Stimulating economic growth in emerging economies through inclusive business models

As noted by the IMF’s chief economist, Maurice Obstfeld, China’s economic slow down has had a ripple effect on investment in emerging economies. Offsetting this economic slow down will require both official development assistance (ODA) and private sector investment.

A key opportunity for aid agencies to foster economic growth in emerging economies is to work with the private sector to build inclusive business models that address the bottom of the pyramid- the four billion people living on less than $3,000 per year. Danone has worked with the Grameen Group, a microfinance organization founded in Bangladesh by Muhammad Yunus, to create an inclusive business model called a “social business”- a non- loss, financially sustainable businesses created to address a social problem. The Grameen Danone joint venture is driven by a social mission: fighting child malnutrition in Bangladesh. Grameen Danone sells a product called Shokti Doi, a highly nutritious yogurt designed to address the nutritional deficits of Bangladeshi children.

Other multinationals such as Orange, Bouygues Construction, Essilor, Schneider Electric, Veolia and SC Johnson have followed in the footsteps of Danone in creating social businesses to address important social issues. The U.S. Agency for International Development (USAID) has also recognized the potential of inclusive business models and has partnered with Yunus Social Business to promote social businesses through the establishment of incubator funds.

By working collaboratively with the private sector, aid agencies will be able to amplify their impact and play a more systematic role in helping countries achieve economic, social and environmental development.

By Trevor S.