as Africa, South America and, to a lesser degree, Asia) face a multitude of barriers and challenges that impede their ability to access finance. Of the estimated 365 to 445 million MSMEs in the developing world, roughly 70 percent do not make use of external financing, despite their need. Furthermore, MSMEs require financial services beyond credit alone. Products such as savings accounts, transactional accounts, insurance, and payment services are crucial for small businesses early in their development when credit is usually difficult to obtain due to deficient credit history or lack of collateral. In developing countries, formal MSMEs represent approximately 45 percent of employment and roughly 33 percent of gross domestic product (GDP), which represents a wealth of untapped opportunity for growth in the private sector. The strengthening of the private sector with expanding and better financed MSMEs provides the potential for shared value on multiple levels.[6]

Financial inclusion advocates have successfully shown that companies can capture growth opportunities for themselves, and support economic development within bottom of the pyramid (BOP) communities, by providing inter-mediation for MSMEs within their value chain. In particular, the “missing middle” represents a major gap in the financing pool that exists today, and presents significant opportunity for finance providers willing to support enterprises that are too large for microcredit and considered too small for commercial credit from banks.[7]

Companies can work alongside target customers to develop products to fit client needs. Savvy businesses benefit from incorporating MSMEs and their local market knowledge into their value chains. They are thus able to utilize local know-how, increase revenues, improve learning, share knowledge and practices, and enhance their reputation.

Related finance sub-sectors

At the November–December 2011 OECD Fourth High Level Forum on Aid Effectiveness convened in Busan, South Korea, the United Nations Capital Development Fund, with support from the World Bank-hosted Consultative Group to Assist the Poor (CGAP) conducted a meeting to highlight the launch of a new financial inclusion tool called FIRE – the Financial Inclusion Roadmap Exercise, intended to provide a diagnostic and action framework for accelerating financial inclusion.

During the discussion and debate, an observation was made that when the term "inclusive finance" was coined in 2005, it was most often associated initially with "microfinance". However, today a much wider group of financial stakeholders are involved in helping to improve access to finance and in developing more inclusive financial markets. Now, the more expansive definition of "inclusive business finance" incorporates:

Rural and agricultural finance

Inclusive business finance includes both “rural finance” and “agricultural finance”. "Rural finance" comprises the full range of financial services—loans, savings, insurance, and payment and money transfer services—needed, offered, or used in rural areas by households and enterprises, and "agricultural finance" refers to financial services ranging from short-, medium- and long-term loans, to leasing, to crop and livestock insurance, and covers the entire agricultural value chain—input supply, production and distribution, wholesaling, processing and marketing.

Value chain finance

“Value chain finance” can best be defined as the flow of financing within a subsector, among value chain actors, for the purpose of getting product to market”.[8]

Impact investment

In addition to the sub-categories of finance presented above, a new type of asset called “impact investment” is also included within the definition of inclusive business finance. Impact investment involves the development of an investment strategy whereby an investor proactively seeks to place capital in businesses that can generate financial returns, as well as achieve a social and/or environmental goal. Impact investment capital may come in a range of forms including equity, debt, working capital, lines of credit, and loan guarantees.[9]

Innovative finance

Since 2002, the term "innovative finance" has often been used to describe a range of non-traditional mechanisms to raise additional funds for development aid through "innovative" projects such as micro-contributions, taxes, public-private partnerships, carbon credit levies, debt mechanisms, and market-based financial transactions.[10] However,”innovative finance” also refers to various non-traditional ways in which inclusive finance institutions have structured funding for enterprises and people at the base of the pyramid.

These innovative structures include:

Biodiversity friendly finance

Biodiversity finance or environmentally-sustainable finance is a sub-category of inclusive business finance, relating to funding that seeks to achieve the twin goals of furthering the development and growth of MSMEs, while also promoting environmentally-sustainable economic growth.[12]

Inclusive enterprise finance

"Inclusive business finance" includes inclusive enterprise finance that corporations provide to consumers (credit), distributors (advances and commissions) and suppliers (payment advances and guarantees) that allow low-income individuals and enterprises to do business with larger indigenous companies and transnational corporations.[13] Companies that provide these types of funds have determined that it is in their business interests to pursue the incorporation of inclusive business models into their core business to enhance growth, support their social responsibility mission, mitigate risk, and support the enforcement of regulations.[14]

Social finance

Social finance refers to financial instruments such as credit, savings, insurance and other products that help the poor to better cope with risk, take advantage of income-generating opportunities, organize and have a voice. Social finance is also about promoting and encouraging those institutions that cater to the financial needs of the working poor, including women groups and small and medium enterprises that create jobs, as well as financial sector policies that set incentives to open up the financial community to the working majority and create an enabling environment in which microfinance institutions can operate.

