Partnering to unlock local market systems

Local businesses, such as GOAL partner Agrinet, play a key role as a link between smallholder farmers and global companies in Uganda. Photo by: GOAL

Despite the huge potential of developing markets, there are relatively few success stories of corporates engaged in shared value projects. While corporates and local businesses both have a huge role to play in developing business ecosystems, neither of them can do it alone.

International nongovernmental organizations need to develop a new role in linking local and corporate business alliances with local communities and the wider market system, adding a local dimension to the shared value concept.    

In a recent study about shared value in the Irish business sector, conducted by the INGO GOAL and the Michael Smurfit Graduate Business School, more than 80 percent of respondents said they were familiar with the concept of shared value. However, only 18 percent of the companies surveyed were actually engaging in shared value projects in developing countries.

A lack of knowledge of, and access to, networks in the local market are the primary barriers to the implementation of shared value projects in developing economies, the survey suggests. Doing business in Africa is hard, even for the world’s leading corporations.

Developing economies can pose a number of challenges for corporates as they seek to engage with supply chains, consumers or local service providers.

First, the population is often rural or remote and therefore hard to reach. This can make engagement with the base of the pyramid as consumers or suppliers a challenge.

Secondly, businesses within the local market system are often ill-equipped to engage with large corporate partners. They often lack the business strategy, systems and the access to finance required to scale and partner with a large firm.

Thirdly, the lack of tailor-made technology for local market systems, consumers and suppliers means that the ecosystem is often slow to respond to the needs of the private sector. This can prevent many shared value projects from realising their potential.

Furthermore all of the stakeholders involved have individual limitations that make it hard to engage with the wider system. Multinationals tend to struggle to reach out to people isolated from the business community. Likewise, individuals in remote areas often lack the knowledge about how to engage with large businesses. Local businesses and social entrepreneurs can struggle on both fronts, finding it difficult to engage with rural farmers individually, while also being unaware of, and unprepared to work with, large corporations.  

INGOs are uniquely positioned to help address these issues. They have the capacity to engage with the entire market system: from smallholder farmers and microentrepreneurs to local businesses, governments and multinational corporations. INGOs can provide business and technical training, facilitate access to financial support — including impact investors and social finance — and support the establishment of market-facing groups.

By creating links to suppliers and customers, INGOs can help local businesses grow their market and engage more successfully. When communities receive this kind of support, corporate engagement becomes a much more viable option that can benefit the entire market system. Therefore, a focus on strengthening small and growing businesses, grounded in the needs of communities, is crucial to building pathways to successful corporate engagement.

For INGOs such as GOAL, this has involved a dramatic shift away from a more traditional direct implementation model and a reorientation toward a facilitative role. Bridging the worlds of business and development is not easy, and lessons are still being learned.

The same survey revealed that 47 percent of respondents felt that INGOs need to better understand business thinking and tailor their services to the business world, while only 18 percent considered INGOs suitable business partners. There is a long way to go before corporate and INGO engagement in shared value projects in developing economies becomes the norm.

And yet, GOAL has already experienced substantial success in building alliances between a range of stakeholders in a number of developing economies. A recent example of this involves a collaboration between GOAL and Microsoft 4Afrika as part of an effort to enhance the growth of private sector tech companies in Uganda and Zimbabwe. Microsoft is providing business and technological expertise to help create more viable and effective local technology companies that deliver services for the agricultural market system.

These technology businesses work in turn with finance providers, social enterprises, aggregators, and mobile phone companies to strengthen the local business ecosystem and create opportunities for some of the world’s most marginalized communities.

While this type of engagement is extremely time-intensive and requires strong dedication to building enduring relationships, early results indicate that the effort is paying off: In the project area in Uganda, 63 percent of targeted farmers showed an increase in yield from 2012 to 2014. In the same period productivity per acre jumped from under 900 kilograms in 2012 to 1,450 kilograms in 2014 and 182 percent more crops were sold.

Partnerships between INGOs, and local and global private sector actors cannot solve all development problems at a stroke, but the figures suggest that a concerted effort can make a significant impact on the lives of some of the poorest communities.

Going forward, GOAL, a founding member of the shared value initiative INGO working group, sees an increasingly important role for such initiatives in its development work around the globe. Deep engagement with communities, local businesses and corporates sustained by honest and open dialogue between all relevant stakeholders, including networking organizations such as the Aspen Network of Development Entrepreneurs, will be crucial to fulfilling the promise of shared value.  

Devex, in partnership with the Shared Value Initiative, FSG and Global Impact, is examining how the world’s largest international nongovernmental organizations are transitioning their partnership strategies from traditional corporate partnerships to more scalable initiatives. We’ll look at how these initiatives accelerate both social impact and a business return on investment, while highlighting engagement in shared value during this special series “The Future of International NGOs.” Join the conversation using #FutureINGO.

Join Devex to network with peers, discover talent and forge new partnerships in international development — it’s free. Then sign up for the Devex Impact newsletter to receive cutting-edge news and analysis at the intersection of business and development.

About the author

  • Henning Ringholz

    Henning Ringholz is the global market development adviser for GOAL, an INGO that focuses on emergency and development programming in 16 countries worldwide, with an annual turnover of $200 million. Prior to joining GOAL in 2010, Henning worked in Sierra Leone in the health and agribusiness sectors. He has long-standing experience in the European and Latin American food processing industry, and worked in strategy consulting at Monitor and BearingPoint. Henning has an M.A. in social and political sciences from Cambridge University, as well as an M.Phil. in technology policy from Cambridge University Judge Business School.