presentation - multiplying impact: supporting the replication of inclusive business models

5/21/2018 PRESENTATION - Multiplying Impact: Supporting the Replication of Inclusive Business Models

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Replicating inclusive businesses

Aline KrmerBad Honnef, July 18 2014

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Presentation at ADBManila, August 26, 2014

Dr. Aline Krmer

Disclaimer: The views expressed in this paper/presentation are the views of theauthor and do not necessarily reflect the views or policies of the Asian DevelopmentBank (ADB), or its Board of Governors, or the governments they represent. ADB doesnot guarantee the accuracy of the data included in this paper and accepts noresponsibility for any consequence of their use. Terminology used may notnecessarily be consistent with ADB official terms.


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1Objectives

Introduction to the findings of the report onMultiplying Impact: Supporting the Replication of

Inclusive Business Models

Make preliminary suggestions for the role ADB

could take to support replication

Jointly discuss findings and suggestions.

Present

Suggest

Discuss


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2

build share apply

enterprise solutions for development

What we do 2


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3Partners across sectors

Companies Development organizations

Non-profit organizations andsocial investors

Universities

3


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4Example: HERi Energy Kiosks Madagascar 4

Assessed marketsize

Identified consumerneeds

Marketresearch

Business

ModelDevelopment

PartnershipBuilding

ResultsMeasurement

Built businessmodel and businesscase

Identified businesspartners

Identified localentrepreneurs

Facilitated know-ledge exchangeamong companies

Designed resultsmeasurementssystem

SupportedImplementation

Analyzed results


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5Example: Study on the role of the EU in PSE 5

Desk research andinterviews to identifygaps in currentlandscape of PSEprogram

Gap analysis

Analysis ofcompany

challenges inIB

Analysis ofEU

Development

of recommen-dations

Desk research andinterviews tounderstandchallenges ofprivate sector in IB

Desk research andinterviews tounderstand thestrengths of the EU

Developed strategicrecommendationswith regards topossible EUinterventions in thearea of PSE

Wh C f


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6Who we are: Core team of senior and juniorconsultants based in Germany 6

Dr. Aline Krmer

7 years consultingexperience

PhD on innovation &market research in

low-income market Expertise in healthsector & replication

Previously withUNDP and Henkel(FMCG)

Dr. Christina Tewes-Gradl 12 years consulting

experience PhD on business

model development

Expertise in agrisector andecosystemsdevelopment

Previously withMcKinsey, UNDP

Claudia Knobloch


Masters in Inter-national Business

Expertise in theenergy sector andresultsmeasurement

Previously withbusiness develop-ment consultancies

Tendai Pasipanodya


Masters in develop-ment studies

Expertise in youth,entrepreneurshipand partnerships

Previously with ILO(Youth EmploymentNetwork)

Wh


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7Who we are:Network of regional and thematic experts 7

Solveig HauptHealth expert

Partly based inBangladesh

Over 18 years ofexperience in health &development sector

Previously Director forGlobal Access at Pfizer

Inc. Developed pilot for

maternal health inBangaldesh

Dr. Martin VogelsangFinance expert

Based in India Director of Fem

Sustainable SocialSolutions (Fem S3)

Has supported theincubation andimplementation of

various IB models Started his carreer in

private banking industryand strategic consulting

Anja KnigFinance expert

15 years ofexpereince workingon market basedsolutions to poverty

Focus on impactinvesment andpolicy

Water, energy,housing andmicrofinancespecialist

Nina CejnarImpact investing expert

7 years of expertise infinance-first impactinvesting in differentregions and sectors

Has sourced, analyzedand monitoredinvestments for a variety

of impact investors


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8Agenda 8

(1) Why does replication matter?

(2) How do inclusive businesses replicate?Which challenges do they face?

(3) What type of support is needed?Which role could ADB take to foster replication?

Th i f i l i b i (IB)


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9

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The promise of inclusive business (IB):Reach the 4 billion consumers at the BoP

Globally, 4 Billion people live on


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1010

The past decade has seen a wealth of innovationaround inclusive business

Through scaling and replicating what works


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11Through scaling and replicating what works,the impact of these innovations can be multiplied 11


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12Research questions 12


(2) How do inclusive businesses replicate?

Which challenges do they face?



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13Two typical paths to replication 13


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14Two typlical paths to replication 14

Waterlife CFW clinics Vision Spring Aravind Sala Uno


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15Aravind Eye Hospital initially used a branch strategy...

Aravind started off in Madurai in

1976 with only 11 beds and 4medical staff.

Offers low cost eye care surgeries

(assembly line approach)

Using a wholly-owned branch

strategy, Aravind opened 9additional branches in India

(Tamilnadu).

Annually, over 378,000 surgeries

are performed by Aravind Eye

Hospitals (doctors perform 4,000

surgeries vs. National average of

400)

Net profit of $7.9 million on

revenues of $20 million (2010).