Communities of practice

There are a number of platforms and communities of practice emerging among institutional inclusive business finance practitioners. A growing number of banks, funds, corporations and other private institutions that directly and indirectly provide inclusive finance are members of one or more of the associations, platforms or business networks mentioned below.

Policy and programme development and review

• Alliance for Financial Inclusion (AFI) – AFI is a global network of financial policymakers from developing and emerging countries working together to increase access to appropriate financial services for the poor. AFI is led by its members and partners, central banks and other financial regulatory institutions from developing countries. The network includes financial institution members from over 70 countries working together to advance its mission of accelerating the adoption of proven and innovative financial inclusion policy solutions, with the ultimate aim of making financial services more accessible to the world’s 2.5 billion unbanked people.

• New Partnership for Africa's Development-Organization for Economic Co-operation and Development (NEPAD-OECD) Africa Investment Initiative – The NEPAD-OECD Africa Investment Initiative is the major regional forum on mobilising investment for Africa’s development. Launched in 2006 as a partnership between the OECD Investment Committee and NEPAD, as well as other regional and global organisations, the Initiative aims to strengthen the capacity of African countries to design and implement reforms that improve their business climate. The Initiative seeks to raise the profile of Africa as an investment destination while facilitating regional cooperation and highlighting the African perspective in international dialogue on investment policies. The Initiative achieves these objectives through facilitating high-level dialogue among African policymakers and undertaking investment policy reviews of selected African countries, as well as capacity-building activities, analytical work and studies.

• Donor Committee for Enterprise Development (DCED) – The DCED is the forum where donors, foundations and United Nations agencies share their practical experience of private sector development (PSD), and identify both good practice and promising new innovations. The DCED has grown significantly since it was formed in 1979. With an expanding web-offer on all aspects of PSD, its main knowledge-sharing website has received more than 50,000 visits from 183 countries in the past year. More and more practitioners use the DCED’s two specialized databases at Value-chains.org and Businessenvironment.org to access hundreds of technical documents. The DCED’s Standard for Results measurement provides practitioners with the framework, and an incentive, to measure their programs’ results credibly and practically.

• The Global Impact Investing Network (GIIN) – The GIIN is a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing, which aims to solve social or environmental challenges while generating financial returns. GIIN was conceived in October 2007, when the Rockefeller Foundation gathered a small group of investors to discuss the needs of the emergent impact investing industry. In June 2008, a broader group of 40 investors from around the world met to discuss what it would take for the impact investing industry to be able to solve more social and environmental challenges with greater efficiency. They organized a number of initiatives, including the creation of a global network of leading impact investors, the development of a standardized framework for assessing social and environmental impact, and a development of a working group of investors focused on sustainable agriculture in Sub-Saharan Africa. Just over a year later, the GIIN was formally constituted as an independent organization.

Knowledge networks

• Making Finance Work for Africa (MFW4A) – The MFW4A Partnership is an initiative to support the development of African financial sectors. It is a unique platform for African governments, the private sector, and development partners to coordinate financial sector development interventions across the continent, avoiding duplication and maximizing developmental impact. Hosted at the African Development Bank, MFW4A facilitates the Partnership’s activities which are focused on donor coordination (including management of a donor project database and donor working groups), knowledge management and dissemination (including development of a website/portal, supporting the Making Financial Journalism Work for Africa training program, and supporting the African Finance Forum blog), and stakeholder engagement (including aligning needs and resources and serving as a project broker).

