PH needs more firms catering to 'BoP' group
MANILA - In order to achieve inclusive growth, the Philippines must make full use of its potentials by developing inclusive businesses (IBs), or the types of enterprises that cater to the needs and wants of poor and lower-middle-class Filipinos, a study released by the Asian Development Bank (ADB) said.
Based on the “Inclusive Business Market in the Philippines” report of the ADB, the Bottom of the Pyramid (BoP)—composed of the poorest of the poor and lower middle-class Filipinos —is a $33.4-billion market.
The Manila-based multilateral development bank classified the BoP as those earning below P18,000 a month for a family of five, or below $3 a day in terms of purchasing-power parity terms.
The United Nations defines purchasing-power parities as the number of units of a country’s currency required to buy the same amount of goods and services in the domestic market as a dollar would buy in the United States. This conversion factor is applicable to private consumption.
“Majority of the Philippine population belongs to the base of the pyramid. It is not the poorest of the poor only but it goes up to P18,000, that’s lower middle-class in the Philippines, which, in this context of base of the pyramid is considered part of this market. [Around] 50 percent of the total expenditure of the Philippines is happening in this space. Money is being spent [here]. Small amounts of money but by a huge population, so this adds up to billions of dollars,” Asian Social Enterprises Incubator (ASEI) Director Markus Dietrich said in a presentation on Monday.
The report said the total number of BoP customers in the Philippines reached 57.4 million Filipinos. This means that 62.5 percent of the country’s total population lives below $3 per day, based on purchasing-parity terms.
The Filipinos living below $2 per day, or around P12,000 a month, account for 41.7 percent, or 38.1 million of the entire population of the country. The study also said 18.4 percent, or 16.9 million Filipinos, are considered the poorest of the poor and live below $1.25 a day.
Dietrich said if Philippine businesses would focus on this market and maximize their gains while helping so many Filipinos, they should engage in IBs.
IBs, Dietrich said, are different from corporate social responsibility efforts, which are often grants and are not part of the core business of firms. He added that IBs are also not social enterprises that are rooted in non-governmental organizations and some operate using grants from various institutions.
He explained that IBs are those whose core businesses are focused on the needs of the poor. In the Philippines, IBs are still at their initial stage, given that only 70 firms in the country are engaged in IBs.
These include the agribusiness firm Coffee for Peace, which sources coffee from indigenous households; food and beverage firm Kennemer Foods, which sources cacao from farmers; manufacturer Gandang Kalikasan, the company behind Human Nature cosmetics; retailer Microventures, which is the company behind the Hapinoy Sari-Sari store program; and tourism-related Island’s Bangka Cruises, which does business with small-boat operators.
Other IBs in the country include those engaged in products and services such as those in finance like Globe BanKO, which is engaged in mobile- microfinance products; energy, powersource group, which is engaged in rural electrification; health, Generika Drugstores, which offer low-cost medicine; information technology such as Encash, which deploys ATMs in rural areas; STI, which offers technical and vocational courses; and urban development, Phinma Properties, which focuses on mass-housing facilities.
“The positive news here is they do it out of business reasons. It’s not only because they want to do good but they want to increase their growth and they want to increase their profitability. They want to localize their supply chain and strengthen their reputation. Why is it good? Because in the market economy, you only do things as a business if they are profitable; because only when they are sustainable will you continue doing them. So this is a very important finding. What are the benefits to the company? By creating share values, they improve sales. So again it’s not something where you lose money, it is something where people are gaining money. And, of course, there is increased gratification with those activities,” Dietrich said.
The report was launched at the second Inclusive Business Forum for the Philippines organized by the ADB, Philippine Business for Social Progress and ASEI. It aims to advance knowledge exchange on inclusive business, and provide a platform for companies to engage with investors on possible funding proposals.
Participants (around 100 to 130 women and men) will be representatives of 50 to 70 companies with inclusive business models in the Philippines, investors (fund managers and banks), government representatives and selected development partners.