Value Chain Development
Friday, November 7th, 2008, from 11:00am to 12:30pm To view powerpoint slides from this presentation, click here. Moderator – Linda Jones, The SEEP Network Panelist – Ashis Kumar Sahu, SELCO Panelist – Mallikarjuna Iytha, FTF-India Panelist – Solomon JP, LaborNet
Section 1: Overview
This session was conceived from the realization that to achieve scale, there is a need to look at new models and approaches to Enterprise Development. Examples such as Social Enterprises or Fair Trade demonstrate the need to discuss new models of business planning. Other funding opportunities outside the donor community for sustainable development, such as private investment and foundations, should be explored. The presentations provided insight on potential investors for their Business Plans for scaling up their social enterprises. This session will attempt to link the process of developing business plans and good practices to a positive impact on poverty reduction.
Section 2: Presenters’ Report Out
Ashis Kumar Sahu, SELCO 1. Background SELCO Solar Pvt. Ltd, a social enterprise established in 1995, provides sustainable energy solutions and services to under-served households and businesses. Currently, Efficient Cooking systems are their next priority for investment. This idea came out of their work to provide lighting
and electricity for small appliances, which reinforced the need to reduce and/or eliminate emission from bio-mass based cooking systems. Awareness of alternative energy as a solution for poor and middle income households is one of their biggest challenges. Solomon JP, LabourNet 1. Background LabourNet utilizes a mobile technology with an internet solution to link workers to work. In India, LabourNet has identified two issues that inform the formation of their social enterprise: a lack of time for middle income households to address household needs; and repairs or services costs are often overrun. As a result, LabourNet attempts to match these issues with a large supply of micro entrepreneurs. 2. Models for expansion Most of their technology and marketing will be centrally located in Bangalore, achieving scale economies as they role out into 6 additional cities. By focusing on the newer areas of the cities, LabourNet helps strengthening existing social networks. 3. Comparative advantage Market research: The first 18 months of this 3-year old enterprise were spent conducting research to understand the market Developing a credit history: LabourNet’s payment system creates a credit line that develops a credit history for micro-entrepreneurs Being well organized: LabourNet has a comparative advantage because it is well organized and its contractors are stable 4. Lessons learned LabourNet has concluded that clients do not pay a premium for better trained workers but for the convenience of having one number and one place to call to hire services.
Mallikarjuna Iytha, FTF-India 1. Background
FTF-I is a national network started in 2000 with only 8 member organizations. Today the network counts with 50 members, 17 of which are women led organizations. In 2007, FTF-I had a U$S 20 million turnover. Concerned with the impact of trade in the population, FTF-I
conducted a survey in India, finding that that 60% of the respondents understood that trade has no effect or impact on their lives. 2. Fair trade FTF-I estimates that 300 million Indians would pay a premium for fairly traded products. As a result, fair trade becomes a domestic issue, abandoning the idea that it is an export only issue. FTF-I has changed the traditional conception of trade. It provides a space for the marginalized to compete in the marketplace of fair trade products.
Section 3: Activity Outcomes and/or Q&A
Q: Have gender roles and equality for women improved since 2002-3 when the questioner reviewed the gender dimensions of Fair Trade? How is this documented? Integrating gender and ensuring gender equity with regards to pay, labor practices and so on, is still an unresolved issue, as agreed by all presenters. While their organizations are not addressing the gender issue, they do so indirectly through equal pay for equal work. For example, LabourNet bases pay on skills, not gender or other factors. All presenters agreed that there is a need to improve social indicators in this area and that there are still cultural and institutional issues to be addressed. Lastly, a key point regarding this issue is that over the last few years there has been a change in behavior from seeing women in need of development to development needs women to be sustainable. Q: Basing pay based on skills would be great but what about cultural issues? What are you doing to teach men about women in the workforce? LabourNet: nothing is being done at the moment. This is not due to lack of willingness but rather a shift of focus. The network has found that the soft sell approach works by empowering women to be wage earners and highlight the opportunities and this shifts perception.
An organization from Pakistan responded that their programs have focused on economic empowerment rather than on women’s empowerment, due to social and cultural norms in Pakistan. This approach has allowed the organization to work with women on economic
opportunities and has resulted in more women having a more public role through the family business. They have achieved more freedom as their husbands and fathers realized the benefits of doing so. Q: How do you externally evaluate services? This issue for social enterprises is similar to the one faced by MFI’s as they started to scale up. LabourNet: the organization has a rating system over the course of the service call (from arriving on time to quality of service). This information is put into a database and LabourNet can utilize this data to refer entrepreneurs to particular training. LabourNet is currently working with an outside firm to develop a sample based assessment system as they go to scale. One issue in India is that although the service provided may be of good quality, the standards of a particular service or the materials are not standardized, like in the United States. This proves to be an obstacle to evaluate the services. For instance, the repairman may have done a technically good job, but the pipe still leaks due to the inferior quality of products available. Q: How much can solar energy meet business needs – i.e., for home generators where the business is in the house? Financial equation has not been developed yet due to subsidized kerosene, among other issues. Audience Observations and Comments: Ivan: In scaling up each of these organizations faces multiple value chains that can be interlinked. There are opportunities to expand into other value chains not just scale up in the one they’ve identified. There is also a need to combine services (i.e., training and financing). As they scale up their enterprises they should think about piloting programs as other opportunities arise to assist with diversification and sustainability Seema (Pakistan): The presenters highlighted how successfully integrating technological innovation empowers the poor. The social enterprises need to expand their networks and build market structures
Marian (SBDC Asia): There is a need to scale up impact (social) and be sustainable while they are scaling up their business. The three presenters are divided into enterprise models based on geography (SELCO), a combination of services (LabourNet) and Interlinking value Chains (FTFI). Rajit (FTFI): All of the issues that were addressed by the three presenters are a priority for India to address. Addressing them is key for sustainable growth and development in India. There is often tension between scale and sustainability where often when you scale-up the depth of social impact decreases. There is often this critique that Enterprise Development doesn’t reach the level of impact and sustainability needed. However, there are many examples that show this not to be the case. Of course there are You can go to SEEP’s website for at least 10 successful examples. challenges and room to improve, but there are success stories out there. Looking at capital obstacles, for example, Focus on promotion of investment and social return on capital Sector specific vs. markets and leaders Social Enterprises are demonstrating and developing value chain, MSMEs and markets.
Original notes by Jeremy Coon [link to raw notes], with formatting by The Foundation for Development Cooperation.