• International Network of Alternative Financial Institutions (INAFI) – The INAFI network consists of various legal entities, each with specific membership and governance structures that own and control the network. Originally, all member organizations were part of the same institution founded under Peruvian law in 1995. As the association expanded, the members decided in 1998 to regionalize INAFI, resulting in the formation of INAFI Africa, INAFI Asia, and INAFI Latin America. Each regional INAFI has a general assembly that elects the regional boards, which in turn appoint the regional secretariats. The regional networks are responsible for the implementation of region-specific programs based on their expertise and experience, specifically aimed at linking and learning at the international level outside their own region. The regional secretariats are located in Nairobi, Kenya; San José, Costa Rica; and Dhaka, Bangladesh. In 2002, the three regional INAFIs registered INAFI International as a foundation in the Netherlands. The INAFI International board has six members, two per continent, elected for a three-year term by their respective chapters. Based in Dakar, Senegal since 2005, INAFI International acts as a coordinating body responsible for the network’s advocacy, fundraising, research, and development. INAFI is an accredited member of the United Nations Economic and Social Council (ECOSOC), which serves as the central forum for discussing international economic and social issues, and for formulating policy recommendations addressed to member states and the United Nations system.

• Global Business School Network (GBSN) – GBSN is a nonprofit organization that tackles the severe shortage of skilled managers in the developing world by building local management education capacity through a unique international network of leading business schools. Since 2003, GBSN has been a leader in promoting management education as a critical component in successful international development strategies. GBSN is fostering a network of emerging business leaders who are committed to using the power of business to create a better world.

• Rural Finance Network (RFN) – The RFN's Rural Finance Knowledge Management Partnership (KMP) is a grant program financed by the International Fund for Agricultural Development (IFAD) that began operations in 2003, mainly targeting IFAD programs. In collaboration with a variety of partners, KMP Phases I and II pursued two objectives: strengthening IFAD engagement in rural financial service delivery in Eastern & Southern Africa (ESA) through knowledge management, experience sharing and capacity building services within IFAD programs, and through direct technical and implementation support to IFAD-supported rural finance initiatives in the region; and developing new and innovative ways to provide financial services to the rural poor through action research programs for the members of the partnership. In its new phase, KMP Phase III seeks to intensify and improve services to IFAD-supported rural finance projects, strengthen action research and promote extensive sharing of rural finance best practice through new partnerships. This comes at a time when countries in the ESA region are seeking to improve financial inclusion as part of their strategy towards broad-based economic growth and poverty reduction. The goal of the initiative is to raise the income and standard of living of poor rural communities in the ESA region.

• Business Fights Poverty (BFP) - BFP is a vibrant community of more than 10,000 individuals from business, the international donor community, non-government organisations and academia who share a passion for fighting poverty through business. Business Fights Poverty provides its members with targeted peer-to-peer engagement and hot-off-the-press, mission-critical knowledge about innovative ways that global business supports global economic development.

Associations

• African Rural and Agricultural Credit Association (AFRACA) – The AFRACA is an association of banks and financial institutions which are involved in providing financial services to the rural population of the continent. Its membership consists of central banks, commercial banks, development and cooperative banks, financial institutions and micro-finance operators. By AFRACA had 90 members – 20 commercial banks, 36 micro-finance institutions, 16 central banks and similar institutions, 8 micro-finance networks, and 10 agricultural and development banks. AFRACA has a liaison status with the Food and Agriculture Organization of the United Nations (FAO). In addition, AFRACA’s programs are supported by other international and bilateral agencies, which are IFAD, and the German Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), which are engaged in the promotion of rural and agricultural financial services, micro-finance and poverty reduction through income generating activities. AFRACA signed a headquarters agreement with the Kenyan government, and the secretariat of the association is based in Nairobi. AFRACA has five chapters: East Africa, Southern Africa, Central Africa, French-speaking West Africa and English-speaking West Africa.

• Council for Micro-finance Equity Funds (CMEF) – The CMEF is the first membership organization to bring together the leading private entities that make equity investments in micro-finance institutions (MFIs) in the developing world. The council’s members seek both social and financial returns from their investments in these institutions, all of which provide a range of financial services to poor households in developing countries. CMEF serves as a valued forum for leading micro-finance equity investors who are pursuing double bottom line goals. By helping council members deepen their relationships with their investors MFIs, enhance the performance of their investments and develop best practices and standards, the CMEF aims to ultimately strengthen

• Association of African Development Finance Institutions (AADFI) – Founded in 1975, the main activities of AADFI are the provision of information and training in the techniques of banking and finance, as well as the provision of development policy advice to African bankers and finance officers. The objectives of AADFI are to promote economic and social development in Africa through cooperation among banks and financial institutions; to stimulate cooperation for the financing of economic and social development; to establish among its members a machinery for systematic interchange of information; to accelerate the process of economic integration in the African region; and to encourage studies focusing on common interest problems.

