Business Linkages at the BoP

Business Linkages are often-times the key to reaching out to the BoP. Often companies are unable to act on their own, requiring several layers of linkage in order to acheive their goals.

The IFC, in collaboration with the the International Business Leaders Forum, and the CSR Initiative of the Harvard Kennedy School has been organizing a series of roundtable discussions to understand the several kinds of linkages that exist. Following one such roundtable in Jaipur in 2009, they jointly brought out a report titled “Business Linkages: Enabling Access to Markets at the Base of the Pyramid.*”

The report draws from experiences of participants at the round table. The discussions are based around three areas: Opportunities to enable access to markets at the BoP, Challenges in forming business linkages, and Patterns of Solutions and cross-cutting themes.

The case examples used in the report draw not from “social enterprises” particularly. For example, while discussing the opportunities to enable access to markets at the BoP, the report highlights the work of the Aditya Birla group in selling to the BoP. The group’s cellular network service, Idea Cellular, has been able to penetrate into rural markets by offering a suite of products and services customized to the needs of rural customers.

The report also talks about how enterprises can find opportunity at the BoP by going beyond traditional value chains. These are applicable in areas that improve the quality of life and help strengthen and diversify local economies. For example, education and health. The work of the Syngenta Foundation is cited as an example. The Foundation focuses on raising farmer productivity and access to markets through farmer training, and assistance with commercialization.

However, the report identifies significant challenges to establishing business linkages. These are in the form operational challenges (obtaining reliable information), reputational and relationship management challenges (managing expecations and reducing dependence) and systemic challenges (skill-building, improving access to finance, strengthening regulatory environment).

The third part of the report draws from previous roundtables in Washington, Johannesburg and Rio de Janeiro, to establish a clear pattern of challenges and a scheme of solutions to meet those challenges. Beyond particular solutions, two broad solutions are offered. The first is to develop a “systems thinking” mentality. This is recommened to enable those engaging with BoP markets to counter inefficiencies that might arise due to the unpredictable nature of BoP suppliers, distributors and customers. To combat a system full of holes that can not be taken for granted, the report suggest that companies think proactively about the sytems, and often take action to make sure they work better.

A second solution on offer is that of “collaboration.” Collaboration becomes necessary when it is not economically feasible for a company to plug all the systemic loopholes on its own. In such cases companies may look for partners — either government agencies, civil society organizations, international development agencies — that are themselves in complementary lines of businesses. For example, GlaxoSmithKline is able to organize a milk value chain from end-to-end for its Horlicks brand, but ICICI Lombard partners with microfinance service providers such as BASIX.

The report emphasises the need for building these linkages at a time when truly risk-free opportunities are rare. The plethora of solutions on offer a valuable set of solutions to organizations looking to reach out to the BoP.

Read the entire report here.

* Jenkins, Beth and Eriko Ishikawa. 2009. “Business Linkages: Enabling Access to Markets at the Base of the Pyramid.” Report of a Roundtable Dialogue, March 3-5, 2009, Jaipur, India. Washington, D.C: International Finance Corporation, International Business Leaders Forum, and the CSR Initiative at the Harvard Kennedy School.