Example: Branch strategy


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16Example: Dissemination

Lions Aravind Institute of Community Ophthalmology (LAICO) is the firstinternational training facility for blindness prevention workers.

Since 1992, 300 eye hospitals across 30 countries have participated in

trainings and are now actively implementing the Aravind model.

And: some trained hospital act as disseminators themselves!

...then decided to actively disseminate its approach


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17Multiplier effect 17

Aravind

.

.

Copycats adapt the model to the local context


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18Copycats adapt the model to the local context,

often improving it

Founders and staff were trainedin India for 5 weeks

Since 2011, Sala Uno is operatesan eye care clinic that providescataract surgeries in Mexico

Copied low-cost surgery methodfrom Aravind

Hub and spoke model to expandreach: Surgical hubs and visionand outreach centers

Adaptation: Innovative pricingmodel, microloans for patients,

separate centers for middle class Cooperation with MFIs and NGOs

to reach the poorest

First 20 months: 5k surgeries

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Example: Second-mover

Sala Uno received financial support from various


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19Sala Uno received financial support from variousplayers

Straight equity of US$ 2.2 million tofinance the companysexpansion

Investment provides company astamp of approval when dealing

with government entities and forattracting capital from other investors

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First investment of $250,000 to copyand accelerate the model (expansionpilot)

Also used for building patient centers

and for financing the training fornurses and doctors

Advice to make the mode scalableand investment ready

It took Aravind over 30 years to scale. We want to scale much

quicker than they did. This is why we are looking for investors.

(Interview with Founder of SalaUno)

20Indeed access to finance was one of the major


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20Indeed, access to finance was one of the majorbarriers of the replicating companies we interviewed 20

Financing needs

Short-term liquidity: Workingcapital to cover costs of day today operations

Long-term financing: To allowcarefully preparation andimplementation of replication

strategies Financing that considers

diverse risk profiles: Cash flowin first stages of replication oftenvolatile and outcome uncertain

as opposed to later stages Financing activities withpositive externalities

are often not met because of

Capacity constraints: IBs ofteninsufficiently prepared for entering intodiscussions with investors

Time horizon: replication oftenrequires investments in long-termassets and equipment

Risks: risks remain considerable atearly replication stage and lowerduring later phases

Immature financial systems: e.g.,lack of franchising or working capital

loans; difficulty to exit equityinvestments High transaction costs and lack of

intermediation

21However, merely providing financing is not enough


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21However, merely providing financing is not enoughExample: M-Pesa 21

M-Pesa is an electronic mobile-phone-

based money transfer system bySafaricom

In 2011, it reached 15 millionsubscribers (with each customerpaying about $1.1 in fees each month)

M-Pesa handles transactions

equivalent to 31% of the GDP ofKenya.

Critical succes factors

High market share of Safaricom

Existing network thousands of airtimedealers

Well developed banking system andbranch network

High level of awareness and need

Can a modelwith suchfavorable

conditions bereplicated?

22Challenges when replicating the model to South


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22Challenges when replicating the model to SouthAfrica and Tanzania 22

Regluatory difficulties ZAs regulations regarding

customer registration and

distributor approval were muchmore stringent than those inKenya

Availability of service ZA: services only available at

a few agents TZ: low market share and low

levels of rural bank branches

Low awareness amongstcustomers and retailers in both

countries about benefits ofmobile money

Low financial literacy ofcustomers and agents

No financial support:expansion of service to ZA

received no financial support Less room for experimentation

and adaptation to local needs; Lack of capital to finance

market creation

23Research questions


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23Research questions 23


(2) How do inclusive businesses replicate?

Which challenges do they face?


24Replicators face a variety of challenges


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24Replicators face a variety of challenges 24

Lack of dataon expansionmarkets

Lack of knowledgeonreplication (e.g. replicationreadiness, strategies, partnerdue diligence)

Differing regulatoryenvironment in expanionmarket

Difficulty finding staff,expansion partnes

Lack of implementation

support in expansionmarkets (e.g., distribution,marketing channels)

Financing products nottailored to needs ofreplicators

Immature financial systems High transaction costs and

lack of intermediation High risk

25ADB has already started to develop the IB ecosystem in


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25y p yAsia through different interventions 25

Awareness raisingamongst national governments

Promoting IB through publicsector lending (e.g., jobcreation loan building on IBaccreditation in Philippines)

Promotion of social stockexchange in Singapore

Awareness raising amongstcompanies (e.g. through

PBSP, fora and roundtables) Building knowledgethough

market scoping papers; Knowledge sharing with

peers and other players(e.g., IDB, SNV, WBCSD)

Financing: Preparatory workto set up specialized IB

Financing Facilities (e.g., sub-regional equity and debt fundsin SEA and SA)