• Emerging Markets Private Equity Association (EMPEA) – The EMPEA is an independent, global membership association whose mission is to catalyze private equity and venture capital investment in emerging markets. EMPEA’s 300 members include the leading institutional investors and private equity and venture capital fund managers across developing and developed markets. EMPEA leverages a global industry network to deliver authoritative intelligence, promote best practices, and provide unique networking opportunities, giving its members a competitive edge for raising funds, making good investments and managing exits to achieve superior returns. EMPEA’s members represent nearly 60 countries and more than $1 trillion in assets under management.

• Association of European Development Finance Institutions (EDFI) – EDFI is the association of 15 bilateral institutions operating in developing and reforming economies, mandated by their governments to foster growth in sustainable businesses; help reduce poverty and improve people's lives; contribute to achieving the Millennium Development Goals by promoting economically, environmentally and socially sustainable development through financing and investing in profitable private sector enterprises. The association strives to strengthen information flow and cooperation between its members and other bilateral, multilateral and regional development finance institutions. EDFI’s consolidated portfolio, including undisbursed commitments, in 2011 was €23.7 billion in 4,421 projects, and its consolidated new projects established in 2011 was €4.8 billion in 821 projects.

• African Venture Capital Association (AVCA) – AVCA is a nonprofit entity founded to promote, develop and stimulate private equity and venture capital in Africa. AVCA is committed to promoting high ethical standards of business conduct and professional competence in the private equity and venture capital industries. AVCA's activities include advocacy, events, research, training. AVCA has offices in Nairobi, Kenya and London, England.

• World Council of Credit Unions (WCCU) – The WCCU is the global trade association and development agency for credit unions. WCCU was incorporated in 1970 and officially began operations Jan. 1, 1971. Today, WCCU acts as the leading voice for advocacy and governance on behalf of the international credit union community, promoting economic freedom and the sustainable growth of financial cooperatives across the globe through education, collaboration and community-based development projects. WCCU is governed by a board of directors that represents its member organizations. The organization and its subsidiaries are headquartered in Madison, Wisconsin, with an additional permanent office in Washington, D.C., and program offices around the world. Worldwide, 49,000 credit unions in 97 countries serve 184 million people. In 2009, WCCU's technical assistance programs reached 5.9 million people in 13 countries.

Funding platforms

• The Aspen Network of Development Entrepreneurs (ANDE) – The ANDE is a global network of organizations that invests money and expertise to propel entrepreneurship in emerging markets. Officially launched in 2009, ANDE is a member-driven organization housed within the Aspen Institute, an international nonprofit that promotes enlightened leadership. ANDEs members are the vanguard of a movement that is focused on small and growing businesses (SGBs) that create economic, environmental, and social benefits for developing countries. ANDE identifies common strategic challenges and opportunities facing SGBs and, based on these findings, provides programs and services for its members and the sector as a whole. The ANDE's focus is filling the "missing middle" – the space representing the disparity between investments in small businesses compared to other business sectors in emerging markets (micro-finance for individuals and small groups, and private equity for larger businesses).

• BiD Network – Established in 2005, the BiD Network prepares emerging market entrepreneurs for investors, focusing on high growth small and medium enterprises (SMEs) with a financing need of US$10,000-$1,000,000. The core goal of BiD Network is to start, grow and facilitate finance for businesses in emerging markets, thereby creating jobs and raising income. WBid Network serves entrepreneurs, coaches, investors, business angels and business incubators, made possible by an international network of partners in developing countries. The BiD Network web platform facilitates business plan competitions, business plan tools, online community building, coaching programs and the assessment of business plans. It currently has 40,000 members, 10,000 entrepreneurs, 3,000 full business plans, 200 BiD Grade Plans (certified to be ready for investors), 800 coaches, 115 international investors and over 100 local investors. The Dutch Ministry of Foreign Affairs (Netherlands) and the National Postcode Lottery (Netherlands) are BiD Network’s core funders. BiD Network has 17 international partners. Since its inception, BiD Network has launched 490 known businesses and created more than 3,500 direct jobs. BiD Network has also mobilized $12 million from investors for 90 BiD Network entrepreneurs.

