Results of the Philippine IB Country Study

Presentation at the 2nd IB Forum on 16 September 2013

For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph, or Armin Bauer, ADB, Tel: 632-5550; abauer@adb.org
The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology.

There is high growth in the Philippines but it is not inclusive:

High level of poverty in the ASEAN context

Philippines Vietnam Indonesia Thailand Malaysia Singapore 0.00% 5.00% Poverty Incidence (2009) 10.00% 15.00% 20.00% 25.00% 30.00%

There is high growth in the Philippines but it is not inclusive:

High growth but no poverty reduction

There is high growth in the Philippines but it is not inclusive:

High and rising inequality
Philippines Thailand Singapore Indonesia Malaysia Vietnam 0.34 0.36 0.38 0.4 0.42 0.44 0.46

Gini Coefficient (2009)

There is high growth in the Philippines but it is not inclusive:

Persistent and high un- and underemployment

The private sector can make growth more inclusive

Decent jobs and income Goods and services relevant, affordable and accessible for the poor Strong Social Consciousness Weak Engagement as Business

300,000 NGOs 20,000 Social Enterprises 70% of companies have CSR programs 50% of companies have corporate foundations

70 companies in ADB study with inclusive business models

Private sector engagement in IB

Benefits
Reasons to engage the BoP
1. Increase growth and profitability 2. Localize supply chain 3. Strengthen reputation and brand

Obstacles
1. Poor regulatory environment for IB and lack of targets 2. Problems to access capital 3. Lack of government incentives 4. Lack of social appreciation on the role of IB in inclusive growth (media, government, civil society)

Benefits to the company 1. Create shared value 2. Improved sales 3. Improved reputation

What is the Base of the Pyramid (BoP) in the Philippines?

62% of the Philippine Population (57 million) with family income below PHP 18,000
62.5% of population = 57.4 million people with income/expenditure of less than US$3 per day/capita (ca 18,000 PhP per family per month) in international Purchasing Power Parity 41.7% = 38.1 million US$2 per day/capita (self rated poverty (SWS) / minimum wage; ca PhP 12,000 per family per month) 18.4% = 16.9 million US$ 1.25 per day/capita (Philippines poverty line)

Source: PovcalNet / 2005 PPP USD, 2009 data

Base of the Pyramid (BoP) Market

BoP consumes US$ 33.4bn (48% of total PH expenditure)

Education Household Operations Gift and Contributions Medical Care Clothing, Footware and Other Personal Care and Effects Transportation and Communication Fuel, Light and Water Rent/Rental Value of Dwelling Unit Food 0

435 490 506 507 677 1,437 1,935 3,077 5,830 16,292 5,000 10,000 US$ Million 15,000 20,000

Source: FIES, 2009 data, Top 10 expenditure items

Findings of ADBs IB Country Study

IB in the Philippines is in a nascent state
Low awareness of IB among business community
Many IB models are early stage IB eco-system does not exist 70 IB companies of which only 30 are investable at the moment

Low awareness in finance community

Only 3 deals with total of US$ 5 million in last 3 years

Low awareness among government and donor community BUT, there are good examples demonstrating potential of IB

10

Findings of ADBs IB Country Study

IB Potential in Key Sectors Job generation
Agriculture and Agribusiness Coffee for Peace sourcing coffee from indigenous HH MCPI sourcing seaweed from fisherfolks Coco Technologies sourcing coco fiber from coconut farmers

Food & Beverage Jollibee Farmer Entrepreneurship Program Nestle sourcing of coffee beans Kennemer Foods sourcing of cacao Manufacturing All Home Design Subcontracting handicraft production Gandang Kalikasan Sourcing for Human Nature cosmetics

11

Findings of ADBs IB Country Study

IB Potential in Key Sectors Job generation
Retail Microventures Hapinoy Sari-Sari store program Julies Bakeshop Micro kiosk franchising program Tourism Islands Banka Cruises Small boat operators

12

Findings of ADBs IB Country Study

IB Potential in Key Sectors Provision of Products and Services
Finance Climbs affordable life and non life insurance Globe BanKO mobile microfinance products Energy Powersource Group Rural electrification SURE Rural electrification plus job generation Health Generika Drugstores low cost medicine Family Vaccine Clinic affordable rabies vaccination

13

Findings of ADBs IB Country Study

IB Potential in Key Sectors Provision of Products and Services
Information Technology Smart and Globe Mobile Phone plus Encash Deployment of ATMs in rural areas Education STI technical and vocational courses Phinma quality and affordable education Urban Development Phinma Properties On-site relocation PPP with Q.C. Clean Engines affordable retro-fitting of motorcycle engines

14

Recommendations of IB Country Study

1. Development of enabling environment
Business associations Promote IB among members

Government Remove barriers promoting ease of doing business Integrate private sector in development planning and implementation with meaningful target setting
Legislators Incentives for IB

Development Partners Support with Technical Assistance

15

Recommendations of IB Country Study

2. Facilitating impact investment into IB
Medium Scale Companies Debt rather than Equity Debt: 0.5Mio to 10Mio USD, IRR 4%-8%, 8 years tenure Equity: 0.5Mio to 10Mio USD, IRR 10%-20%

16

Progress Report
IB is gaining momentum
More companies identify themselves as IB Business associations are committed to inclusive business and inclusive growth agenda PBSP and LCF Government is working with private sector DAR

Senators with social entrepreneurship agenda were elected

Impact investors are focussing on the Philippines

17

Conclusion
A lot still needs to be done
Aligning inclusive growth agenda with inclusive business initatives

Bringing investment to inclusive business

=> 2nd Philippine Inclusive Business Forum

18

Maraming salamat po

For further questions, please contact Markus Dietrich, ASEI, Tel 02-2398216, markus.dietrich@asei.com.ph, or Armin Bauer, ADB, Tel: 632-5550; abauer@adb.org