Businesses around the world are finding innovative ways to work with low-income people living at the base of the pyramid (BOP), working with them as suppliers, distributors, retailers, or customers. These firms are called inclusive businesses. Developing an inclusive business model that addresses the particular needs of people living at the base of the pyramid is an accomplishment. Scaling that model and replicating it in new markets is a challenge.
By recognizing businesses that have already succeeded in developing innovative, scalable, and commercially viable inclusive business models, the G20 Challenge provides a global platform for all businesses to learn from successful leaders in the growing field of inclusive business, and enables these leaders to come together and develop linkages with other inclusive businesses. When fellow innovators have the opportunity to exchange ideas and experiences, who knows what new business opportunities may become possible?
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The Group of 20 together with IFC launched the Challenge at the G20 Summit in Cannes (November 3-4, 2011). Dalberg Global Development Advisors implemented the Challenge on behalf of IFC.
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The Group of 20 is the premier forum for international economic development that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. Its goals are to bring stability to financial markets and to promote economic cooperation. Membership consists of advanced and emerging economies from all regions of the globe. G20 leaders gather to stabilize the financial system, coordinate national economic policies to steer the world towards recovery, ensure that the international financial institutions are provided with the right underpinnings and adequate resources, and take new steps to increase access to food, fuel, and finance among the world’s poorest. For more information and for the list of G20 countries, see www.g20.org
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The International Finance Corporation, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. It helps developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilizing capital in the international financial markets. In fiscal year 2011, amid economic uncertainty across the globe, IFC helped its clients create jobs, strengthen environmental performance, and contribute to their local communities—all while driving its investments to an all-time high of nearly $19 billion. For more information, see www.ifc.org
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Dalberg Global Development Advisors is a strategy and policy advisory firm focused on developing countries and emerging markets. Its mission is to mobilize effective responses to the world’s most pressing issues, in particular those which affect people in developing countries. During the last 10 years, Dalberg has successfully completed over 550 engagements for more than 200 leading multilateral institutions, international agencies, foundations, NGOs, governments, and global corporations operating or investing in frontier and emerging markets, including extensive work with organizations and companies focused on the base of the pyramid. For more information, see www.dalberg.com
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The G20 Challenge on Inclusive Business Innovation was open to eligible businesses and subsidiaries that meet the following eligibility criteria:
[1] The World Bank defines ‘low income’ countries as economies with GNI/capita<$1,005 and ‘middle income’ countries as lower-middle and upper-middle income economies with GNI/capita between $1,005 – $12,275.
[2] Any business regardless of its type of legal entity can be eligible to apply if it uses a commercial business model and generates commercial revenues.
[3] Commercial debt is defined as loans, given on commercial terms, by financial institutions or IFIs (International Finance Institutions). This excludes grant funding and loans on non-commercial terms.
[4] Applicant must have been using an inclusive business model that engages individuals living at the BOP since at least June 30, 2009.
No, there were no size limits in the eligibility criteria. Any business that met the eligibility criteria could apply, no matter how large the business was.
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A domestic business is a firm that is based in the country where it operates. For an inclusive business to operate as a domestic firm, it must be headquartered or have a substantial part of its operations in a low- or middle-income country. The Challenge aims to accelerate South-South growth by recognizing business models that have originated and had success in low- and middle-income countries and have the potential to expand on that innovation in other emerging markets.
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A business that has its headquarters in a high-income country could only be eligible for the Challenge if a substantial part of its operations are in a low- or middle-income country. For example, a business headquartered in Switzerland that does most of its business in Haiti would have been eligible for the Challenge whereas a business headquartered in Madrid that does only 20% of its business in low- or middle-income countries would not have been eligible.
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The Challenge uses the World Bank definition of “high-income economy”, which is defined as a 2010 GNI per capita of $12,276 or more. The World Bank lists the following countries as high-income economies:
Firms that are headquartered in one of these countries or cannot show that they have a substantial part of their operations in a low- or middle-income country were not eligible for the Challenge.
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The Challenge focused primarily on for-profit organizations because financial sustainability is a key eligibility criterion. Any legal corporate entity (including a non-profit, partnership, or cooperative) could apply if it used a viable commercial business model and generated commercial revenues.