• G-20 SME Finance Network – In 2010, the G-20 and Ashoka’s Changemakers, with support from the Rockefeller Foundation, launched an online competition to find the best models worldwide for public-private partnerships that catalyze finance for small and medium enterprises (SMEs). The G-20 SME Finance Challenge, the first-ever competition launched by the G-20, was a unique financial inclusion effort aimed at giving small entrepreneurs a chance to grow their businesses. The G-20 SME Finance Challenge was a unique competition that asked the private sector to identify path-breaking models that make public programs more effective in leveraging private finance. Private financial institutions, investors, companies, foundations and civil society organizations were all invited to submit proposals. Successful entries demonstrated innovation, leverage, scale-ability, social and economic impact, and sustainability. The G-20 is collectively committed to mobilizing the public share of the funding needed to implement winning proposals from development banks and interested bilateral donors. The International Finance Corporation (IFC), World Bank, Asian Development Bank, the Inter-American Development Bank Group, the African Development Bank and the European Bank for Reconstruction and Development have all indicated their support for implementing scale-able and sustainable SME financing proposals, including those from the Challenge, in partnership with the private sector.

• Changemakers.com – Ashoka’s Changemakers is an online community of action that connects social entrepreneurships around the globe to share ideas, as well as inspire and mentor one another. Through its online collaborative competitions and open source process, Changemakers is one of the world’s most robust spaces for launching, discussing, and scaling ideas to solve the world's most pressing social problems. Changemakers builds on Ashoka's three-decade history and vision for an "Everyone a Changemaker" world by creating a place where the best ideas in social innovation can be shared, refined, and funded. Changemaker's community mission is to grow new ideas through transparency and collaboration, and to facilitate the sharing of ideas, track progress, communicate with supporters, and invest in global change. To date, Changemakers has facilitated more than 50 online funding competitions and channeled more than $600 million to social investment projects in support of more than 10,700 social innovations. At least 125 countries are represented within the Changemakers network of more than 500,000 "community builders".

• Venture Capital 4 Africa (VC4A) – VC4A is a fast-growing network of entrepreneurs and investors building innovative companies on the continent. It is a peer-to-peer network and seeks to connect entrepreneurs with the connections, information and capital they need to realize their potential. VC4A has members in 159 countries and more than 200 ventures building businesses in 25 African countries. VC4A was started as a LinkedIn group in the spring of 2008 and has grown into what is now the largest online community dedicated to entrepreneurs and investors building companies on the continent. VC4A can be found on VC4Africa.biz, Linkedin, Twitter and Facebook.

Selected programmes

• Growing Inclusive Markets (GIM) – A United Nations Development Programme (UNDP) program, GIM seeks to demonstrate how business can significantly contribute to human development by including the poor in the value chain as consumers, producers, business owners or employees (inclusive business models). GIM highlights portraits of successful simultaneous pursuits of revenues and social impact by private sectors, from social entrepreneurs to local small and medium-sized enterprises, large domestic companies and multinational corporations, as well as state-owned companies and civil society organizations. Furthermore, GIM works to partner with southern experts to build and share knowledge and research; leverage resources and catalyze useful partnerships in implementing inclusive business models on the ground; and build a powerhouse of empirical evidence of proven strategies in inclusive market development.

• Alliance for a Green Revolution in Africa (AGRA) – Founded in 2006, AGRA is a dynamic, African-led partnership working across the African continent to help millions of small-scale farmers and their families lift themselves out of poverty and hunger. AGRA programs develop practical solutions to significantly boost farm productivity and incomes for the poor while safeguarding the environment. AGRA advocates for policies that support its work across all key aspects of the African agricultural value chain—from finance to seeds, soil health, and water to markets and agricultural education. AGRA partners with African governments, farmers’ groups, the private sector, the science community, civil society and international organizations, and supports the African Union's Comprehensive Africa Agriculture Development Program (CAADP). Grantees operate across the agricultural value chain, laying the basis for the kind of comprehensive, integrated change needed by Africa’s smallholder farmers. AGRA is chaired by Kofi Annan, the former Secretary-General of the United Nations and a team of African scientists, economists and business leaders guide AGRA’s day-to-day work. AGRA, with initial support from the Rockefeller Foundation and the Bill & Melinda Gates Foundation, maintains offices in Nairobi, Kenya and Accra, Ghana.

