Private sector can make money and still fight poverty: UNDP

July 28th, 2008 - 9:16 pm ICT by IANS  


New Delhi, July 28 (IANS) There is strong empirical evidence to show that the private sector can stick to its core business of creating economic value and still help eradicate poverty by adopting more inclusive business models, a report released here by the United Nations Development Programme (UNDP) Monday said. “Clearly, the private sector has a vital role to play in promoting, sustaining and enabling more inclusive markets that can help create social values for the poor,” UNDP resident representative and UN resident coordinator Maxie Olsen said at the India release of the report ‘Creating value for all: Strategies for doing business with the poor’.

By way of empirical evidence, the report highlights 50 case studies of business models worldwide that included the poor in ways that allowed private sector companies to be profitable and still promote human development.

While the private sector is already creating social value through corporate social responsibility and philanthropic initiatives, “our emphasis is to show that companies can stick to their core business of creating economic value and still help mitigate poverty,” said Sahba Sobhani, the lead author of the report and the head of UNDP’s Growing Inclusive Markets (GIM) initiative.

V. Kasturi Rangan, the Malcolm P. McNair professor of marketing and director of research at the Harvard Business School and co-chair of the Advisory Group for the report, said if the major stakeholders - the government, entrepreneurs, civil society and ordinary people - come together and look at ways of developing more inclusive business models that involve the poor, then “private companies can help in fulfilling the Millenium Development Goals despite pursuing revenues and profits which is their core business”.

The report highlights three cases from India to showcase how the pursuit of profit is not inconsistent with poverty eradication and creation of social values.

The three cases are eminent cardiologist Devi Shetty’s Narayana Hrudayalaya hospital group, a cardiac health care provider that never denies patients unable to pay, the New Tirupur Area Development Corp, which provides cheap water to the poor, and Sulabh International, which has freed more than 60,000 people from a scavenger’s life.

All three are commercially viable business units and are creating not only economic value for themselves but also social value for the poor, the report says.

The report also highlights cases where even multinational corporations such as Procter and Gamble, Lafarge, Danone, ANZ Bank are creating both economic value for themselves as well as social value for the poor.

The report has identified five broad constraints that are deterring private sector companies from adopting inclusive business models.

These are limited market information, ineffective regulatory environments, inadequate physical infrastructure, missing knowledge and skills, and restricted access to financial products and services.

The companies in the 50 case studies have, however, overcome these challenges by adopting five strategies.

The report says these companies have adapted products and processes, invested to remove market constraints, leveraged the strengths of the poor, combined resources and capabilities with others, and engaged in policy dialogue with governments.

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