Anti-Poverty Model Taps an Unlikely Partnership in Latin America

SNV and Nestlé launch their joint “Well-being at Home” program in Lima, Peru. Photo by: SNV

In one of the world's most economically unequal regions, a Dutch social enterprise is increasingly using an anti-poverty model aimed at connecting two previously distant, and even antagonistic, Latin American social groups: the business community and the poor.

Although it only begun in 2006, SNV's "inclusive business" initiative has become its "star product" in Latin America. The development model now encompasses 70 initiatives in nine countries across Central America and the Andean region. SNV hopes to expand the initiative to additional Latin American countries in the near future.

Inclusive business seeks to generate profits for small, medium, and large companies operating in Latin America while simultaneously integrating previously excluded or ignored poor communities into businesses' operations. Depending on local circumstances, inclusive business may involve employing low-income workers; targeting development of suppliers and service providers from low-income communities; or providing new and beneficial goods and services to such communities.

From family farmers to multinational corporations

The inclusive business initiative encompasses business enterprises ranging from campesinos with small family plots to multinational corporations with profits in the billions of dollars. Major companies currently using the model include Ecuadorian processed food giant Pronaca and Swiss multinational Nestlé.

The majority of SNV's inclusive business portfolio comprises businesses that sell $1 million to $2 million annually in products and services, and have 50 to 100 employees, according to Christian Marlin, SNV Latin America coordinator for the World Business Council for Sustainable Development-SNV Alliance for Inclusive Business.

In order to gain entry into the business community, SNV partnered with the WBCSD in February 2006.

"They are our principal ally," Marlin said. "In each of the countries where we work, they have helped us to open doors."

The Switzerland-based association provides SNV with the business bona fides needed to strike up partnerships with private sector entities.

"Before our alliance, impresarios saw us as a well-meaning development organization that didn't know anything about business," Marlin said. "Now, we have a lot of credibility."

Target sectors: From agriculture to IT

SNV's inclusive business initiative targets four main economic sectors - agriculture; provision of basic services such as water, electricity and health; tourism; and information technology.

"The agricultural sector is important because a lot of poverty is rural," Marlin said, adding that more than half of the 70 inclusive business ventures currently under way in Latin America are operating in this sector. This includes companies that grow, distribute and sell agricultural products such as coffee, cacao, bananas, rice, dairy products, and meat and poultry.

"This sector, in general, [represents] a major part of low-income people's budgets," Marlin said. "For people that earn less than $2 per day, 80 percent of their budgets go toward buying food."

SNV also works with companies that increase the quality and reduce the costs of basic services for poor communities. Due to inefficiencies in delivering services to low-income consumers, basic service costs in some of Lima's poor neighborhoods can be higher than those in New York or Los Angeles, according to Marlin.

Tourism is another sector that is ripe for the inclusive business model.

"People from the developed countries like to go to beautiful areas in the Andes, Amazon, and to the beaches of the Pacific," Marlin said. "But there's a problem when they stay in luxurious five-star hotels next to people that are living in miserable circumstances. This raises a question about traditional tourism."

Marlin said the inclusive business model for tourism strives to integrate low-income communities into the tourism industry by tapping them as guides, providers of transportation, and creators and retailers of arts and crafts. This model integrates the poor communities that often surround tourist enclaves to share in the wealth generated through the travel industry.

Information technology, meanwhile, has become an increasingly important sector for SNV. According to Marlin, it is one with many opportunities for inclusive business ventures, from using mobile phones for e-learning to electronic money transfers.

Expansion plans

Inclusive business is most active in nations such as Bolivia, Ecuador, Peru, Honduras and Nicaragua, where SNV has an established presence based on 30 to 40 years of on-the-ground experience.

"In these countries, the business people come to us because we are already well-known," Marlin said.

SNV plays a more active role marketing the inclusive business model to potential partners in countries where its presence is less established, such as Colombia, Panama, Chile and El Salvador.

"[We go] from door to door to identify opportunities." Marlin said.

The largest impact of inclusive business may be in nations that SNV has yet to enter.

"The countries with the biggest potential are where there is already a strong business culture," Marlin said. "We wanted to start in small and medium[-sized economies] and later expand to bigger countries like Mexico or Brazil."

Getting connected

Firms in Latin America seek SNV's advice primarily to address specific business obstacles linked to working with the poor.

In one case, Ecuadorian food giant Pronaca wanted to substitute domestically grown corn feed for the corn it purchased overseas to support its large poultry production operations.

But traditionally in Ecuador, small producers, who cultivate just three or four hectares of land, own 70 to 80 percent of the corn plots.

The larger corn producers with 20 or more hectares of land were already selling their corn to Pronaca. In order to meet all its corn needs domestically, the company was forced to find a way to tap into the corn produced by Ecuador's multitude of small farmers.

Pronaca called on SNV to help it work with small farmers, who, historically, neither knew nor trusted the large processed food company. Furthermore, even if it was able to successfully communicate with small farmers without SNV's assistance, the company was unsure of how to integrate the small-scale producers into its business operations.

Companies also embrace the inclusive business model when businesses realize the potential opportunities of integrating poor communities into their business plans. Such was the case of global food giant Nestlé.

Marlin said that many poor communities surrounding Lima have poor nutritional habits and widespread malnutrition due, in part, to a shortage of milk products. Nestlé saw an opportunity to gain new consumers, while at the same time providing products that would enhance nutrition in the Peruvian capital's poor neighborhoods. Aware of the inclusive business model, Nestlé contacted SNV in order to facilitate its plans.

Staffing inclusive business projects

When it comes to recruiting people for inclusive business projects, SNV looks for applicants, first and foremost, with practical business experience.

Carolien Van Bremen, SNV's regional human resources manager for Latin America, said many of the organization's employees in the region once worked in the corporate world, "when a light bulb went off" and decided to change directions.

"We definitely look at [candidates] maybe not experienced in development work but definitely experienced in the private sector," she said, noting that SNV appreciates applicants who hail from "a very business-like environment" - big companies, consultancies or law firms, for instance.

Marlin and van Bremen said the ideal inclusive business candidate would combine business acumen and experience with traditional development skills and sensibilities.

SNV is seeking "people that have a good understanding of traditional business, but who also have the capability to help adapt a company's processes to work with those in poverty, to convince a CEO or the vice president of a company about what they need to change in their business model in order to work with low-income communities," Marlin said.

About the author

  • Andrew Wainer

    Andrew Wainer is director of policy research for Save the Children. He was formerly a senior immigration policy analyst at Bread for the World Institute, which provides policy analysis on hunger and strategies to end it. He has also worked as a journalist and social researcher in Latin America and the United States. Andrew’s research and journalism has appeared in the Los Angeles Times and the Wall Street Journal, among other publications. He holds a master’s degree in Latin American studies from UCLA and is fluent in Spanish and proficient in Portuguese.