• Business Innovation Facility (BIF) – The BIF, launched on 10 March 2010, aims to build stronger partnerships between Department for International Development (DFID) and the private sector. The objective of these partnerships is to take advantage of market opportunities in developing countries and to maximize the trans-formal impact of business by way of including the poor as consumers, employees and producers. The BIF supports business initiatives including those that develop, or adapt existing, supply and distribution chains so as to increase the participation of disadvantaged producers, informal traders and employees; develop new, or adapt existing, products and services needed by the poor and/or enable greater access to these products and services to the poor; and develop low-carbon and/or climate resilient business models that lead to direct positive impacts for the poor.

• AidFlows – AidFlows visualizes how much development aid is provided and received around the world. Users can select individual donors (providing the aid) and beneficiaries (receiving the aid) to track the sources and uses of aid funding. AidFlows is the result of a partnership between the OECD, the World Bank and the Asian Development Bank. They came together to raise the transparency of aid, making global data on development assistance more easily accessible. AidFlows is of interest to constituencies in both donor and beneficiary countries, helping to further inform the global dialogue about development aid.

Inclusive business forums

• World Business Council for Sustainable Development (WBCSD) – The WBCSD was founded on the eve of the 1992 Rio Earth Summit to ensure that the business voice was heard at the forum. Today, the WBCSD is a CEO-led organization of forward-thinking companies that galvanizes the global business community to create a sustainable future for business, society and the environment. The council plays a leading advocacy role for business. Leveraging strong relationships with stakeholders, it helps drive debate and policy change in favor of sustainable development solutions, providing a forum for its 200-member companies (who represent all business sectors, all continents with a combined revenue of over $US 7 trillion) to share best practices on sustainable development issues and to develop innovative tools that change the status quo. The council benefits as well from a network of 60 national and regional business councils and partner organizations, a majority of which are based in developing countries.

• Business Call to Action (BCtA) – BCtA was launched in 2008 and aims to accelerate progress towards the Millennium Development Goals (MDGs) by challenging companies to develop inclusive business models that offer the potential for both commercial success and development impact. The BCtA global leadership platform is supported by the Australian Agency for International Development, the Dutch Ministry of Foreign Affairs, the Swedish International Development Cooperation Agency, the UK Department for International Development, the United States Agency for International Development, the United Nations Development Programme, the United Nations Global Compact, and the International Business Leaders Forum. Worldwide, more than 60 companies have responded to the BCtA by making commitments to improve the lives and livelihoods of millions through commercially viable business ventures that engage low-income people as consumers, producers, suppliers, and distributors of goods and services.

• Business Action for Africa (BAA) – Since its launch in 2005, BAA has emerged as an innovative international platform for harnessing the collective energy of businesses in support of Africa’s development. BAA is a free-to-join network of businesses, business organisations and development partners, and works in three areas: advocacy, for policies needed to drive growth and wealth creation for poor people in Africa, and to facilitate business engagement in tackling development issues; activity, catalyzing business-to-business partnerships to drive on-the-ground action on business issues that matter for development, and development issues that matter for business; and knowledge sharing, by facilitating practical, how-to information sharing between practitioners committed to harnessing the power of business for development impact. BAA is supported by a group of international and national businesses, the UK’s Department for International Development and the International Business Leaders Forum. BAA is run as a nonprofit and managed by Inspiris.

• International Business Leaders Forum (IBLF) – The IBLF is an independent, global members organisation of over 150 leading multinational companies. Since 1990, IBLF has identified critical issues concerning business leadership and corporate responsibility, working directly with CEO and board-level executives to drive change across their companies and networks. IBLF works to challenge and change current assumptions through innovative research and dissemination of ideas; build capacity to deliver sustainable solutions by developing "next generation" leadership and partnerships; implement collective action projects and new responsible business standards that put policy into practice.