IB impact assessment toolfor possible ADB investments

IB investment fora

Match-making:Investmentfora connecting IB companiesto investors and development

partners

26Supporting replication creates multiple benefits


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26Supporting replication creates multiple benefits

Prevent unnecessary trial and error:

For many players in Asia, IB is a new concept; supporting the disseminationof models that work can prevent repeating the same mistakes

Impact and Additionality:Greater impact at reduced marginal costs;Positive externalities of ecosystem building activities;

Financing replicators can attract other investorsFilling the pipeline:

ADB can fill its investment pipeline by

supporting companies that actively replicate proven models from onecountry to the other (exporting IB models)

Supporting those who adopt a proven model (importing IB models)

26

Finance

27Building on these activities, ADB is well positioned


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g pto support replication 27

Replication in Asia:

ADB has regional outreach due to field offices;Can enable replication from more mature IB markets (e.g., India) tomarkets with rather nascent IB ecosystems

South-South replication:Partnerships with other regional banks could support replication from

Asia to Africa/Latin America or vice versa

28How?


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How? 28

Market A Market B

Identify businesses with functioning IB

models (in Asia or other regions) Screening of investments of other

DFIs Award scheme

Provide support to replicate

Workshops to develop replicationstrategy and structure financing needs Policy dialogue

Finance replicators

Analyze business models within asector (e.g., energy)

Extract and document functioningand profitable models (e.g., solarhome systems, energy kiosks)

(1) Foster Expansion (export) (2) Foster Dissemination (import)

Promote models in a specificcountry and industry

Finance adopters

29Questions for discussion 29


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Questions for discussion

In what way can supporting replication help ADB to build future

investment cases?

How could this be done?

Which existing ADB instruments/programs/toolscould be employed tosupport replication (ranging from internal procedures to externalfacilities/financing programs)?

What capacity would ADB need? What HR skills are needed to makesuch support/such deals happen?

Which potential do you see to cooperatewith other donors, impactinvestors, intermediaries or technical experts to support replication andthusbuild future investment cases?

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30Connecting the dots: Replication ecosystems 30


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Connecting the dots: Replication ecosystems 30

Ecosystem facilitation ensures that activities of ADB and other actorsreinforce each other, ultimatley contributing to stronger IB ecosystemsthat support replication!

31Suggestion: A program to support replication 31


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Suggestion: A program to support replication 31

1. Identify: Award to identify replicable models that work2. Share: Document models that work to foster dissemination3. Enable: Workshop to support potential replicators to define their replication strategy

4. Connect: Fair to support replicators find partners5. Finance: Coaching to structure financing needs of winners (mix of grant and loan

products)6. Learn: Build an online community and a repository of knowledge around replication

1 2 3 4 5

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Identify Share Enable Connect Finance

Learn

32Identify replicable models and share


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Identify replicable models and share

Identify replicable models by

Screening existing portfolio of IBinvestments for replicable businessmodels

Cooperatingwith other DFIs anddevelopment partners to identifyreplicable models in their portfolio(e.g., IDB, AfDB, SNV, WBCSD)

Creating an award to identifyreplicable models in Asia orinternationally

1 2 3 4 5

Share by Documenting IB models that already

work in the region; Such documentations should not be

high-level best practices, but look

deeply into the details of existingmodels

These documentations canencourage the adoption of IB models,contributing to their diffusion

Tools and partners available IB impact assessment tools can ensure

identified models show positive socialoutcomes

IFCsreplication readiness tool

Identify Share

Tools and partners available Endevais currently creating a business

model library with diverse partners

33Enable and connect replicators


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1 2 3 4 5

ab e a d co ec ep ca o s

1 2 3 4 5

Connect companies that are fit forreplication to potential partners andinvestors, e.g. by organizing a match-making fair at existing conferences or byleveraging online platforms

Enable Connect

Tools and partners available ADBs investment fora Sankalp forum has already experimented

with match-making Online platforms (e.g., GIZsIB AN, BFP)

Tools and partners available Cooperate with services providers,

impact investors, donors and others Build on workshops provided to the

winners of the G20 Award by BMZ & IFC

Enable potential replicatorsto pursue their replication efforts byproviding targeted workshopsto makethe company fit for replication through

Identifying a suitable replication

strategy Structuring financing needs Identifying needs for partners

Workshops could be coupled with anaward

34Enable and connect replicators


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1 2 3 4 5

p

Learn from experiences and build arepository of knowledge

Finance

Tools and partners available Online platforms (e.g., GIZsIB AN, BFP)

Finance most promising replicatorsthrough Loans Equity

And potentially also Catalytic first-loss capital Grants for pure dissemination efforts

(e.g. training facilities)

Learn

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35Questions for discussion 35


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In what way can supporting replication help ADB to build futureinvestment cases?

