Refugee crisis: taking an inclusive approach to foster sustainable development
European leaders are fighting to cope with tides of people coming from regions where prolonged and recently escalated conflicts have fostered hopelessness so intractable that entire populations have no better survival option than to risk their lives in flight. They all agree that an important component of any successful strategy must be real and meaningful economic development in Syria, Afghanistan, Iraq, and other countries from which the mass exodus of refugees originates. But in the post-recession world, governments (as well as philanthropists and business working individually) do not have the resources to address poverty by traditional means.
One light on the horizon: This crisis is occurring at a time of tremendous innovation in development. And whether it’s Bill Gates talking about “creative capitalism,” billionaires and industrialists and government officials putting their heads together at the Clinton Global Initiative, or grassroots activists teaming up with corporations to expand markets and fight poverty in struggling or conflict-torn regions, most development actors are casting aside traditional categories to pursue development innovation, united in the understanding that what really matters right now is outcomes.
If there is a unifying theme to all the activity, it is this: inclusiveness. Those involved in development understand that, to be sustainable, economic growth must include everyone—it must reflect and incorporate the full range of stakeholders in a given economic context. Is that Idealism? Maybe 20 years ago. Now it’s the essence of Realism. A business plan can no longer be true even to its own earnings projections if it is built on practices that marginalize large segments of society.
Two promising growth strategies
Inclusive business and impact investing are two of the most innovative approaches to inclusive growth in practice today. Both deliver real progress, and are embraced by many as sustainable and scalable strategies for integrating low-income citizens into the formal economy and thereby fueling economic growth.
Inclusive business describes strategies under which national and multinational companies working together with foundations, civil society, and government bring more struggling local producers and providers into their value chains. The idea is to benefit—and benefit from—the so-called Base of the Pyramid (BoP): the vast reservoir of creativity and purchasing power residing latent worldwide in the people who are not yet integrated into the formal economy. In the process, wherever they are applied, inclusive business models also seek to solidify governance to provide legal frameworks that lend stability, fairness and transparency to enterprise.
It’s a win-win: global companies gain local expertise and new markets for their goods, and the producers gain access to global economic opportunities. Organizations including the Bill and Melinda Gates Foundation, the Ford Foundation, USAID, DFID, the World Bank, have already embraced this approach. National and multi-national companies such as Coca Cola, PepsiCo, INTEL, Walmart, SC Johnson, Vodafone, and Unilever are working with academic economists on inclusive business initiatives as well. And finally, global alliance and membership organizations such as InterAction, SIDW, CGI, CGD are also working to increase awareness of inclusive development approaches. The size of this potential market is staggering. According to figures provided by the World Resources Institute and the International Finance Corporation in their report The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, the four billion individuals at the BoP have incomes below $3,000 in local purchasing power. Yet taken together, they represent a $5 trillion global consumer market.
Impact investing, for its part, aims to solve social or environmental challenges while generating financial profit for funding entities. This approach brings together a diverse group of stakeholders: investors, philanthropists, venture capitalists, NGOs, governments, small and growing businesses, banks, multilateral corporations, and more. The list is potentially endless, and so is the potential. According to the Global Impact Investing Network, impact investing could attract $2 trillion in the next 5-10 years. Impact investors affect poverty directly by seeing partners where agents of traditional aid see only people who need hand-outs. And where institutional lenders may be prevented by the absence of conventional ratings structures from supporting a new enterprise, impact investors can realize significant returns by structuring deals to meet the requirements of the situation, all the while achieving social goals.
During the past 24 months, a growing number of multi-lateral and bilateral organizations as well as foundations and philanthropists have embraced this integrated “triple bottom line” model as the most effective way to address numerous global challenges. Contrary to what some development dreamers desire, after...
To read the full article as written by SNV USA's Neil Ghosh and published in the Stanford Social Innovation Review, please go to Refugee Crisis: Capitalism to the Rescue?