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A commercial business model is one that generates enough revenue to cover costs. A commercially viable business model consistently generates more than enough revenue to cover its costs. Grants or donations, even those provided on a recurring basis, do not qualify as commercial revenue.
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Yes, they could apply as long as they fulfilled the Challenge’s eligibility criteria.
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Financial sustainability is demonstrated by obtaining commercial financing (equity or debt) and being current on all repayments. Back to Top
Buseinesses were able apply to the Challenge as long as the business integrated low-income people into its business model in an innovative way. Not everyone or even most people associated with the business needed to be low-income. Consideration of how businesses engaged with BOP individuals and how many they reached were evaluated through the ‘development results’ section of the application.
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The Challenge was not open to applications from micro-finance institutions (MFIs), private equity funds, or deposit taking institutions. However, businesses that include access to financial services as part of a broader business model (value chain finance) were considered. Examples include facilitating payment for basic goods through mobile money applications or offering insurance together with agribusiness products to smallholder farmers.
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Providers of microinsurance were eligible if they met all of the eligibility criteria. The Challenge was open to applications from microinsurance providers.
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Businesses were not able to apply if they were involved in the production or trade of alcohol, tobacco, gambling, or weapons.
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Extractive businesses extract nonrenewable natural resources from the earth and refine them for commercial and industrial use. The extractive sector includes oil and gas extraction and all mining industries.
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Businesses could not submit more than one application. However, multiple subsidiaries of the same business could apply separately if they fit the eligibility criteria and each employs a unique innovative business model.
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Winners of the Challenge were recognized on a global level when they were announced at the G20 Leaders Summit in Mexico held June 18 – 19, 2012. At the Summit, the business’s successes were showcased in front of world leaders, fellow innovation leaders, and the global public.
Winners attended a high-profile event on June 18, 2012 at the G20 Leaders Summit to honor Challenge winners. Winners could also expect to receive announcement of their recognition in local media and were recognized in an official press release issued by the G20 Challenge.
Following the Summit, winners will have the opportunity to attend G20 regional workshops, where they will strengthen their inclusive business relationships and work together to accelerate the growth of inclusive business in developing countries. The regional workshops will focus on the challenges that businesses face when replicating their business model in other countries, e.g., adaptation to new markets, standardization of their business model, legal questions, and selection of the right business partners. Investors will be invited to attend the workshops so that the winners of the Challenge will be given a unique business-to-business forum. The workshops will be organized with generous additional support from the United Arab Emirates and in cooperation with the Siemens Stiftung (Foundation).
The application period for the G20 Challenge has closed.
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Applications may only be submitted in English. You may, however, submit financial statements in a language other than English.
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Applicants were not encouraged to submit documents beyond those requested in the application, i.e. other than their financial statements for the last three years of operation.
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Absolutely not. Data entered as part of the full application form are confidential and will only be used in scoring your application. Please note that there are two questions on the pre-application form that could serve as a description of your business’ profile for the Challenge website (Question 13: “Please briefly describe your business” and Question 14: “Briefly describe how your business is inclusive by integrating BOP individuals as suppliers, distributors, retailers, or customers and what is innovative about how your business reaches the BOP”).
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A screening team conducted initial screening and identified a group of finalists. Fifteen Challenge winners were selected by an independent judging panel comprised of representatives from the G20, the private sector, academia, foundations, and International Finance Institutions.
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The winner selection criteria are as follows:
Due to the large volume of applications expected, we are unable to provide individual applicants with feedback regarding their application.
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Inclusive business is a private sector approach to providing goods, services, and livelihoods on a commercially viable basis, either at scale or scalable, to people at the base of the pyramid by making them part of the value chain of companies’ core business as suppliers, distributors, retailers, or customers.
Inclusive businesses provide opportunities for individuals living at the base of the pyramid to step into new roles: as suppliers, as distributors, as retailers, or as customers. If a firm’s customers are low-income individuals, or if it sources from people living at the base of the pyramid, or if low-income people distribute its products through their communities or sell them in local stores, that firm is an inclusive business.
Inclusive business models are helping businesses turn underserved populations into dynamic consumer markets or diverse new sources of supply. At the same time, inclusive business expands access to goods, services, and livelihood opportunities for those living at the base of the pyramid in commercially viable, scalable ways.