• UN Global Compact – The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption. With over 8,700 corporate participants and other stakeholders from over 130 countries, it is the largest voluntary corporate responsibility initiative in the world. Endorsed by chief executives, the Global Compact is a practical framework for the development, implementation, and disclosure of sustainability policies and practices, offering participants a wide spectrum of workstreams, management tools and resources, all designed to help advance sustainable business models and markets. Overall, the Global Compact pursues two complementary objectives: mainstreaming the 10 principles of business activities around the world; and catalyzing actions in support of broader UN goals, including the Millennium Development Goals (MDGs).

Global inclusive business financial institution development partners

• UN Capital Development Fund (UNCDF) – UNCDF’s mandate from the United Nations General Assembly (1966) is to "assist developing countries in the development of their economies by supplementing existing sources of capital assistance by means of grants and loans". The mandate was modified in 1974 to focus on "first and foremost, the least developed among the developing countries". UNCDF supports the strengthening of public investment at the local level, decentralization and strong financial management within decentralized systems which leads to improved allocation of scarce public resources, stronger and more responsive local governments and, ultimately, better public investment – in roads, marketplaces, irrigation systems and other basic infrastructure that improve people’s lives and lay the foundations for economic growth. UNCDF ensures that financial services reach poor people and small businesses, and ensures that formal financial systems include poor people with savings, credit, payments, insurance, and remittances.

• The International Fund for Agricultural Development (IFAD) – IFAD was established as an international financial institution in 1977 as one of the major outcomes of the 1974 World Food Conference. Working with rural poor people, governments, donors, non-governmental organizations and many other partners, IFAD focuses on country-specific solutions, which can involve increasing rural poor people's access to financial services, markets, technology, land and other natural resources. IFAD collaborates with partners to develop innovative and sound projects that respond to the constraints and priorities identified by poor rural people, fostering the empowerment of poor rural men and women, their organizations and communities. It engages in policy dialogue on the basis of its field experience.

• International Labour Organization (ILO) – The ILO was founded in 1919 after World War I to pursue a vision based on the premise that universal, lasting peace can be established only if it is based on social justice. The ILO became the first specialized agency of the UN in 1946. In the realm of inclusive finance, the ILO promotes social finance as a means of using financial instruments to promote decent work. Like impact investing, ILO’s promotion of sustainable finance is to seek the provision of finance – with a social goal. With a staff of 135 professionals, ILO’s annual budget is roughly US$80 million. The ILO Social Finance Program addresses three major goals: reducing vulnerability and increasing access to risk management tools, creating jobs through enterprise development, and making financial policies more employment-sensitive. Another core focus of ILO’s initiatives is promoting microinsurance programs for the poor through the ILO Microinsurance Innovation Facility.

• International Finance Corporation (IFC) – The IFC is the private sector finance window of the World Bank. IFC’s mission is to create opportunities for people to escape poverty and improve their lives, pursuing this mission by investing in the private sector. At a fundamental level, it is the private sector that drives economic growth—a basic ingredient in poverty alleviation. At the same time, the private sector can expand access to goods, services, and livelihood opportunities for the poor, helping to ensure that growth is inclusive. IFC is particularly interested in investments with this dual rationale—investments in what is called inclusive business models which expand access to goods, services, and livelihood opportunities for those at the base of the global economic pyramid in commercially viable, scale-able ways.