How could this be done?

Which existing ADB instruments/programs/toolscould be employed tosupport replication (ranging from internal procedures to externalfacilities/financing programs)?

What capacity would ADB need? What HR skills are needed to makesuch support/such deals happen?

Which potential do you see to cooperatewith other donors, impactinvestors, intermediaries or technical experts to support replication andthusbuild future investment cases?

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Thank you

Dr. Aline [email protected]

+49 176 2426 8240www.endeva.org

37Backup Slides 37


38/4938Defining replication 38


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Scaling= increasing the size of an

inclusive business model (e.g., byincreasing revenues, peopleserved)

Scalingthrough

replicating

Replicating= copying or reproducing an

inclusive business model (orparts of it)

Dissemination

Second mover

Branch

FranchisePartnership

Joint Venture

39What your peers do 39


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IFC+BMZ: Policy papers tomake national governments

aware of IB BMZ+Endeva: Report on IB

Policies

IFC+BMZ: G20 workshops tosupport winners in finding

replication partners andsupport

IFC: Consumption Databaseprovides market data

IFC+Intellecap: Replicationreadiness framework

BMZ+Endeva: Report on IBReplication

IDB: Specialized unitOpportunities for the Majority

provides grants and loans toIBs

KfW invests in AavishkaarFund to support SocialEnterprises

40Example: Uniminuto 40


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Tertiary education provider estab-lished in 1990 in Bogot, Columbia

Offers affordable, high qualitytechnical, technological anduniversity education

82,000 students, of which 68% arefrom lowest income segments

Has successfully replicated ist modelin XXX

Replication plans

Aims to replicate its model to Ivory

Coast and Benin However, two challenge stand in the

way

Information

Lacks support to analyse the best

practices of its model: What madethe model successful? Whichsuccess factors can be replicate?

Company lacks market informationon the replication markets: What arelocal education needs? What are

consumers willing to pay?

41The research process 41


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Desk researchInterviews &

Expert reviews

Literature research(business and developmentliterature)

Interviews with16 inclusive businesses

Interviews with18 support organisations

Validation of intermediary

results with expert panel

Results

For businesses:Case studies on replicationstrategies

For support organizations:

12 Recommendations on howthe replication of inclusivebusiness can be supported in3 action areas

Research questions:

Why is replication important?

How do inclusive businesses replicate? What challenges do they face? Or what keeps them away from replicating? How to support replication?

4242Information and Knowledge


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43People and Partner


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4444Finance


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45Recommendation: Train second-movers! 45


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SELCOs aim is to increase the number of companies active in the

sustainable energy sector

Created the incubation centre disseminate SELCOs knowledge and

experience (e.g. on marketing and sales, building partnerships, finance)

Selected entrepreneurs are trained for 1 year in the classroom and the field

46Mobile phone based payments can only bereplicated in markets where. 46


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p

Government regulateappropriately, striking the

right balance between financialinclusion, consumer protectionand overall stability of thefinancial system

A critical mass of consumers,retailers, services providersand employers understand

the benefits users can cash in and cash

out conveniently at a widerange of locations

Companies have the marketunderstanding about and

technologyto operate in low-income markets

Capitalis available to financenot only the companies

operations, but also marketcreation (e.g. consumer andprovider awareness)

47M-Pesa in Tanzania 47


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BMGF and GSMA supported to build the market

Built aggregators to help accelerate the establishment of dedicated M-

Pesa distribution channels by acquiring and training agents andprovide hand-holding of agents (e.g., manage floats)

Marketing approach depicting use scenarios of mobile money (moreeducational); local events with usic, dnace etc.

Increased commission and provision of working capital to agents

(GSMA grant to create revolving credit facility for MPESA agents)BMGF role

Engagement with Bank of Tanzania (financial services industryregulator) to develop conducive policy

Set up of Alliance for Financial Inclusion

BoT Created an approriate framework, building on best practices and

resources develoepd by others

48Novartis: Replicating Arogya Parivar to Kenya 48


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Arogya Paricar

Launched in 2007

Trained more than 500 health educatorsFamily Nawiri (Kenya)

Increasing access to meds by informign local physicians about treatmentoptions

Outreach and education centers: trainings in schools, churches, SHG,cooperatives, health camps

Differences

Low population density in rural Kenya (spread out) > travel costs extra burden

Challenges

Cultural factors (local beliefs, traditional healers)

Clean water and sanitation

Geographic isolation and inadequate infrastrucutre Weak healthcare capacity, limited availablity of doctors and pharmacies, long

waiting times in public facilites

presentation - multiplying impact: supporting the replication of inclusive business models

Documents

healthsector replication

years consultingexperience

report onmultiplying

adb doesnot

views of theauthor

asian developmentbank

adb official terms

role adbcould