An inclusive business customizes its business model to take full advantage of the benefits of working with this underserved segment. The benefits are not just to individuals living at the BOP, who can realize greater access to the basic goods, services, and means of livelihood that they need, but also to the businesses themselves.
In the process, businesses are developing product, service, and business model innovations with the potential to tip the scales of competitive advantage in more established markets. And they are providing clean water, electrical power, modern communications, health care, education, financial services, and income-generating opportunities to millions of people at levels of quality and affordability they have never experienced—if they ever had access—before.
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BOP stands for “base of the pyramid.”
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As defined by IFC, the base of the pyramid (BOP) are those that live on less than $8 per day in purchasing power parity (PPP) or lack access to basic goods, services, and income generation opportunities.
The BOP concept has become popular shorthand for describing individuals living below a given income or spending threshold. But many people debate where these income or spending lines are best drawn, and consequently the size of this population and its purchasing power. Using a threshold of $8 per day (PPP), there are an estimated 4 billion people living at the base of the pyramid.
But income is just one parameter for poverty. Too often, poor people cannot get key products at the prices and quality on which others rely. Whether they are informal settlers, urban dwellers, small-scale farmers, villagers, or others, they are often denied clean water, electrical power, good roads, modern communications, health care, education, financial services, and—perhaps most important—steady sources of income.
An estimate of the number of people living without access to basic goods, services, and income generation opportunities would likely be much higher than the 4 billion people identified by the income threshold alone.
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For the purpose of the Challenge, a person is low income if she or he is considered to be part of the base of the pyramid (BOP). The BOP is defined as those living on less than $8 per day in purchasing power parity (PPP), or lacking access to basic goods, services, and income generation opportunities.
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A business model describes how the business will make money to survive and grow. It answers the questions: Who is your customer, what does the customer value, and how do you deliver that value at a cost that allows you to make a profit? A description of the business model should detail the full value chain, which includes everything from procurement (how raw inputs are sourced), to development of the product or service, to distribution, to sales and marketing, and finally to customer service.
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Inclusive business models integrate BOP individuals into some part(s) of the value chain, as suppliers, distributors, retailers, or customers. Successful inclusive business models also take into account BOP needs during product and service development.
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As defined by IFC, the base of the pyramid (BOP) is the portion of the global population that lives on less than $8 per day in purchasing power parity (PPP) or lacks access to basic goods, services, and income generation opportunities.
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BOP stands for “base of the pyramid.”
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A business model describes how the business will make money to survive and grow. It answers the questions: Who is your customer, what does the customer value, and how do you deliver that value at a cost that allows you to make a profit? A description of the business model should detail the full value chain, which includes everything from procurement (how raw inputs are sourced), to development of the product or service, to distribution, to sales and marketing, and finally to customer service.
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Extractive businesses extract nonrenewable natural resources from the earth and refine them for commercial and industrial use. The extractive sector includes oil and gas extraction and all mining industries.
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For the purpose of the Challenge, a person has a low income if he or she is part of the base of the pyramid (BOP). People at the BOP live on less than $8 per day in purchasing power parity (PPP), or they could be considered part of the base of the pyramid due to a lack of access to basic goods, services, and income generation opportunities.
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Inclusive business models expand access to goods, services, and livelihood opportunities for those at the base of the pyramid in commercially viable, scalable ways. These businesses integrate people living at the base of the pyramid into new roles, as suppliers, distributors, retailers, or customers.
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The way in which a business delivers value involves the value chain, which includes the following processes: procurement, product/service development, distribution, sales and marketing, and customer service.
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Net profit is obtained by subtracting a company’s total expenses — direct and indirect costs, interest expense, taxes — from its total revenue over a given period of time (usually, one year).
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Commercial revenue refers to money made by a company through the sale of goods and services. It excludes grants, loans, and other cash inflows that do not result from sales (e.g., interest, owner’s contribution, etc.).
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For the purposes of the full application form, debt refers to primarily long-term obligations (e.g., loans), defined as lasting over one year.
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For any questions or concerns regarding the closed application process or the winners publication, please contact:
Dalberg Global Development Advisors (www.dalberg.com)
info@g20challenge.com
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