References

  1. ↑ See UNDP AFIM - www.undp.org/Africa/privatesector
  2. ↑ Stein, Peer, “Towards Universal Access: Addressing the Global Challenge of Financial Inclusion” - Paper presented at the Korea-World Bank High Level Conference on Post-Crisis Growth and Development, co-organized by the Presidential Committee for the G-20 Summit and the World Bank with the support of the Korea Institute for International Economic Policy (KIEP), June 3–4, 2010, Busan, Korea
  3. ↑ Stein, Peer, "Towards Universal Access: Addressing the Global Challenge of Financial Inclusion", 2010, p.10
  4. ↑ See www.ifc.org/inclusivebusiness
  5. ↑ Kushmir, Khrystyna. How Do Economies Define Micro, Small and Medium Enterprises? Companion Note for the MSME Country Index ( see http://www.ifc.org/msmecountryindicators)
  6. ↑ Mckinsey & Co., Two Trillion and Counting: Assessing the credit gap for micro, small, and medium-size enterprises in the developing world, October 2010 - http://mckinseyonsociety.com/two-trillion-and-counting/
  7. ↑ Milder, Brian, ‘’Closing the Gap”’, 2008 - http://www.ingentaconnect.com/content/itpub/edm/2008/00000019/00000004/art00005
  8. ↑ Miller, Calvin and Jones, Linda, Agricultural Value Chain Finance - Tools and Lessons, FAO, 2010
  9. ↑ Monitor Group, Investing for Social and Environmental Impact, 2009 and Rockefeller Foundation and JP Morgan, Impact Investments: An Emerging Asset Class”, November 2010
  10. ↑ In 2002, global leaders gathered for the “International Conference on Financing for Development” to “explore [the mobilization of] innovative sources of finance [to support the achievement of the Millennium Development Goals], provided that those sources do not unduly burden developing countries. The types of funding methods (remittances, climate change levies, related green bonds) developed to support developing nations toward the achievement of the MDGs through means other than donor funding has become known as “Innovative Finance”.
  11. ↑ Runde, Daniel, Sharing Risk in a World of Dangers and Opportunity: Strengthening US Development Finance Capabilities, A Report on the CSIS A project on US Leadership in Development, Center for Strategic and International Studies, December 2011
  12. ↑ See also Hamilton, Kirsty, Energy Efficiency & The Finance Sector: A survey on lending activities and policy issues, A report commissioned by UNEP Finance Initiative’s Climate Change Working Group, January 2009
  13. ↑ See http://www2.adb.org/projects/Base-Pyramid/default.asp
  14. ↑ International Finance Corporation, Scaling Up SME Access to Finance in the Developing World, 2010 - http://www.ifc.org/ifcext/globalfm.nsf/Content/Scaling-UpSME+Access+to+Financial+Services+in+the+Developing+World

Business Action for Africa, Financing Business Innovation for Africa’s Development, May 2011

Kubzansky, Michael, Cooper, Ansulie, and Barbary, Victoria; Promise and Progress: Market Based Solutions, The Monitor Group, May 2011

Jenkins, Beth; Akhalkatsi, Anna; Roberts, Brad; and Gardiner, Amanda, Business Linkages: Lessons, Opportunities and Challenges, 2007 IFC, International Business Leaders Forum, and the Fellows of Harvard College

Agribusiness for Africa’s Prosperity, UNIDO, May 2011

International Finance Corporation, The Case for Emerging Markets Private Equity, February 2011

International Finance Corporation, Scaling-UP SME Access to Financial Services in the Developing World, G-20 Financial Inclusion Experts Group- SME Finance Sub-Group, October 2012

International Fund for Agricultural Development, IFAD Decision Tools for Rural Finance, March 2010

Innovative Financial Services and the Emerging Role of Central Banks: Kenya’s Experience; Presentation by Central Bank of Kenya to Participants at the Third AFRACA Central Banks Forum, May 9, 2011

Napier, Mark, Including Africa: Beyond Micro-finance, Centre for the Study of Financial Innovation (CSFI), February 2011 Institute of Development Studies, Value Chains: Donor Interventions and Poverty Reduction: A review of Donor Practice, March 2010

J.P. Morgan Global Research & Rockefeller Foundation, Impact Investment: An Emerging Asset Class, 2010

Miller, Calvin and Jones, Linda, Agricultural Value Chain Finance – Tools and Lessons, FAO, 2010

USAID Briefing Paper, Using Mobile Money - Mobile Banking to Enhance Agriculture in Africa, December 2010

USAID RAFI Notes, Value Chain Finance, The Rural and Agricultural Finance Initiative, June 2005

USAID Micro-report # 20, Value Chains and Their Significance for Addressing the Rural Finance Challenge, December 2004 Micro-finance News, http://www.microfinancefocus.com/news, The Role of Corporate-micro-finance Institutions Partnerships in the Development of Value Chains

External links

UNDP AFIM - www.undp.org/africa/privatesector IFC – www.ifc.org UNCDF – www.uncdf.org ILO - www.ilo.org DCED - www.enterprise-development.org UN Global Compact - www.unglobalcompact.org

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